With income inequality all over the news and politics these days, it would seem reasonable to ask why the price of any given wine should be determined by anyone other than the consumer. When someone says that a wine is overpriced, aren’t they really saying that it’s overpriced for me, either because of choice or necessity? What arbitrary entity is going to determine ‘fair’ pricing if it’s not the market? It would also seem naive to think that wine prices should be contingent on grape prices. What about the cost of land, taxes, insurances, etc? It would be like saying that a restaurant should base their menu prices solely on food costs. While many wine prices have escalated to a point of being what I’m either not able or willing to pay, I’m not resentful of that situation at all. To me it’s simply a matter of adjusting my buying priorities. What do you think?
The part about consumers deciding based on buying priorities (for wine or other goods) sounds pretty reasonable to me, Michael. In most cases the winery sets the price and they learn whether they’ve made a good choice when they see how the market reacts.
I don’t really care how much the grapes, labor, water, equipment, diesel for the tractor, taxes, insurance etc. all cost. Is the wine worth it to me? Most of the time that’s about the pleasure of drinking it. But sometimes there are factors besides the quality in the bottle that come into play. It could be a special year or producer or sentimental value. Sometimes it’s label seeking/trophy collecting behavior in anticipation of sharing with others or gaining access to a tasting where that bottle is in demand.
I have been known to spend more on a bottle of wine than I myself would logically say is reasonable. Passion (or some other form of temporary insanity) overcomes reason from time to time. I’m pretty sure it’ll happen again. Hmm, what’s this in my inbox? The Screaming Eagle offer? Ooops, there I go again.
Producer and/or Importer should decide what a wine costs (like McDonalds and/or their franchisees should decide what to charge for their hamburgers). Consumers should decide if they want to pay that cost. If the Item is priced too low, it sells out way too fast, if too dear, it doesn’t sell out at all.
Supply and demand curves. Econ 101.
Part of the problem is the 3 tier system. The producer decides either what they need for their product to be financially viable, or they decide what it can sell for at market and work backwards. Either way there are a lot of hands in the pot that ultimately make the consumer pony up more.
I certainly drop a lot of money on wine (for me), but in reality I consider anything over $15-$20/btl a luxury expenditure.
If a winery gets popular and their prices go beyond what I’m willing to pay, I drop out and fondly recall that I was there when the wines were yet undiscovered.
Wine is a commodity - market sets the price. If your wine sells out in 1 month, you are leaving money on the table. If you have to close out at the end of every year you are charging too much.
Peter is correct - Econ 101.
Yes, I would say the price of a bottle is ultimately determined by the consumer in that the price is sustainable if the wine sells well enough, and it isn’t if the wine doesn’t sell well enough. I’m not sure I understand any other way of looking at it. All of these other factors are basically functions of supply and demand.
Calling Jeff “Greed is Good” Leve
You have a cellar full of old, classified growth Bordeaux, more than you’ll ever drink in your lifetime, so you decide to sell some. Are you going to price it ‘fairly’ or for what the market will bare? One man’s greed is another’s business savy.
Who Should Decide How Much A Wine Costs?
Me.
Next question.
![[crazy1.gif]](/uploads/db3686/original/2X/c/ccbc5ec3bb76214876150a1afaf934e26cb2d9f7.gif "crazy1"){kind=small}
Whew, I thought for a second someone else is going to tell me to do something else. ![[wink.gif]](/uploads/db3686/original/2X/0/04707e6a7bbb03e0153e349d8a9270d30e1e9525.gif "wink"){kind=small}
We set our prices though based on what our market analysis showed including our costs and market threshold.
me - $2.
So, if your market analysis showed that you could charge 3x what you are doing now, and still sell all of your wine, you would do it, right?
Michael, there are a lot of people who make wine because they truly love making wine. There are many who do an outstanding job and could probably charge more…and don’t. Surprisingly, the reason(s) they don’t charge more are not always directly related to market forces.
RT
Well, since my wines have current front line price points of $10.00 to $15.00 you’re talking a max price increase to $30.00 up to $45.00. My Tempranillo Joven will never sell for $24.00 a bottle in the US. There are too many good Spanish wines out there in the under $20 range. The three / four tier system here assures that.
Now in China, that’s a market of a different color. The Chinese are scouring Spain right now looking for ExCellar wines at 1euro a bottle or less, and by the time it reaches the market in China it is retailed for the equivalent of 100 euros a bottle and then you have to buy 2 bottles. We recently sold a container to a distributor in China at the same ExCellar price for which we export our wine to the States. It is the multitude of levels it hits there that increases the price to their retail level.
We each set our own price. Where the prices cross is where business starts.
That’s fine. I would think most of those people to whom you are referring are financially comfortable if not wealthy. And it should be obvious that while the winery can set a suggested retail price, in the real world prices go up and down according to demand.
To buyers I don’t know? I will sell it for as much as I can get. It’s hard to have much sympathy for people buying old, fancy Bordeaux–meaning it’s hard to find a reason to cut them a deal. Those buyers have knowledge about what they’re getting and what they want, and a lot of money to spend on it.
To friends and people I know personally who would appreciate the wine? I would give it away, sell it for cheap, or make a trade. Or, open a bunch up together over a dinner so we can all enjoy it.
What a dilemma to have though!
One reason for a winery to not sell for as much as possible is stability. If you don’t nurture a loyal customer base, you can be royally screwed by vagaries of the economy, not so great critics ratings and other such things.
Another factor is economic value to the owner/winemaker. Just like customers value that close relationship with a winemaker, so do many winemakers with their customers. They want the tangible feedback from what they put their hearts into. They like to see some of those same faces visiting year after year.
I agree with that conventional wisdom, save this: that is Capitalism 101 as well, and, IMHO, capitalism is failing massively on a global basis. (No political screed coming, and no leftist politics, either, as I could be a black-sheep distant cousin of the one-percenters!) Supply and demand for luxury goods seems skewed to me now. If the bankstahs decide to stop drinking $2,000-a-bottle, secondary-market Screagle (guessing that they could not be bothered with actually signing up for a mailing-list wait list), the resale market for the wine would collapse (although probably not the $850-a-pop mailing list price, at least not until there are empty slots on the list). Most wine drinkers are out of that loop. Thus, while that example does no violence to supply and demand, nor the proposition that Peter and Matt put forth which seems better suited to setting pricing on wines made in quantity and that the majority of drinkers can afford. My point is that fine wine is one of the luxury goods at play in the world where a bank CEO oversees criminal enterprises that lose his bank an entire year’s worth of earnings in fines, and is rewarded for it. The same irrationality, volatility and fraud criminality that is now a permanent part of the world’s capital markets are also, by extension, part of the fine wine marketplace. Oh, yes: see Rudy. Hardy. Kapon.
Against that backdrop, I submit that, for high-end wines in the secondary market, he or she who has the gold makes the rules and establishes the prices, which often bear no rational relationship to widely held perceptions of quality and intrinsic value, much less cost of production and the other factors mentioned above…
The answer is obviously: Robert Parker.
