The Difference Between a Cheap and an Expensive Bottle of Wine

So there's this perfectly good bottle of wine you get from the local market for ten bucks. Then there are these hundred or two hundred dollar wines you'll probably never try, but are curious about. Are they really that much better? I can't really answer that for you as that's really a personal thing. What makes them so much more expensive? That I can shed some light on.

A couple of the biggest sellers in the U.S. are Barefoot by Gallo and Yellow Tail from Australia. You can find both wines for around five or six bucks. And Yellow Tail has to be transported all the way here! Then there's the Opus One Napa Cabernet Sauvignon going for over $300.

There are a couple of items that control the price of a bottle of wine. One is the cost of the grapes, the other is what the market will bear. This can be broken down a bit farther to get the main costs of labor, material, and overhead. You might call the $5 bottles industrial wines and the premium-priced ones craft wines.

Land Cost

Farm land is relatively cheap in California's Central Valley where Gallo gets most of its fruit (although they also have a big operation in Sonoma County). Napa is a spot for half-million dollar starter homes. It's supply-and-demand for homes and vineyards. The highly-prized Cabernet Sauvignon vineyards can demand top-dollar. If you were trying to buy existing Cab vineyards in Napa Valley prices can be several hundred thousand dollars per acre. That will vary quite a bit depending on where in Napa even though Napa Valley isn't really very big; it's much smaller than Bordeaux.

Cost of Growing Grapes

Decoy, from Napa's Duckhorn
Vineyards, sources fruit mostly
from Sonoma County and sells
for under $20. Duckhorn's
Napa Cab goes from about $65

Labor is a key element as you can spend a lot of time managing a vineyard for the best fruit. Among other things this means having a smaller crop to get the best grapes -- maybe two or three tons of fruit per acre of  vineyard. In the inexpensive growing areas they might be getting eight tons per acre. So not only is the land cheaper, but there's more fruit coming from the same amount land.

Cost of Buying Grapes

Some wineries buy fruit from grape growers, others grow their own. If you are buying then the Cost of Growing Grapes from above is part of the cost along with supply-and-demand as some areas and some vineyards are more prized than others.

Cost of the Harvest

The first step is picking the fruit by hand or machine and by machine is cheaper. You may not be using a percentage of the fruit if it doesn't meet you quality standards. If it's a five dollar wine you can't afford to be picky.

There is lots of expensive equipment using in wine making and there are economies of scale for larger production wineries. Automation at larger operations can cut labor costs. Smaller wineries tend to be very hands-on during the harvest with the winemaker and cellar crew performing lots of manual tasks. Large production facilities are more industrial and often the winemaker is a project manager sitting in front of a computer.

Oak

Most red wines and some whites are improved with oak influence. It can come from expensive French oak barrels or cheaper ones from the U.S. or Hungary. Or it might be oak chips or powder. Premium California wines use oak barrels. The inexpensive wines can't afford the cost of barrels.

Expensive wine barrels in an expensive to build wine cave

          
Admin and Overhead

If you are buying from a big, lavish tasting room the cost of all that comes from the bottle of wine. Buying out of a barn isn't quite as impressive, but you're not paying much to support that barn. Marketing departments, tasting room staff, general managers, etc. are overhead. As mentioned above there is lots of wine making equipment required. A ma-and-pa operation has little overhead compared to big, corporate wineries. Are you spreading that overhead across 1,000 cases of wine or two million?

What the Market Will Bear

If you have an in-demand wine from an in demand region you can charge more -- that's just simple capitalism. So Napa Valley Cabernet will command a higher price than Lodi Petite Sirah regardless of the costs incurred in making the wine and getting it to your store.

For those willing to pay $18,000 for a ton of Cabernet fruit
here's when you go in Napa Valley (one ton makes about 700 bottles of wine)

I don't know about you, but I'm fine with paying for quality grapes that go through a hands-on rather than industrial harvest and processing and then put into quality oak barrels. I'm not so hot on paying jacked up prices for the name. That's the trick -- finding quality wine from lesser known areas and producers that don't command top dollar.