What makes up the price of wine? The price is formed from the cost of the bottle, cork, label, advertising, delivery, labor and, of course, from the cost of the grapes, plus excise tax and the historical image of the place of growth. The peculiarity of the region, the method of cultivation, the grape variety and weather conditions form the value of the grapes, which can differ tenfold.
To collect the necessary data, we contacted French manufacturers from Champagne, Burgundy, Rhone Valley, Jura, as well as Italian manufacturers from Piedmont, Sardinia, Alto Adige. Based on the data received from producers and from other sources “from the fields”, we created a pricing structure for wine, depending on the approach to winemaking.
We decided not to take into account the huge impact on the cost of wine critics, various ratings, victories in competitions or the creation of an expensive tourist point from our own winery and limited ourselves to clearly measurable factors.
So, our task is to identify the key factors that affect the cost of wine content in a bottle.
1. The cost of grapes can form up to 60% of the price of wine. In the most important wine regions, the cost of 1 kilogram of grapes is 2-3 times higher than the cost of grapes on store shelves. The price depends very much on the permissible norms of cultivation per hectare in the given region, the complexity of vineyard processing, the use of artificial irrigation, the cost of land and weather conditions. From 1 hectare of land, you can get from 2000 to 8000 kg of vineyard. The less the yield of grapes per hectare, the more the berries received nutrients, the richer and brighter the wine.
Depending on the classification of the region and the quality of the wine produced, from one to three bottles of wine are obtained from one vine.
Examples of the average cost of grapes per 1000 kg
• Champagne (France) – 5500-6000 EUR.
• Piedmont (Italy) – 3500-5500 EUR.
• Burgundy (France) – 2700 EUR.
• Company (Italy) – 1500 EUR.
2. Next – the weather. Wine is an agricultural product that is harvested once a year and depends heavily on environmental influences during the season. Late or early spring, rains, hail and other surprises greatly reduce the volume and quality of the berries. This is especially true for the more northerly wine regions of France, Austria and Germany. For example, in some parts of Burgundy winemakers lose 30 to 100% of their harvest every year, which will certainly affect the price in the future.
3. The value of the land. Determined by a variety of factors, including site exposure, altitude, soil type, vines age, vine classification, and more. The historically established value of the wine region and the popularity of the country have a great influence.
The cost of 1 hectare varies from 20,000 EUR (this is land for the production of table wines) to several million euros for unique plots where grapes exhibit extraordinary properties … These lands include vineyards in Champagne, Burgundy, Piedmont and Bordeaux.
4. Remuneration for labor is a very large component in the costs of a winemaker. One of the problems of modern European winemaking is liberal labor legislation with 35 hours of work per week and a minimum wage of 1250 EUR. The labor cost per bottle produced can range from 0.40 to 2.8 EUR. Most family winemakers with small planting areas use manual labor to handle the vines and to harvest and sort the crops. Winemakers, who have a larger area, and the product is more massive, use, of course, technology. For example, in order for a bottle of the great Burgundy wine to end up on the shelf, local winemakers claim that at least 70 times a person’s hand must touch the ground, vines, grapes, barrels, bottles, etc. It’s like the cost of a designer dress or suit. People who create individual models of clothes, sew them by hand, fill the product with their own emotions, knowledge, giving it more value in the eyes of other people. These winemakers themselves become part of their wine, its character and taste.
5. A separate story with oak barrels. Many winemakers choose new barrels for aging wines every time, and this is from 600 to 900 EUR, depending on the level of the cooper. In the barrique (French barrels) – 300 bottles. It turns out that the price of a barrique for a bottle of wine is 2-3 EUR. Obviously, wine from 4-12 EUR has nothing to do with oak, it should be light and fruity, and if there is a vanilla hue, then, most likely, oak chips or wooden cubes were used in the production – this is an absolutely commercial move. In this case, the deficiencies of the raw materials are covered with oak. In the production of high quality wines, barrels are used to achieve a richer and more mature taste of wines with greater aging potential.
Table No. 1
Quite often winemakers buy used 2-3-year-old barrels, previously such a barrel cost 600 EUR, and now it is sold for 40-50.
Oak arithmetic
- Wine from 3.5 EUR (in the country of origin) – a simple, light wine without contact with oak, if it is present, these are chips.
- Wine from 6 to 10 EUR can be aged in old barrels, but attention should be paid to the brand and manufacturer.
- Wine from 10 EUR can be aged in a barrel, adjusted for the exchange value of raw materials and the cost of land. Wine from the south of France may well be aged in new barriques.
6. Time, as you know, is money. Not all wines are subject to additional aging, but those that have fallen into barrels immediately become more expensive, since they require more investments in equipment, storage space and labor costs … This is a long-term project, and every month the winemaker pays salaries to employees, pays electricity bills, taxes, etc. … Of course, all these costs will be included in the price of wine. For example, a bottle of Italian Barolo costs at least 35 EUR and is aged for at least three years, but more often – longer, until it goes on sale.
7. Cork is a very important element for proper wine development and long-term storage. The quality of the cork depends on the material from which it is made and the reliability of the manufacturer. Different types of corks are used depending on the level of the wines. The cheapest is composite, at 0.05 EUR, it is not especially designed for storage, it is used for mass wines. Portuguese cork – up to 6 cm long and made from a single piece of bark – costs 3 EUR and is intended for wines that can develop up to 30-50 years. On average, a quality wine cork costs the producers 0.40 EUR.
8. Label is a serious component, often a navigation when choosing a wine. Here prices range from EUR 0.10 for understated elegance to EUR 0.90 for a festive champagne dress with gold foil on the neck.
Let’s take a look at table # 1, which summarizes the main factors and numbers. As you can see, we have obtained an approximate estimated production cost per bottle of wine for two different wine classifications: AOC, and V.D.P (or I.G.P.).
The left column – Vin de Pays – is the most undemanding category. The limits of tolerance for the production of these wines are as wide as the limits for the areas of wine production.
Right column – A.O.C. – the highest category of the French classification. Wine, the geographical origin of which, the methods of production (vinification) and grape varieties are strictly determined by the law for a given appellation – a certain wine-growing area.
Now that we have figured out the basic factors of the formation of the cost of wine, the question arises: what is the price of a bottle of wine on the shelves of stores in Latvia? How much of the cost of a bottle is the wine itself?
Using the example of two price categories – 9 and 18 EUR – I decided to decompose the cost of a bottle into its components.
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Table No. 2
Table 2 clearly shows that the cheaper the wine, the higher the importer, logistics and packaging markup component. In this comparison, with the difference in the cost of a bottle on the shelf by 2 times, the costs of a winemaker for the production of wine itself differ by 4 times. I suppose that the quality of the wine will be 4 times better, and I am absolutely sure that these wines have completely different souls and bodies.
The conclusion suggests itself the following: if it is preferable for you to purchase a bottle, in the cost of which the price of wine is the largest part, then this is an option for 18 EUR.
Drink good wine!
