The Truth About Wine Prices

Wine Prices Are Often Mystified

Very few wineries, wine shops, and retailers are willing to openly discuss their margins. One who isn’t? Coffaro Wines.

The True Cost of a Bottle of Wine

David Coffaro is not your typical winemaker, and he’s not afraid to lay out a transparent view of topics that others avoid. In an article titled “My $100 Bottle of Wine” (also called The People Deserve to Know the Truth), Brendan Eliason outlines a brutally honest, detailed, and somewhat cheeky breakdown of what it costs to make a single bottle of wine.

"What can you possibly do to make a bottle cost $100 ? Were the grapes individually crushed between the thighs of Cuban virgins ? Were many overpaid psychologists hired to deal with the wine’s post-crush stress ? How can $50, $70, $100 or more a bottle ever seem reasonable ?"

While his outline is slightly exaggerated for effect, the truth remains clear — the cost to make a bottle of wine is only a fraction of what you pay, and prices often reflect prestige and scarcity more than the actual cost of production. Still, it begs the question — how does a $25 bottle end up at $100 ?

This Archaic System Exists to Limit Choice and Raise Prices

Suppose a winery sells a $25 Cabernet to a wholesaler for $45. That’s a modest markup, and reasonable considering their costs. But here’s where the price really starts to climb.

"Even with all this spending, I’m only up to $28.25 — a far cry from my $100 goal. Luckily, I still have an ace up my sleeve: the three-tier marketing system, in which I have other people selling my wine."

The distributor charges the retailer $65, earning a standard 33 percent margin. The retailer then tacks on roughly 50 percent. Presto — the wine is listed at $95 on the shelf, with a $100 MSRP so you’re “saving” five percent. This process is called the three-tier system. It’s not entirely evil — it keeps a variety of wines on store shelves — but it also means consumers pay several middlemen, each taking a substantial markup. Even though many states now allow out-of-state wine shipments, some still ban online retailers from shipping across state lines. If your local shop sells out of a coveted label, you might be out of luck ordering it elsewhere. Imagine having to buy Nike sneakers only from the local Foot Locker instead of online.

Cheap Bulk Juice by Any Other Name Is Still Just Cheap Bulk Juice

You’ve probably seen it — a new wine club pops up, promising to cut out the middleman with direct-to-consumer shipping. They may feature whimsical names and hip labels from street artists, but the wine often comes from unknown sources. While not always bad, these wines are usually untested by critics and lack the consistency of a traditional producer. Unlike wines from a negociant — which might have long-term contracts with growers ensuring consistent quality — bulk juice wines can vary drastically year to year.

"If you’re drinking a bulked-off white label wine that cost the manufacturer $1.50 to produce and it’s $13 cost to you, is that really a better “value” than a hand-made, farming-focused wine that cost $3 a bottle to produce and is $15 on the shelf ?"
— Madeline Puckette, The Trouble With White Label Wines

Here’s the deal — you can buy a bulk red blend from Paso Robles for $9 per gallon. That’s $1.80 worth of juice per bottle. Stainless steel aging keeps oak out of the equation, and with corks (30 cents), glass (50 cents), labels (33 cents), and bottling, the total cost is around $3.50. At a retail price of $13.99, that’s a 400% markup and a very handsome margin.

So when you ask yourself, “How does Last Bottle get such stupendous deals on great wines ?” you have your answer — we scour everywhere, from Napa to Tuscany, in search of incredible wines. We buy directly from the families who make them and remove the middlemen from the equation. The end result? You get legitimately great wine at a fair price.

Resources

http://winefolly.com/update/white-label-wines-what-wine-buyers-dont-know/

http://www.cleveland.com/open/index.ssf/2014/03/proponents_of_beer_distributio.html

http://fermentationwineblog.com/2016/08/billion-dollar-wine-boondoggle/