Costs of Wine Production
The fact that one bottle sells for $10 and another for $50 isn't a matter of chance. Winemakers can choose whether they want to make their wines cheaply or expensively. There are lots of variables that go into pricing wine — but it all begins with the grapes.
Growing grapes takes land. Like any real estate, the watchwords for vineyard land are “location, location, location.” Some properties are ideal for growing grapes: good soil, proper drainage, good breezes, and the right sun exposure. Of course, not all vineyard land is created equal.
Some properties, because of the cachet they acquire, command top dollar. The Napa Valley is a perfect example. In 1960 you could have bought an acre of vineyard land there for $2,000. Today, the average price per acre is $200,000.
Not all vineyard land is that exorbitant. Elsewhere in the United States and certainly in areas like South America, you'll find affordable land for growing grapes. The cost of the vineyard land goes into your bottle of wine.
Winemakers who produce high-end wines like to brag about the low yields of their vineyards. It's not uncommon to hear about yields of less than a ton of grapes per acre. Contrast this to the grapes headed for the lower-priced wines. The yields can be from six tons per acre up to ten tons per acre.
How the grapes are grown affects price. It stands to reason that the more grapes you grow on an acre of land, the more wine you can make. On the other hand, it's generally agreed that lower yields produce better quality grapes and more concentrated flavors in the juice. So producers of high-quality wines seek to lower yields even though it will result in less juice.
A winemaker who grows grapes in high-yielding vineyards will harvest the grapes by machine with minimum labor cost. To achieve lower yields, another winemaker will thin the vines — meaning she'll remove whole clusters of grapes — by hand. The cost of the bottle goes up again.
Winemakers who don't grow their own grapes buy them from other growers. The price they pay depends on the grape variety, the location of the vineyard and, of course, supply and demand. In 2009 the average ton of Cabernet Sauvignon grapes from Napa Valley sold for about $4,700, whereas in some parts of California's Central Valley, Cabernet Sauvignon sold for as little as $350 per ton.
Grape variety makes a difference. A less in-demand grape will cost less. In the same year that Cabernet grapes from Napa Valley sold for $4,700 a ton, other grape varieties from the same region had lower price tags. The average cost for a ton of Chardonnay or Pinot Noir grapes was about half the Cabernet price. That too is reflected in your bottle.
Turning Grapes Into Wine
Pressing, fermenting, and aging all contribute to price. One winemaker might squeeze as much juice as possible out of the grapes and then ferment it in huge tanks — filtering and bottling after only a few weeks. Another producer might use minimal pressing, using only the free-run juice, and ferment and age the wine in oak barrels.
Oak is a major cost. American oak barrels sell for about $700 each, while French oak barrels can top $1,000 each. Barrels hold about three hundred bottles of wine. The sad part is that these barrels have a short life span. With each successive use, they have a smaller effect on the wine's flavor and eventually have to be replaced. Blue chip producers might use them three or four times before buying new ones. Some producers buy new barrels every year for their most exclusive wines.