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Trust us, there is logic behind wine pricing

Sunday liquor sales will start this weekend in Minnesota just in time for the big July 4th weekend. At Bridgeview Liquor in Moorhead, a sign draws attention to a summer wine sale Friday, June 30, 2017. Dave Wallis / The Forum1 / 2
Ron Smith, World of Wine columnist2 / 2

The British Prime Minister and King Louis XV both drank bottles of Château Lafite Rothschild Bordeaux wine on a regular basis. In 1855, Napoleon instructed wine experts to classify France's Bordeaux wines, and this same wine earned a top spot as a Premier Cru, a status it still holds.

The most famous bottle of this wine was supposedly owned by Thomas Jefferson and sold at an auction for $156,000, making the purchaser eventually regret such an extravagance when it turned out to be a fraud.

What causes prices to be the way they are? Basic economics would dictate a limited supply of product would be the first to cause a price elevation, but expert opinions also have an elevating effect.

Let's take a look at the "supply/demand" structure of price impact. According to an article titled "The Price Of Wine," the world produces more than 23 billion liters of wine annually. That is a lot, and it keeps going up.

In 2010, world wineries produced 26.38 billion liters, but the world only consumed 23.21 billion liters in the same year.

What happens to the surplus? Wine merchants known as négociants will purchase it and sell it under their own name and label, usually undercutting the price set by the brand names recognized on the market.

Current world consumption hovers around the 24 billion liters mark, while production is around 28 billion liters, giving the négociants a ballpark figure of about 4 billion liters to buy up, bottle, and market.

Through efficiency of scale, label giants like Yellow Tail and Charles Shaw can flood the market with $10 and under bottles of wine, which American consumers are all too happy to consume, with only 12 percent of us spending $30 or more on a bottle weekly or monthly.

When I was a graduate student, I appreciated data that did not need statistical analysis to determine differences between data collected. Such is the case with the Australian import, Yellow Tail; America imports more of this wine every year than the total number of bottles imported from France.

I believe the pricing conundrum is due to most of us just wanting good wine to drink, so we happily drink bottles we find in the neighborhood of $20/bottle. These wines are produced in volume, efficiently, and distributed through mass-market networks like Costco. The other wines are produced in limited quantities and sold by the wineries that produce them.

My amateur wine tasters cannot distinguish the difference between expensive wines or the less expensive stuff. Neither can experts make the distinction between the romantic and mass produced wines on a consistent basis.

Enjoy wine at your favorite price point!

Ron Smith, a retired NDSU Extension horticulturist, writes weekly about his love of wine and its history. Readers can reach him at tuftruck1@gmail.com.

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