Over the last decade or so we get asked the same set of questions over and over again. The same old wine myths continue to need busting and hands need holding when it comes to picking out a bottle for the inlaws. Yet it was just the other week that I was quizzed on wine pricing and short of sitting this customer down for a three hour, death spiral lecture on the impending doom of late stage capitalism eating away away at the fabric of society, I gave a brief and somewhat boring answer with something about shit harvests and tax… But this did get us all thinking and it turns out the internet seems a bit conflicted.
Based on our experiences and the chats we’ve had with the suppliers we work with we thought we might do a bit more of a deep dive into wine prices; what steers them and at what point are you buying quality. Bare with us though, some of this is based on some rather questionable ‘back of napkin’ maths and at the time of writing a lack of caffeine.
If we are to grasp any of this the first place to start would be the tax. To date the UK government imposes a flat duty rate between £1.82 and £3.21 depending on ABV. Correctly assumely the world is getting hotter and wines are getting boozier we are safe to say that most wines would fit in above the 13% ABV range giving us a basic cost of £2.67. That gives us our starting point. We can then tumble on all the other costs facing both the producer and the importer. From the producers point of view they need to cover dried goods (bottles/closures/cardboard), energy, labor, machine rental, chemicals etc and what's more, they have to do this with whatever yield they get that year. From the importers perspective they need to cover shipping, paperwork, handling, and storage fees. And all of this hullabaloo is before the retailer takes his/her margin. You can see where this is going can’t you?
Yeah yeah yeah, hurry up!….So what percentage does the winemaker get? This tricky little question sits at the heart of everything but varies massively depending how tight we are feeling and thus how much we can bring ourselves to pay. What we can tell you though is the industry average gross profit for both retailers and importers is around 22%. So with that in your arsenal lets look at some wines:
Vinos El Shitty McShitty - £6.00
VAT (20%) - £1.00
Duty - £2.67
Retailer - £1.10
Importer - £0.85
PRODUCER - £0.38
Maison ‘Waiting for next train from Paddington’ Rose - £8.00
VAT (20%) - £1.33
Duty - £2.67
Retailer - £1.46
Importer - £1.14
PRODUCER - £1.40
Domaine Du ‘Fuck! the kids have broken up from school’ Rouge - £10.00
VAT (20%) - £1.66
Duty - £2.67
Retailer - £1.83
Importer - £1.43
PRODUCER - £2.41
Bodegas ‘I like Lagar, but I’ve got a date’ Blanco - £15.00
VAT (20%) - £2.50
Duty - £2.67
Retailer - £2.75
Importer - £2.14
Producer - £4.94
Crement ‘just got a pay rise at work’ NV - £25.00
VAT (20%) - £5.00
Duty - £2.67
Retailer - £4.40
Importer - £3.43
Producer - £9.50
...And if we go to the other extreme end of the wine market…
Chateau ‘I’m rich and bored’ 1er Cru 2005 - £100
VAT (20%) - £16.66
Duty - £2.88
Retailer - £18.33
Importer - £14.3
Producer - £48.04
Kaboom! That’s it in a nutshell. If you purchase a bottle of wine for £6.00 the winery has 38p to buy/grow fruit, run a winery and purchase dried goods, but throw £100 down on a bottle they have fifty quid to roll around with. Now of course we’ve missed out some stuff and of course the margin retailers/importers ask for also varies significantly but as a loose illustration we can see how much you need to pay before the producer takes home the largest share of your hard earned money.
The question is, at what price bracket does that producer have enough revenue to start investing in all the things that make a great wine great ? - premium growing sites, handharvesting, state of the art equipment, oak barrels, talented winemakers and viticulturalists. Better still, at what price does the producer have enough money where they don’t have to cut corners? - Ie Using sugar as filler, wood chips instead of oak, juice from concentrate and all the other things that might explain why prosecco hangovers are THE FUCKING WORST.
How long is a piece of string? This is the question that is almost impossible to answer as the cost for these purchases varies massively depending where in the world you are making wine and at what scale you are making wine.
Helpful right?
OK, I concede it would appear that we are chasing our tails a little bit. We have the prices down but what we don’t know is how much it costs to make improvements or where we get the best value. This is true, but what we do have is our own taste buds and for our sins you’ll find the Wolf Wine crew has painstakingly drunk many examples of all the wine styles at all pricepoints (Oh, the sacrifices we make). We can categorically tell you that the biggest jump up in quality is moving from £10.00 a bottle up to £15.00. Thereafter you’ll find the quality does improve but a lot more gradually. That's not to say it’s all rosie after £15.00; we can still find you some total dogshit if pushed.
Is there a ceiling? Is there a point at which you are just paying for the sake of it? We would argue yes. There definitely comes a point where you are purchasing a bottle as an exclusive luxury item, much the same as high-end fashion or ridiculous modern art. This is particularly true when you're buying older vintages of wine from the more prestigious areas of Europe and America. With that said it is much harder to pinpoint where on the pricing scale this might be, again, because the cost of doing business in Western Europe varies massively from the cost of business in say South America or South Africa . However, if you were to ask anyone in the wine trade how much they would spend on themselves you would find very few prepared to spend much over £50/£60 a bottle. That seems to be the sweet spot. Mind you, nobody in the wine trade has any money so we probably aren’t the best metric.
The wine world is huge, and ever changing. The challenges faced by both producers and importers alike continues to fluctuate and flex and navigating that as a consumer is in itself a huge challenge. But the soundest advice that anyone ever gave us, and in turn we can give to you is 1) Buy what you can afford. 2) Drink a little less and spend the savings on buying a better bottle. And 3) buy from a wineshop or wine merchant in person where possible as they have tried the wines and can steer you towards the best vinos whatever your budget.
Drink well and prosper Amigos