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The Mystery of Wine Prices
By Robert Whitley
Aug 2, 2016
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 A headline in a local fish wrap recently caught my eye: "Why wine costs what it does."

Ah, the mystery of wine. Is a $100 bottle of cabernet sauvignon really ten times better than a $10 bottle? The answer to this eternal question hardly comes down to numbers.

The most important factor to consider is place. The most expensive wines come from somewhat hallowed ground, in my humble opinion. Bordeaux, for example, is revered around the world for the exceptional quality and longevity of its finest wines. Those would be the classified growths from the most famous chateaux.

The fame of the Bordeaux first growths, such as Chateau Lafite, Chateau Latour and Chateau Mouton, is such that they've become trophy wines, purchased either because of their potential to increase in value on the auction market or to impress wealthy business clients. Any one of the three routinely fetches $1,000 or more per bottle. The most expensive Bordeaux, Chateau Petrus, costs double that.

How much better are they than a top-notch Napa Valley cabernet sauvignon, such as the Nickel & Nickel Martin Stelling Vineyard Cabernet Sauvignon that retails for about $150? As a matter of taste, a person may prefer one to the other, but the wines are comparable by any measure.

So, the fame of the wine's origin plays a significant role in the price, yet it's not the only factor.

Quality is determined by the specific site within a general location. Not all Bordeaux are exceptional, hence Bordeaux grapes grown in what are known as "satellite appellations" can be hit or miss, which is reflected in the price. The same can be said of the wines of Burgundy, where the hierarchy of vineyards is well-defined.

The top level for quality is grand cru, followed by premier cru, cru villages and generic Bourgogne. These classifications were established generations ago. I am willing to pay more for a grand cru Burgundy because it's better.

Other distinctions that affect price aren't as straightforward, particularly in the New World.

Is that $150 Nickel & Nickel Cab better than a $75 Flora Springs Trilogy or a $45 Smith-Madrone Cabernet from roughly the same area? Perhaps, but not to the degree you might think. Flora Springs purchased its more than 1,000 acres of vineyards in the Napa Valley decades ago, when land prices were cheaper, as did Smith-Madrone. Both wineries can charge less for their wines than Nickel & Nickel and make the same profit, everything else being equal.

But, there's the rub. Everything else isn't equal.

Red wines that would benefit from barrel aging cost more to produce, depending on the type of oak and the age of the barrel. A new French oak barrel from a top forest can cost $1,000, or thereabouts. One barrel holds approximately 25 cases of wine. As follows, a relatively miniscule production of 500 cases would require 20 barrels at a cost of approximately $20,000.

American oak is considerably cheaper, but the taste imparted might not be to your liking, so there is a strong likelihood you would buy into the belief the additional expense is worth it. Or not.

Finally, there is the question of volume and how it affects price. Vineyards with low yields, say one to two tons per acre, produce more intense flavors. Higher yields make for lighter, generally less interesting wines.

Vintners who crop their vines to achieve lower yields typically charge more for their wines because they make less profit, while the cost of the land is the same and the cost of labor is likely a bit higher. Conversely, producers shooting for higher yields tend to aim for the mass market with lighter, less intense wines that can be sold at a much lower price due to high production volumes.

Whether a pricing decision is correct or not is ultimately decided by the consumer. It's up to each individual to decide what a wine is worth and whether it fits the budget. I might enjoy Napa Valley cabernet, but my budget might dictate that I look to Sonoma or Paso Robles instead.

The tricky part for the wine enthusiast is identifying wines of equal quality at dramatically different price points. That's the mystery, and much of the fun, of wine.

Follow Robert on Twitter at @wineguru.