Jose Lopez  
Grape Picker
Posts: 23
 | | 03-13-2003 04:57 PM |
| I was wondering, what drives the price of wine? I've been researching this subject and haven't found a satisfactory answer. Maybe there isn't one...  | | |
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stemor
Collierville, TN
Wine Connoisseur
Posts: 5564
| | 03-13-2003 05:04 PM |
| Supply and demand. There's no logic to it.
| | | Cheers, y'all | |
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ChangeMe
Grape Stomper
Posts: 196
| | 03-13-2003 05:11 PM |
| The price of a bottle of wine can be calculated using the following formula:
P=[(C/S)xD]^E
where P=price, C=cost of producing a bottle of given wine, S=supply, D=demand, and E=ego of the winemaker.
Unless the winery has made recent acquisitions of land in Napa. Then the resulting price must be further multiplied by the constant "c", where c= the speed of light.
P=c[(C/S)xD]^E
Hope this helps. | | | |
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stemor
Collierville, TN
Wine Connoisseur
Posts: 5564
| | 03-13-2003 05:14 PM |
| dammit, PV, I left out "c"! Uncle Albert would've been soooo disappointed in me!
| | | Cheers, y'all | |
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TCK
Barrel Filler
Posts: 1279
| | 03-13-2003 05:17 PM |
| Supply and Demand,
However wineries are often able to work through short term fluctuations of supply and demand. Sorrt of like a fixed currency, they PEG there price at a certain value and try to hold strong. The risk is that eventually if the downward pull becomes to strong there will be a massive correction.
Bordeaux is an exception here. Pricing is much more elastic for these wines. They seem to represent the worlds current demand.
Outside of these basic economic principles other factors that individule wines use for pricing are:
Region
Varietal
Pedigree of Label
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Jose Lopez
Grape Picker
Posts: 23
| | 03-13-2003 05:20 PM |
| May be this is the main factor:
E=ego of the winemaker.
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JimmyV
Central Connecticut
Wine Connoisseur
Posts: 5168
| | 03-13-2003 05:26 PM |
| | plusvini: Somewhere in your equation you need to put in an "R" to account for Parker's rating and an "r" to account for WS's rating. Remember the '96 Cinq Cepage fiasco. The suppy was huge, and the price was raised before there was a demand, simply becasue WS gave this WOTY honors. Had the wine been released at $27, and later bumped becasue of the demand, the supply/demand curve thingy would have held true. But this wine was released at 3x the previous vintage, all because of ratings. | | | Beta testing a new signature. | |
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Jose Lopez
Grape Picker
Posts: 23
| | 03-13-2003 05:35 PM |
| Thinking in terms of R (R.Parker) and r (WS)
Then E = PPQ^R (or r)
In which PPQ is the Producers Perception of the Quality of his/her product.
So the price of wine may be more subjective than objective.
...and I haven't touch a glass of wine since yesterday!
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JimmyV
Central Connecticut
Wine Connoisseur
Posts: 5168
| | 03-13-2003 05:41 PM |
| Oh. And one more thing. There seems to be some force in the universe that dictates that if you were successful in some prior business wholly unrelatred to wine, and decide to buy land in Napa and start a <1,000 case operation, you must price your premiere release at $100+, or no one will take you seriously. Neither demand nor ratings play a role, because there are neither. | | | Beta testing a new signature. | |
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David Niederauer
Los Gatos, CA
Master Sommelier
Posts: 15756
| | 03-13-2003 05:46 PM |
| Yes... Let's see the formula with the Q factor. Are there three Q factors? #1 winemaker's perception. #2 critic's perception. #3 our perceptions.
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ChangeMe
Grape Destemmer
Posts: 89
| | 03-13-2003 06:54 PM |
| I always assume there is a factor involved like there is with art. I have a friend who is a painter and when he started showing and selling pieces in galleries and shows, he was told to price his pieces quite higher than he thought they were worth - not as a bargaining ploy. Suddenly, when he raised his prices from about $400 a piece to $1000, people started lining up and buying his works that previously sat for months.
So I would guess that regardsless of cost, a serious winery would be tempted to sell any wine it thinks is better than mediocre for greater than $15 USD.
Q: How many people out there would walk into a wine store and buy a $5 bottle unless someone knew in advance that it was a great QPR wine?
Bass | | | |
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love_cab_chard 
Master of Wine
Posts: 12582
| | 03-13-2003 07:26 PM |
| Quote:
Q: How many people out there would walk into a wine store and buy a $5 bottle unless someone knew in advance that it was a great QPR wine?
About 99.9% of the people that buy Wine. We are the minority. A very small minority. | | | |
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Bob Bressler
Napa Valley
Wine Lover
Posts: 4889
| | 03-13-2003 07:30 PM |
| | since it is fun to build these formulae, you should also differentiate between the WINEMAKER's view of the product and the VINTNER's view, which may be quite different. | | | |
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ChangeMe
Grape Stomper
Posts: 196
| | 03-13-2003 08:31 PM |
| To take in to account WS and RP ratings: the closer the score comes to 100, the closer the price reaches infinity.
The formula for that kind of relationship requires calculus and I'd rather not ever go there again. One year was enough for a lifetime. | | | |
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Jose Lopez
Grape Picker
Posts: 23
| | 03-13-2003 09:15 PM |
| Quote:
Q: How many people out there would walk into a wine store and buy a $5 bottle unless someone knew in advance that it was a great QPR wine?
This is why I'm asking about what drives the Price; because I've been able to get a number of bottles of wine priced between $5 and $10 from Chile, Australia, Spain, even France that (IMHO and K) can go head to head with wines priced between $11 and $20.
I have to admit that I never have tried anything priced over $20. Maybe if I try something over that line, I may "See the Light..." (or something!). | | | |
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RawReds
Grape Fermenter
Posts: 646
| | 03-13-2003 09:55 PM |
| | all the more power to you JV! once you have a $75 95+pt wine.. it'll rock your world... and your bank account will never be the same. | | | |
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ChangeMe
Grape Stomper
Posts: 196
| | 03-14-2003 12:04 AM |
| | Labour and land costs in California vs. South America are significantly different. | | | |
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Jeremy Matthew
Barrel Sampler
Posts: 2067
| | 03-14-2003 01:00 AM |
| US labour costs are twice that of NZ or Aussie. Also it seems that the demand in the US increases as you increase price, irrlevant of quality- maybe not irrelevant, but certainly with little respect to.
Maybe its because a large percentage of more wealthy buyers have little knowledge of wine outside of , if its expensive it must be good. Branding seems to have a huge impact- look at Cloudy Bay in NZ. Few NZer's buy it because there are sav blancs out there of equal if not better quality but are half the price. Thornbury was the same until WS put it in the top 100 in 2001 , same with Lawson Dry Hills. However all good for them, they get more money and people like me find other wines for cheaper. That is what I am paid to do afterall.
I think media and public opinion and marketing have huge effects on the price.
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JonesWineNo1
Sommelier
Posts: 8568
| | 03-14-2003 04:14 PM |
| Quote:
Also it seems that the demand in the US increases as you increase price, irrlevant of quality- maybe not irrelevant, but certainly with little respect to.
A little hyperbole is expected but does the foregoing statement really communicate what you intended to convey? | | | |
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Bob Bressler
Napa Valley
Wine Lover
Posts: 4889
| | 03-14-2003 07:04 PM |
| It is certainly true that a couple of low production wineries recently made statements about how a significant fraction of their wine was being flipped on release - and so jacked up the price to “keep some of that money” for themselves. But, if you take out the corner cases and those few who forgot to look at current market data, I think there is more correlation between pricing and consensus quality than you might think. I bet if you take buckets like $60-70, $70-80, $80-90, etc. and put the consistently good California cabs in there, it will track pretty well with quality.
Note that I said “consistently good” – meaning those with a track record. New producers may not have had time to readjust their prices with market demand.
\bob | | | |
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