The price is right, somewhat

The price element cannot be overlooked in wine. I mean, people do not pay me to drink so I have to pay for it myself with hard-earned money from my Clark Kent job, which means I have to factor in the price of the bottle in my appreciation of the wine.

And wine can get pricey, it’s probably an issue that puts people off from wine, they expect that good wine is pricier and feel they cannot afford a good bottle. They read in a magazine that a bottle of 2009 Chateau Margaux is selling for $195.000 and the image sticks. There is a certain level of truth to that belief that more expensive means better, but not a whole lot. It is of course more complicated than that. I believe a lot of it has to do with perceived quality versus real quality of the wine.

What factors in the price of a bottle? Since I’ve been discussing Burgundy lately, let’s start with that. In Burgundy, parcels are small, the vineyards are small, and thus production is small. By simple virtue of the Offer and Demand law, prices for what is rare goes up. In this case it’s the offer side of the equation that is driving the prices up, what is rare is usually more expensive.

On the other hand, if you look at Bordeaux, yields and production are much larger but prices for the grand chateaux are still incredibly high. That is because they are recognized as brands. Like a Louis Vuitton bag is different from another handbag, a Chateau Latour is different from any other wine. People recognize and value these brands; they associate it with high quality, whether real or perceived, and thus are ready to pay more for it. Here it’s the demand side of the question that drives prices up.

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Rarity and recognition, these are the two forces driving prices up. This does not mean however that you cannot get a good bottle for a reasonable price. When I mention wine as a brand that means it is subject to the same laws as brands. Brands go through trends and fads. A wine that is popular and demanding high prices now may see its perceived value drop down in the future whereas its real value will remain the same. So looking for downward trends might actually be a good way to score bargains.

Another good idea, for high level Bordeaux is to look for “second vin” (second wine). Most of the Grand Chateaux produce a set number of bottles per vintage. Why ? To keep the value of their brand of course by not producing too many bottles and driving their prices down. When they have more grapes than needed to produce that set number, they produce a second wine. This second wine is made from grapes from the same vineyard and is produced by the same people, second wines are very similar to the main wines in everything but price. My favorite second wine is Baron de Brane, the second wine of Chateau Brane-Cantenac. A bottle of the 2009 vintage is worth $70 for the main wine and $27 for the second wine.

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Besides, let’s think things through for a second. You’re at the wine shop; you see a $20 bottle and a $40 bottle. Is the $40 bottle going to be twice as good as the cheaper one? Probably not, but what is true is that its perceived value is in fact twice as high. Another example, you decide to buy both these bottles (you big spender, you!) and you decide to invite me over to drink them both (Thank you), It turns out we find the two wines are very similar in quality, both equally enjoyable. Which one is the most impressive bottle then? Of course it’s the $20 one because it has the best value for money.

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One thought on “The price is right, somewhat

  1. Pingback: Wine Trivia : small is beautiful | Wine Ramblings

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