Monday, February 18, 2008

$750 a bottle

On the tail of my last blog entry about being on a winery mailing list, came notification that Screaming Eagle is now priced at $750 a bottle, and the lucky ones still on the mailing list can buy only two bottles.

To some, the price increase is calculated to foil flippers—people who bought their allotted three-pack of the last batch at $500 a bottle, then flipped (sold) a bottle for $1,000, reducing the price of the two others to $250 a bottle.

I find it interesting that the producer would decide that if others not on their mailing list or on allocation were willing to pay $1,000, then they’ve been stupidly pricing the wine too low to those on the mailing list, which says nothing about the cost to produce the wine, or its real value for that matter.

People who claim that this is the producer’s aim expect the wine to be $1,000 a bottle next year, and many of them claim they don’t see why not. The harder blowhards among them use the line, “it’s what the market will bear.”

Sure, it’s what the market will bear. The question I have is why does the market bear it?

Fred Franzia, owner of Bronco Wine Company and Two Buck Chuck said in an interview, "There's not a bottle of wine made worth more than $5. Ten dollars would be a stretch.”

I won’t go that far, or that low, because I know that producing on the Franzia scale he’s right. But for producing on a small scale, he’s dead wrong. With the cost of production today, a stellar bottle of American wine should cost consumers anywhere between $20 and $80, depending upon location, variety, and level of greed.

Still, Mr. Franzia’s sentiment is on target.

Generally, the cost of premium in-demand grapes in Napa topped out in 2007 at $5,000 a ton—the average price was between $3,000 and $4,000.

At $4,000 a ton, the grapes that go into making one bottle would cost about $6.

The oak? Let’s top it at $900 a barrel. That would be about $4 a bottle.

What’s the cost of a good glass bottle, cork, and a capsule? On the high end, about $10—then throw in an expensive, slick label at $.50 a bottle.

That’s almost $21 a bottle for grapes and package.

Remember, this is at the highest end of the spectrum. I might be off a little but only by a few dollars up or down. Then there’s fermentation, time holding inventory, equipment depreciation, labor, and distribution costs to include.

For a wine retailing at $750 a bottle to reap a 30% return on investment, that would mean the rest of the costs beyond $21 for grapes and package would be over $500 a bottle—not bloody likely.

Now, consumers can say that the wine tastes like it should cost them $750, and that’s their prerogative. Can’t argue with subjectivity. In fact, I don’t blame Screaming Eagle, or any other producer who can get away with charging such prices. The producer can’t be responsible for fools clamoring outside its doors.

In my view, wine exists in a parallel universe. I have been consuming it for decades, for its utility and the pleasure that it gives to me. That’s my universe.

In that other universe, people buy wine for additional reasons, the kind of pleasure with which I am unfamiliar: the pleasure of burning money, of begging to be allowed into a private club, or of ensuring that the world know that I have taste, as well as money.

I used to worry over the paucity of wine consumers in America, that it would keep us from developing a quality wine industry beyond the old Martin Ray, Louis Martini, Beaulieu, et al, of sixty years ago. Now that we have a larger wine consuming American public, I worry over the connection between wine and conspicuousness, and whether it will backfire, maybe even feed the ever-bearing flames of prohibition as a reaction to the ostentation.

I’m waiting for the smart California winemaker who labels his product for what wine seems to have become to many: “bling.”

Take a look at this display:


Copyright, Thomas Pellechia
February 2008. All rights reserved.


  1. conspicuous consumption, my

  2. Thomas,

    Perhaps the term "veblen good(s)" is rather apt.

    I just noticed it on that BB we know so well.


  3. Yes, Jay, I saw that too. I think Steve posted it as a tweak...

  4. Thomas, the mantra could have some legs

  5. Googling “Veblen” AND “wine”:

    Veblenisms do indeed have legs !

  6. It's what collectors do, Jay. Others--well, we consume wine, quietly or at least without chest pounding.

  7. Thomas, You may be overlooking a key consideration. See:

    If some/many people have their CNS pleasure centers light up when they think a wine is pricier, there could be more going on here (for some) than simply collectors' snobbery. Remember the Cal Tech studies were replicated with wine buffs in Stanford's wine club, giving analogous results... Perhaps they should have chosen Berkeley instead ? ;-)

  8. Jay,

    How about we coin a new word: "vebling."

    The fact that people generally believe that the higher the price the better the wine is likely connected to the "snob" appeal.

    Collectors are just a notch up the snob ladder! High rollers who do drink the stuff may or may not be snobs, but they certainly can be ostentatious.

    You know, when I operated a winery in the 1980s, if I saw a wine that was moving too slowly at the tasting room, I upped the price to speed up sales. Worked every time...disappointing as a people watcher; great for a wine seller!