Wine Pricing

We've all heard of the wines that cost seemingly unbelievable sums. From the cult Cabernets of California (Screaming Eagle, Harlan) to the Super-Tuscans of Italy (Sassacaia, Vigorello) to the Prestige Champagnes (Moet's Dom Perignon, Roederer's Cristal), wines the world over command prices that would seem to indicate impossibly superior quality.

This is not to suggest that these wine are not good. Being fortunately lucky enough to taste many of these wines, I can tell you from first-hand experience that they are usually fantastic. But there is no level of possible quality that can determine their enormous expense. So what makes these wines so pricey? Simple (and in some cases not so simple) economics.

Three of the reasons that I've seen to justify exorbitant wine prices are as follows:

Supply and Demand: This is, of course, the most obvious. It is a factor in all high-priced wine that I can think of. The simple fact is that the winemakers who spend the money (and it costs a lot of money) to create high-quality wine often do so in order to command a premium. This creates the first pressure for demand that can outstrip supply. If this is then joined by the fact that the wine is created in a specific delimited area (as are all of the great wines of the Old World, as well as a growing faction of wines from the New World) that is inherently limited in size and thus in the sheer quantity that can be produced in any given year (most of these areas are also limited in yields per acre as well, and the whole process is abetted by the fact that lower yields almost invariably produce a better wine), then you necessarily have a system that drives demand up much further than supply can ever possibly be.

Futures: This is one of the more complicated reasons for wine pricing. It's only a fixture in the Bordeaux wine region in France, and is a highly individualistic system in determining the value of some of the highest-priced wines in the world. The en primeur, or futures market is pretty much what it sounds like. The most prestigious (read, most expensive) wines in Bordeaux are sold in part before they are bottled. They are released in three subsequently more expensive lots while the wines is still in barrel (and thus not finished and of relatively speculative quality) that go towards determining the final price on the market. The futures can be directly linked to quality - the stellar 2005 vintage of Chateau Lafite-Rothschild sold for record prices, but the merely average 2006 and 2007 vintages were sold for prices that far outstripped their quality, simply because the buying of futures was in fashion for the noveau riche buyers of the time.

Prestige: This category ties back into the supply and demand cycle as well as hitting on the futures market. However, it extends beyond both because the wine can be of less-established quality. Many of the prestige-based wines come from non-traditional areas, such as the IGT Super-Tuscans or the wildly expensive cuvees from the enormous Napa Valley AVA in California. These are wines that are difficult to obtain and thus highly priced more because of clever marketing than any necessary inherent quality. Keep in mind that these wines are certainly well made, but by definition monetarily exceed any logical sliding scale that accompanies the pricing of wine if you consider the sheer scale of drinkablilty of wines priced from $10-$2500.

The long and the short of it is that if you can't afford the most expensive wines in the world, you're not necessarily missing out on all that much. Gorgeous wine experiences can be had within the means of most people and the majority of the politicing that goes along with exceptionally expensive wine proves to be noise that isn't necessarily worth the effort.