The Economics of Good, Affordable Wine

He makes grass grow for the cattle,
and plants for man to cultivate—
bringing forth food from the earth:

wine that gladdens the heart of man,
oil to make his face shine,
and bread that sustains his heart.
(Psalm 104.14-16)

An interesting article in Slate by Mike Steinberger entitled The Great California Wine Mystery: Why superstar West Coast vintners don't (or won't) put out inexpensive bottles.

The article wonders why elite vintners in California, whose bottles sell for hundreds of dollars, can't (or won't) put out good bottles of wine in the $15-20 range. And I asked, "Yeah, why don't they?"

As Steinberger points out, this is particularly puzzling as many reputable European vintners do produce excellent and affordable wines:

In Europe, some of the most celebrated vintners put out modestly priced wines alongside their loftier offerings. Jean-Louis Chave's Hermitage (red or white—take your pick) sells for hundreds of dollars a bottle, but he also makes a delicious Côtes-du-Rhône that retails for about $18. Erni Loosen has an excellent $10 riesling. Aubert de Villaine, Christian Moueix, Dominique Lafon, and Alvaro Palacios all produce wines that are within reach of the budget-conscious. Nor is this trend confined to the Old World; David Powell, one of Australia's finest, puts out a quartet of sub-$20 wines. But among California's superstar vintners, there is almost no one making wine for the masses.
Given our new budget consciousness in a difficult economy you would think a quality budget wine would make sense:
What makes this topic especially salient now is that California wines priced above $20 have effectively become display items—they are still on the shelves, but not many people are buying them. Americans haven't stopped drinking wine as a result of the Great Recession, but they have scaled back what they are willing to pay; $15 is the new $30. It thus seems the ideal moment for an acclaimed California winemaker to emulate the likes of Chave and Loosen (or Draper, for that matter) and to come out with a stellar bargain wine.
Steinberger goes looking for answers. One of the reasons he discovers has to do with the economies of acreage:
Krankl suggested that one reason the Europeans are better at value wines is that they are often working in vineyards that have been family owned for generations and that were paid down long ago. By contrast, many of the better vineyards in California were developed or acquired fairly recently, and land is expensive. According to Krankl, an acre of prime vineyard on the Central Coast is a minimum $25,000 these days and more likely closer to $50,000. When you factor in planting, farming, and labor costs, the road to profitability gets even longer. A $20-or-under wine would really only be economically feasible, Krankl said, if it could be made in large volumes, which goes some way to explaining why this segment of the U.S. market is dominated by corporations like Gallo, and why boutique wineries such as Sine Qua Non direct their efforts elsewhere.
And there are other reasons as well. Check out the article for more.

I realize a post about wine doesn't fit Lent, but some people do need wine for Passover observances (Jewish and Christian). See here for a nice guide for Picking the Perfect Passover Wine.

This entry was posted by Richard Beck. Bookmark the permalink.

3 thoughts on “The Economics of Good, Affordable Wine”

  1. And then, Europe loves it wine, unlike the Americans. Americans probably like beer, more...(just a hunch). Supply and demand, sometimes drives prices down because there are more average people (the "masses) that love wine...

  2. Stop the presses! You mean that supply, demand, product quality, and production costs all figure into the retail price of wine? Who knew?

    This will come as quite a surprise to our young president and his golden-thread tailors. Imagine him taking account of all of those concepts in his health-insurance reform proposals.



  3. qb,
    As best I can tell, looking over the plan, it is a very moderate proposal. Very similar to the one the Republicans proposed as the alternative to Clinton's plan in the '90s. (Thus proving again my contention that Obama is a pragmatic moderate.) The core of the plan does two things:

    1) Prevents the worst abuses of the insurance companies (e.g., dropping people for pre-existing conditions or if they get sick). A good thing I hope you'd agree.

    2) Allows individuals to by into a coopts so they can get some bargaining power at the table with the insurance companies (the way a big business can do). A good thing I hope you'd agree.

    Of course, nothing is free. But the median family incomes has been flat-lined for over a decade and insurance costs are going up and up. Something needs to be done and, of all the ideas on the table, this one seem to get a lot done for the American people. (We can also note that Obama is not pushing the public option, causing the liberals to scream blood murder which, again, proves my point: Obama is a pragmatic moderate). To date, I've not seen a plan offered by the Republicans that is more that a bandaid. I guess we'll see tomorrow what they show up with. Hopefully both parties will get the best ideas on the table, find a compromise and get this problem fixed.

    In the end, I don't care a lot about the ideological debates. The system is broken and I'm behind anyone who is making serious, nuts and bolts proposals to help hurting individuals and families. The horror stories out there are too close, too real and too important.

Leave a Reply