As you probably know, at retail level the bulk of wine sold in Europe is priced EUR 5.00-8.00 per bottle* and is sold through supermarkets (and most often purchased by women which leads to some interesting marketing questions).

I personally would argue that between EUR 5.00 and EUR 20.00 per bottle there usually is a clear relation between an increase in price and an increase in wine quality. I find this especially clear if you use intervals of EUR 5.00

At EUR10.00 or below, the pricing is basically “cost-plus” based. You have to make the wine, then distribute it and then try to make a margin. The larger wineries active in this segment are therefore always on the look-out for cost reductions, such as:

• Higher yields per hectare

• Pressing the last juice out of the grapes

• Using oaking alternatives (oak chips instead of expensive barrels)

• Transporting wine in bulk (bladder tanks) and bottling it near the distribution network where the wine is sold

• Plastic corks instead of real corks

• Light weight bottles/bag-in-the box

• Etc.

But the interesting part is that even to produce a first growth (Premier Cru) Bordeaux (no costs spared) the actual total cost is not more than EUR10.00 per bottle. (see Jancis Robinson’s article: FFR 50 (less than EUR8.00) is the production cost of a bottle of Le Pin). So basically, anything above the EUR10.00 is pure margin.

So, if you make a wine which clearly “tastes” like a bottle of EUR10.00 or more, you have the freedom to set you own price. This NYT article describes it very well. And indeed, some people ask for very high prices for their wine.

Like the Romanée Conti mentioned in the link above, in the case of very high prices, there usually is a combination of scarcity (only 5000 bottles of Romanée Conti per year), outstanding quality, but also “reputation”, that drives the price up.

Fascinating for example this story about 2 almost identical wines, one being about 10x more expensive than the other one, just because of the first wine only 300 cases are produced and of the second wine 10.000 cases!

And in case you wonder, as far as I know, the current record for the most expensive (and yes, at 300 bottles per year, very scarce) wine seems to be held by a Spanish wine.

Scarcity alone of course is not enough, otherwise we would see many home-made wines at several thousands of EUR per bottle. Also needed is some form of reputation. “Reputation” is the non-quantifiable, rather psychological element in wine price “acceptance”.

Please note, there is a historical precedent: in 1855 the Bordeaux wine merchants decided to make a ranking of Bordeaux wines, a classification of first growth (Premier Cru) wines, second growth, etc. based on the prices the various wines had been fetching until that year. And with a few exceptions, after a review of the classification in 1995, this ranking is still valid today!

“Utram bibis? Poculum an utrem?”
[paraphrasing John Fowles** ]

Already hinted at in the story about the 1855 Bordeaux classification, there is an hard-to-accept oddity: people tend not only to think, but also physiologically (!) perceive, that more expensive wines are better. The same wine at a higher price is usually appreciated more than the same wine at a lower price.

This seems hard to believe and that is what wine lover Baba Shiv, a professor of Marketing at Stanford Business School, thought too, so he decided to investigate this in more detail.

In his first trial, he made students taste 5 wines, with different (visible) price tags. In reality, only 3 different wines were tasted, 2 were given twice. Prices for one and the same wine ranged from $5 to $45. No surprise: the same wine at the higher price was systematically preferred.

Professor Shiv started to wonder if this was not some sort of psychological trick, played by the mind, a “short cut” to reach an opinion on the quality of the wine quicker. In other words, the mind “convinces” the wine taster that such a higher priced wine tastes better, even if there is no neurological reaction in the brain, indicating a true feeling of pleasure.

Therefore he decided to repeat the test, but this time while scanning the taster’s brain during the tasting, to see if the “pleasure parts” of the brain would lighten up. To achieve that, an actual MRI scan was done during the tasting. One wonders what the experiment must have looked like: 5 glasses of wine with a long straw going into the MRI scanner?

The end result was astonishing: tasting the more expensive version (of the same wine) did indeed lighten up the pleasure part of the brain more than the inexpensive version of the wine did. More expensive = really more pleasure!

This is wonderful news for winemakers, but it needs guts to implement such a high price strategy.

I, on the other hand, do not have to deal with this issue, as I am not selling nor commercializing my wine. I do have a wine that would be worth more than EUR10 per bottle, if sold, and I have very little of it (scarcity!). I could therefore fantasize about asking a few hundred Euros per bottle for my wine, but then I would have to be ready to accept potential refusal from the customer/market side. Not ready for that.

* In Europe, excluding Scandinavia, UK and Ireland

* * Translation: “What are you drinking? A glass or the bottle?” Paraphrased from The Magus, by John Fowles: “Utram bibis? Aquam an undam?” (Translation: “What are you drinking? The water or the wave?”). A bit pretentious, but I like the original so much that I had to use it.