Does Cost = Quality?

A lot of the questions I get asked are about the cost of a bottle of wine.  What makes a $40 wine worth $40?  Is a $50 wine twice as good as a $25 of wine?  How come two buck chuck is so cheap?  

Let me first talk about the cost of wine.  A lot goes into the cost of a bottle of wine.   

Chateau Margaux - One of the most expensive wines in the world.

First off the land that the grapes grow on impacts the price.  Using California as an example, an acre of land in Napa will cost several times what an acre of land in Livermore County costs.  The taxes on that land are also much greater.  That additional cost works it's way into the price of the wine.   

The cost of the grapes works its way into the price of a bottle of wine.  Because they are considered some of the best grapes in the world grapes grown in Napa are some of the most expensive grapes in the world.  Because they don't have much of a reputation grapes from Livermore county cost much less.  Really cheap wines like "Two Buck Chuck" buy bulk grapes or overstocked grapes from anywhere they can find them to make their wine and that is why they cost less.   

How the grapes are picked impacts the price.  Wines made from grapes that are harvested by automated machines that are not selective about the grapes that are picked cost less.  It is more expensive to hand pick grapes and use only the best ones. Obviously that makes a bottle of wine cost more.  Wines like "Two Buck Chuck" are not hand picked and they are not very selective in the grapes that they use.   

Where the wine is aged and how long it is aged adds to the price of a bottle of wine. A lot of wine has traditionally been aged in oak barrels before the wine goes into the bottle.  As a general rule wines that are aged in oak barrels, particularly new oak, cost more than wines aged in stainless steel or cement.  In order to recover the cost of a new oak Barrel you need to add at least $5 to the cost of a bottle of wine.   Oak is desirable because it adds a smoothness as well as vanilla and spice flavors to the wine.  How is it that you can get a bottle of wine with that oakey taste for $5 or less?  By not aging it in oak barrels but by adding oak flavoring or making up a huge teabag with a mixture of glued together oak sawdust that floats in the stainless steel tanks with the wine prior to bottling.   If that bottle costs $10-$20 chances are it was not aged in a barrel but they added wood chips or  barrel staves (one of the strips of wood that makes up the barrel) to the wine as it ages in a stainless steel tank.  If a wine costs more than $20 chances are it was aged in an oak barrel.   

And that is where all logic and reason ends when it comes to wine pricing.   

The rest of wine pricing has to do with less tangible factors like the reputation of the area.  Since Napa has a better reputation than Livermore they charge more and people are willing to pay more.  Marketing.  A winemaker that heavily advertises their wines has to charge more for the wine to recover the marketing costs and since people are more willing to pay for a wine they have heard of (because of the marketing) they are willing to pay it.  Scarcity.  People are willing to pay more for something when it is hard to find or there is not much of it so small boutique wineries, or small production wines from large wineries, command a higher price.  There are also several other factors such as the reputation of the winemaker, wine ratings, celebrities associated with or endorsing the wine, and other factors that impact the price of a bottle of wine.   

"Two Buck Chuck" - one of the least expensive wines in the world.

All of this brings us to answering the question is a $50 wine twice as good a $25 bottle of wine?  I'm going to answer that question with the official "Gasper The Wine Guy" rule of wine pricing and quality.  This is based on my experience drinking wine and my work as a Wine Guy and as far as I know these are my thoughts and my thoughts alone.   The rule is this: A $10 bottle of wine is 50% better than a $5 wine.  A $20 bottle of wine is 25% better than a $10 bottle of wine.  A $40 bottle is 12.5% better than a $20 bottle.  An $80 bottle is 6.25% better than a $40 bottle.  As you can see way the rule works is that every time the price of a bottle of wine doubles the incremental quality difference in the price of the wine does not keep pace.  If I had continued the example above a couple more iterations you would have seen virtually no quality difference.  (If I can get a mathematician out there to draw me up a formula for this it would be most appreciated).

So why do people pay hundreds even thousands of dollars for a bottle of wine when there may not be a huge difference in quality?  A lot of the less tangible factors outlined above play into it.  People want the thrill of drinking a wine that few other people will ever have the opportunity to drink or that was produced by a rock star winemaker.  Because they can.  People like to celebrate their success by drinking wines other people can't afford.  It’s the same reason people by Maserati's and Bentley's, it makes them feel good and they can show everyone around them that they have made it.  It is a hobby.  Just like people are fascinated by collecting coins, collecting art, or collecting cars, people collect wines.  They may may not ever drink the wine but they get a great deal of pleasure out of going into their wine cellar and knowing that they possess a  particular unique, rare, and expensive bottle of wine.  It is an investment.  Like the stock market, flipping houses, or buying rare collectibles investors buy wines in hopes of the price of those wines appreciating in the future so they can then sell the wine at a profit.     

This is just scratching the surface but I hope it helps you better understand why a bottle of wine costs what it does and how to make a better decision on how much you want to pay.