What Determines the Price of Wine?

Although wine pricing may seem a big mystery, there’s a method behind the perceived madness. 

From internal winery costs to added fees from importers, distributors, and restaurants or retailers, several key factors determine what a bottle will cost by the time it reaches drinker. We asked four industry experts to weigh in on how a wine’s price is determined, from production to final sale. 

Production costs behind the bottle 

California-based winemaker Joel Burt of Las Jaras says that the final price of his wines are primarily determined by the cost of the grapes. This sentiment is echoed by others across the industry. 

“The cost of land in some areas is very high,” says Roberta Ceretto, director of communications and marketing at Ceretto winery in Piedmont. Ceretto explains that high land prices can be attributed to numerous factors, including lack of availability, as well as difficult conditions (vineyards on steep slopes, for example) which require pricier manual labor versus machines. 

“When [my family] first started to invest in vineyards, the land was not considered a valuable asset, because producers were not conscious of the treasure they were sitting on,” says Ceretto. Fast forward a few decades, and the 5.5-hectare plot of Brunate (Barolo) that her family purchased for approximately $33,000, can now go for up to $1.1m per hectare. 

Christy Frank, advanced sommelier and partner at Copake Wine Works says that a vineyard acre in Napa Valley will be “wildly more expensive” than an acre in Vermont or Wisconsin, which in turn impacts the price of wines from those regions. Sought-after land can also create supply-and-demand issues, which will drive up prices. 

“This supply and demand plays a large role in setting the market price,” says Jeff Porter, sommelier, wine educator, and host of Sip Trip Italy. “No matter the producer, certain parts of Burgundy will fetch a much higher average price than a wine from Friuli,” he says.

Other costs include land prices, labor — including but not limited to full-time employees and seasonal harvest workers — and shipping costs. Porter says energy sources to operate the winery (including electricity and water), as well as packaging costs from glass bottles and labels to boxes, inserts, and additional labels for shipping also contribute to a wine’s base pricing.

Important to note, however, is that a wine’s price isn’t final when it leaves the winery. “In the US market, the multiple mark-ups by the importer, distributor, and retailer or restaurant can add layers onto that cost,” says Frank. 

High prices: merited or marketing?

Although the cost of land, labor, and raw materials generally make up the base cost for producing wine, marketing schemes and simple supply and demand can also play into exuberant costs for sought-after wines. 

“In the end, if the market is willing to pay ‘XYZ’ for a bottle of wine, then that is the price, be it low or high,” says Porter. “I wish that people were not priced out of regions, but unfortunately that is not how the wine economy has ever worked,” he says.

However, some additional costs can be attributed to marketing ploys. Frank says that in an ideal world, higher-priced wines would reflect high-quality farming and provide liveable wages for all employees across the supply chain, from vineyard workers to restaurant workers and retailers — not for flashy marketing.

“Wines [shouldn’t be priced] to generate margins to fund fancy tasting rooms designed by a name-brand architect or pay for flash aspirational events and advertising,” she says, even though the latter regularly rings true. 

Keeping costs as low as possible is important, but most wineries have at least a few costlier non-negotiables that come into play. 

For example, Burt could slash costs by purchasing lower-quality fruit, though he chooses to only work with organic fruit grown in healthy vineyard sites despite it being pricier, to ensure quality wines. “The extra diligence takes time, but is necessary to make naturally produced fine wines as we do,” he says. 

So the question remains: When considering the added costs incurred by wineries, as well as the numerous markups taken from importers and distributors, how can retailers and restaurants help keep bottle costs down for the consumer? 

Porter suggests that restaurant and retail businesses buy in bulk when possible, to create an economy of scale. 

“Accessibility is important to me, so rather than jack up the price to what the market will bear [on high-end wines], I tend to take my normal margin and let these wines hang out on the shelf as little cherries for anyone who happens to wander in,” says Frank. To this end, Frank ensures that her margins on fast-moving wines are robust enough that she can play “a little fast and loose” with pricing on higher-end bottles.

“I think the best retailers and sommeliers right now are highlighting other regions that are lesser-known, but where quality is on the rise,” says Porter. “No matter if your margin is super small, a grand cru Burgundy or cru Barolo will likely be inaccessible to most no matter what.”