How A $100 Wine Sells For $500
Wednesday - April 20, 2011
I’m in the cellar of one of the finest winemakers in burgundy. He makes wines that are not only rare, but delicious, and his wines command quite a bit of money on the auction market. so i ask him, “How do you feel about your wine going for thousands of dollars at auction?”
He looks at me with his deep, intense brown eyes, dressed in dirty jeans, a well-worn flannel sweatshirt with hands eternally stained with earth and grapes. He pauses and looks away for a moment, then returns my gaze, saying, “it’s crazy!” but that is exactly what happens to the most coveted wines in the world - many of which are made in small quantities by the hands of a few individuals who live humble and non-ostentatious lives, the opposite of what some would think they deserve.
Here is how it works. Let’s say a winemaker makes four barrels of a Grand Cru burgundy. He sells his wines to an importer for $100 a bottle. the importer then sells it to a wholesaler marked up around 30 percent. then the wholesale sells it to a retailer marked up another 25 percent. then the retailer sells it to the consumer marked up another 25 percent. by that time the bottle goes for about $250. it is pretty elementary to understand the supply chain. it works the same way with many other products as well, not just wine.
With wine, however, there is a secondary market - auctions. these four barrels of wine are so highly sought after, and nearly impossible to acquire at the retail level, that there are people who are willing to pay even more than $250. this same wine could go for $500 a bottle at the auction market, assuming the wine is well-made, and maybe even more so if it is highly rated.
Most people would think that the vintners who made the wine are swimming in pools of cash. they must be flying on private jets and driving expensive cars. Granted there are some very wealthy people who make coveted wines, but there are many more who realize a small fraction of what the auction market will pay for their wines.
there have been instances where the winemaker realizes this and jacks up the price of his bottle to the level that the auction market will bear. this can eliminate the broker level and even the wholesale step, going direct to consumers. it’s great if it works, but many are insecure about having to sell wines themselves. After all, they are winemakers, not wine sellers. they don’t have the time or the strategy to sell directly to consumers. they may be even a bit frightful or humble to sell their wines for that much money, fearing it may not sell at all at that price.
I predict that more producers will begin to sell their highly prized wines directly to consumers. everyone will be on the World Wide (Wine) Web. it is the only way that they will be able to realize their own wines’ full market value.
Perhaps then the prices won’t be as “crazy” to them anymore.
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