BD Value 14.02.2014

The concepts of wine and value do not often share the same space. Just the same, the term “value-for-money wines” is one of the most widely used in producer promotions, and by wine commentators. If you analyse what it really means, it comes down to the claim that a particular bottle offers “better value” than the one alongside it on the supermarket shelf.

The wine component of most brands is usually a fraction of the retail cost of the product. With cheap wines – something retailing for between R20 and R25 in a supermarket – it’s usually about R4 before excise. Packaging comes to between R5 and R7. Transport and handling of the finished product adds a further R5 – R9. Leave a little margin for the bottler, something for the wholesaler-distributor and sales rep, and excise for the tax-man, and clearly there’s not much money for the beverage itself.

Basic bulk wine prices start at around R5-00 per litre. This is a category where the weakness of the Rand now empties the producers’ tanks for them. Accordingly, floor prices move upwards in inverse proportion to the exchange rate. We are talking here about commodity wines, technically adequate but wholly without any redeeming features. If you double what you pay for the bulk wine there should – in theory – be a dramatic improvement in the quality of what goes into the bottle. After all, it costs the same to process cheap grapes as it does to handle better fruit. If a producer is paying R6000 per ton instead of R3000, he’s entitled to be a lot more demanding about the grape quality.

It’s easy to see why the bottle of wine which goes on shelf at R30 could potentially be twice as good as the one selling for R25. But what of the bottle at R35, or even R40? And for that matter, R350 or R400? It would be naïve to think that the fruit component of the R35 bottle costs three times as much as the R25 bottle, and insane to imagine a R400 bottle of wine has fruit at least 50 times better than the supermarket cheapie.

Of course there are other input costs the further up the pricing pyramid you travel. Oak alone adds significantly to the producer’s investment (assuming we are talking about French oak barrels and not staves or wood chips). At current exchange rates this could contribute R30 to the cost of bottle of wine. There’s a reason why punters buy wines which smell as if they’ve been dragged through a furniture factory: the oak makes them taste expensive. Then there are heavy-weight bottles, longer and better quality corks, higher margins for slower moving wines – and the cost of holding them until the market buys into their pretensions.

So where should the wise punter narrow his/her focus, where exactly is the sweet spot in all this? There’s a huge concentration of quality white wine in the R55 – R75 bracket, with the unwooded varieties near the lower limit, and the oaked styles (mainly chardonnay) generally more expensive. There’s real competition at these price points – it’s the next category above the sub-R40 level which is the focus of the supermarket trade – and the pretenders are weeded out swiftly enough.

For red wines – which must be matured for a little longer and where oak ageing is very much part of the process – expect to look in the R80 to R120 range. There’s sufficient margin here for producers to make an effort, and for the distributors to get the wines into the trade. Beyond these price points expect the law of diminishing returns to kick in: though if it makes you feel more comfortable to bite the bullet and pay more, there’s nothing except your e-toll bill to stop you from indulging.

Research shows that, taken in moderation, wine is good for your health. RMB WineX supports responsible alcohol consumption. © 2017 WineX Pty Ltd

netoops blog
netoops blog