Price and Value 3 July 2019

It’s not difficult to understand the problem the average wine drinker faces in trying to discern value when it comes to wine buying. There are no obvious clues or guidelines: buying wine is not like buying eggs (free range/jumbo/packed in dozens) or bacon (streaky/back, priced per kilo). There are delicious and inexpensive wines selling for R50 or so per bottle with perfect varietal characteristics (Porcupine Ridge Cabernet or Shiraz), so fruit definition alone is not a sufficient criterion. Even the use of barrels – once a clear indication of a premium offering (or at least the intention of conveying that impression) – no longer counts for much: oak notes can be cheaply acquired using wood chips, staves or even tannin additives. (Anyway, nowadays geeky consumers want to drink fruit, not the forests of France.)

Taste being largely subjective, it’s easier to persuade consumers by offering them the guideline of price. That’s why a whole field of wine marketing functions with the seemingly irrefutable logic that if the price tag is higher, the product must be better. There’s no one to gainsay it – not even the professional wine critics (most of whom do their tasting sighted, label in front of them, rather than “blind.”) It’s much easier to be convinced that a wine is great if the winery’s brand manager has done a decent job, generating a general consensus that brand A is better than brand B.

Average wine quality has improved dramatically in the past half century. About fifteen years ago I attended a course on yeasts in Bordeaux. One of the lecturers produced a list of technical faults which were common until the 1980s and which had pretty much vanished since then. By way of an example, he said a whole generation of younger experts had literally never encountered a wine which was “ropey.” (For those brave enough to want to know more, “ropiness” is caused by bacteria which exude a mucilaginous jelly-like substance giving the wine the appearance of thick goo: it flows from the bottle like a rope). With ample good quality wine now readily available, you can’t say that wine is cheap because it’s bad, or that wine is good because it’s fault-free.

The fair cost price for most South African wines (assuming you are not trying to amortize a massive vineyard investment) lies somewhere between R60 and R120 per bottle for young white wines and slightly more (say R150) for reds. At the upper point a producer could buy in the grapes at over R50k per ton – more than anyone is paying growers in South Africa (as far as I know), hand-sort the berries and use the best barrels. From these numbers alone it is clear that there’s no connection between the on-shelf price of a bottle of wine and its input costs.

Of course, this doesn’t mean that everyone selling wine for more than R200 per bottle is getting rich. Those who grow their own fruit may well under-recover on their farming costs, those who have a large sales and marketing infrastructure may not yet be able to achieve sufficient volumes to amortise the expense. Then there’s cost of distribution, wholesaler and retailer margins, and the cut that goes to the taxman. However, no matter which way you look at it, there comes a point (perhaps R400, perhaps R450) where either you are being asked to pay for the producer’s stupidity, or else for his cupidity.

There’s an important lesson here from relatively recent history: the generation which bought wine in the 1960s was brought up on a value system honed by the Great Depression and the Second World War. They knew how to hang onto their cash: their anxiety about money ensured they had a well-grounded concept of value which kept their propensity for self-delusion at bay. It’s no surprise to discover that the price of luxury wines today (in hard currency terms) has diverged from good drinking wine by a factor of at least ten.


Research shows that, taken in moderation, wine is good for your health. RMB WineX supports responsible alcohol consumption. © 2019 WineX Pty Ltd

netoops blog
netoops blog