Napa Cabernet Sauvignon Wine Vs Grape Pricing
I am sure this is not the exact science behind pricing, but it’s insight …enjoy …
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An interesting read, thanks for that. But no, I already know how Napa wine is priced by most producers, and I’ve known for a long time. They throw shit against the wall and see what sticks. There are exceptions, no doubt, but most Napa wines are priced on the “shoot the customer first, discount later” premise.
EGO -
And I will, of course, take exception to some commentary here. One cannot just make an assumption because “it’s Napa.” I am not sure why there appears to be such angst over the pricing of wine. Not worth it to you? Don’t buy it! Spend your money on a seat at the World Series…or a trip to Piedmont, or a private school for your kid. Whatever. Other than the fact that this is a wine board, I continue to be amused at the outrage regarding wine pricing.
It’s also funny how so many people continue to hold on to the belief that wine pricing is somehow related to the cost (grape prices) of producing it. They are unrelated. Wines are priced at what the winery/business can get for them. It’s market driven. The cost of the grapes is only important to the business as they need to ensure they make a profit. Otherwise they won’t be around for long…
Maybe people think the two are related because some wineries use the grape cost as an excuse for raising prices. If you believe that…
I think the biggest issue you will run into is, especially on a wine board like this, is comparative value. Obviously there are other regions in the world that get the same criticism, especially Burgundy and Classified Growths, so Napa is really no different in that case. I love Napa Valley Cabernet, but do feel that there is a very, very large percentage of the wines that are becoming grossly overpriced. It’s obviously a very expensive place to produce wine, especially if you don’t own your vineyards outright, but when you start hitting $300 - $500 - $600 a bottle - there is more than a little ego involved.
So yes Merrill - they are not worth it to me - so I don’t buy them.
Comparing the cost of grapes to the price of wine is like comparing the cost of chicken to the price of a restaurant entree.
Oh I definitely look at chicken searcher pro before I order off the menu.
I’ve never heard it put that way, but that’s quite a good analogy.
If I am not mistaken, Beckstoffer sets his customers’ bottle pricing by the price per ton they pay for ToKalon fruit. Or maybe their intended bottle pricing is a function of the per ton pricing/charging. I am quite certain that at least at some point in the past, there was a correlation between the two, covered by contract. I think it may have been Piper who posted on that some time ago.
But, I would have to say that in general, fruit costs are only one of the items a winery considers when they consider pricing.
And in general, I believe wine prices are market driven, not cost driven, as are so many products. Did a seat at the World Series COST any more than it did during the season? I don’t think so. One can make a sale if there is demand for an item.
Thomas, I mostly agree with you. But there are plenty of us out there producing (some of us are growing) excellent Napa Cabs at a fraction of your $300 plus number. Mike Smith’s Myriad and Quivet, TRB’s Rivers-Marie, Jean Edwards…on and on. EMH included! My opening price for my single-vineyard, estate-grown Cabernet is $70/bottle. I moved to $135/bottle for a special label this year (20 case production) and that is far less than $300, I think you will agree.
Take a serious look. Yes, there are some ego wines out there, but it is not all that. Many of us have built our businesses with integrity and a desire to make a living. I think you will agree that broad generalizations serve no one.
personally I feel that only commercial mass production wineries have the close relationship to the price per ton and the price of the bottle … the grapes cost 500 a ton the bottle can be sold for $5 … if the cost per ton is 700 the price per bottle $7 … so it used to be divide 100 into the fruit price to get price per bottle…
I price wines by demand and perceptive quality in relation to existing paradigm … a wine I sold for $218.00 a bottle is the most expensive bottle in the FLX if not the state … how was it priced was by market demand for perceived quality and rarity …
boutique or cult wines of high quality are priced by the same matrix … market demand for perceived quality and rarity … NAPA prices did not happen overnight, they evolved over time … if I was to price wine in NAPA I would not sell a bottle for less than $100 and most likely $150-$175 per bottle … why ??? because of the cost to do business and perceived market pricing …
it’s a wonderful thing for art to sell like this … I view wine like art the value being the most the artist can get for the work … it’s a wonderful thing to see so many artists making a living …
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Beckstoffer is in the happy position of a commodity producer turning into a branded producer, and doesn’t have to price his offerings as if they were potentially substitutable. They typical producer of any commodity - coal, oil, wheat etc. - doesn’t have that luxury and has to take what the market prices are. His pricing doctrine reminds me of Intel’s when Andy Grove started monitoring the end margins of his computer manufacturer customers. If he saw them getting better profits than he was, he’d raise the price for his chips, under his view that the CPU was the real hard part of the computer to make, and the rest surrounding it was fungible. It also helped that they had set about branding their part with the Intel Inside campaign.
Beckstoffer had pricing consultants come in and help with his strategy. These are the same crowd who “help” the Valeants and Mylans of the world though.
As douchebaggy as the Bronco Wine Co. can be, one can see the business rationale for vertical integration there.
I’m with you. I buy very little Napa wine now because the QPR isn’t there. I can find great wines with similar grapes and flavors and ageability elsewhere, in WA for example, at much lower prices. I can get Cabs from all over the world at better price points so that’s where I buy.
Don’t know if it’s still true but AFIK the Beckstoffer rule was that the price of a ton of To Kalon Cabernet was 100 times the bottle’s retail price. So in his case, there’s a direct correlation between the price of his grapes and the price of the bottle, although I suppose it’s the inverse of what most people would think.
But when people talk about “Napa” it’s like talking about “Bordeaux”. There are a lot of vanity projects where people with a lot of money moved in and they’re trying to recoup some of their money, or they’re trying to get their wines out there as a kind of vanity thing. Yao Ming, Darioush, etc. They may not have to sell any wine to live comfortably.
There are others who don’t have that kind of money, who don’t hire consultants but make the wine themselves, and who just make the best wines they can and sell them at a price that allows them to make a decent living. And not everyone is a negociant who buys grapes or juice.
Thank you for the mention Merrill - sorry I did not see your post sooner. Although our business models are different - you own your own vineyard and we have contracts with our growers - we share very similar views on bottle pricing. John and I don’t buy a lot of wine in the $200-300/bottle range - we look at our wines through that lense (we are our target customer). Our customers tell us our wines are a good value based on quality, our fruit sources and peer group (our cabs range from $68-$90). We source from many of the growers mentioned and our blocks are adjacent to some well-known wineries charging 2-3 times what we do (and their costs are far less than ours as our production is only around 600 cases). Greg - I could be wrong but believe the ratio on fruit price is a bit more for To Kalon now - like 150-175 times bottle price.
Here is the article regarding To Kalon.
Thanks,
Ed
great article … 175 X the price per bottle = $ per ton as the new model …
‘Look at it this way’, he says. ‘If you are a winery and you’re charging $350 for a bottle of To Kalon Cabernet, and you’re making roughly 55 cases per ton of grapes (an average that Beckstoffer says holds up pretty well among his clients), your revenue on that wine is $231,000 per ton of grapes you buy from me. I’m not telling you whether to charge $350 a bottle, I’m just asking for my share.’
At his current pricing of 175 times the bottle price, Beckstoffer’s share would be exactly 26.5% of that $231,000.
the key is no wholesale … direct to consumer… if I was wholesalers I would worry…
I know wineries in the FLX that run the 175 X formula and are thriving, the caveat no wholesale … you have lesser quality wineries producing at 80 to 100 X and they are commercial and rely on wholesale …
so if I am seeing this correctly the new pricing comes with special direct to consumer sales as the goal to bring in the same return pre price paradigm shift …
looks like things are a changing after a 50 year run in pricing formulations …
Shalom !!!
Salute !!!