More expensive wine has more alcohol

Why does a wine cost as much as it costs?

Development costs - right from the start

The production of a wine can be divided into different phases. The first phase is that you first have to have a winery and grapes. Sure, you say, that goes without saying. Nevertheless, you should think about it for a moment. Because even here there can be huge differences in costs. Do I grow my wine in my own garage or in a hyper-modern winery? Do I rent premises or, as a winemaker, do I take out a loan for the acquisition or renovation of a winery? Do I own three anonymous hectares in the lowlands of Rheinhessen or some parcels in the Scharzhofberg, in the Napa Valley or in Gevrey-Chambertin? The cost of a hectare of vineyard can vary between a few thousand and a few million euros per hectare. It is the same, of course, when buying grapes, because many winemakers do not own any or too few hectares of land and have to buy additional ones. This is common practice in regions like Champagne or the Napa Valley mentioned earlier. Nowadays there are horrific grape prices of seven or more euros per kilo, while in the aforementioned Rheinhessen only a few dozen cents are charged. If you calculate the costs, you can roughly distinguish between the costs of grape production, pressing and expansion, bottle filling and equipment, as well as sales and marketing.

Wine for € 2.99

If a wine is in the shop for € 2.99, you can deduct the following from this: The VAT of 19%, so that € 2.51 remains. Then of course there is the margin, which we set at 35% in food retailing. So we are currently at € 1.63. The costs for filling the wine, the transport, the glass, the labels and the cork as well as the screw cap are around € 1.30 in the basic segment. If we take a dumping price of € 0.90, we end up with € 0.73. However, the producer has not yet made a profit. There are also no chemical additives, yeasts and enzymes submitted, no wages for winery workers, no costs for harvesters, no lubricants and no gasoline. The average price for a bottle of wine over the counter in Germany is currently € 2.92 per liter. All wines that have an EAN code and are scanned are recorded.

Since around 80% of the wine in Germany is now sold through discount stores and supermarkets and many wine retailers also scan their wines, this is a reliable picture. If the content of a bottle, including production costs, is around 70 cents, one can imagine that not much human energy has been invested in making the wine. Such wines can only be produced on large, largely flat areas in dry areas such as La Mancha in Spain, in Apulia or - we will soon notice - on large areas in China. The work in the vineyard is only done by machines there, as is the harvest, which is brought to large wineries that look something like what one imagines the production sites of lemonade producers to be. Possible problems that have arisen through the technical work and the chemical gifts in the vineyard are to be compensated in the cellar by technology and by over a hundred permitted additives. Nowadays, the result is technically clean but in our opinion completely soulless products that by no means deserve the title luxury goods.

Wine for € 29.99 - in the vineyard

It takes more to create character. This more costs money. But how much? The Bavarian State Ministry for Food, Agriculture and Forests created a very good overview in 2014. It divides the costs into basic (approx. 5 to 7 euros), premium (7 to 15 euros) and super premium (15 to 25 euros) and assumes a wage of € 12.40 per hour in its calculations. With basic wine, 7,500 liters of wine are produced on one hectare, with premium 5,000 and superpremium 2,500. In the vineyard, the costs differ mainly in the amount of manual labor.

While there are no additional costs for the basic wine besides standard work and harvesting, there are additional foliage work for the high-class locations, the defoliation, the green reading or the thinning and hand picking. According to this, working with the harvester costs around € 725 per hectare, while manual harvesting costs € 2,500. Overall, the bill comes to € 1.28 per liter for the basic wine and € 6.46 for the super premium wine. Of course, these costs can increase. All you have to do is look at steep slopes on the Moselle, the Douro or the North Rhône, where you can get 1,500 or more hours per hectare per hectare. In addition, in some extreme vineyards - and we sell wines that are often made at the limit - the harvests can be very small, so that it is not around 2,500 liters per hectare, but only 1,000.

Wine for € 29.99 - in the cellar

The whole thing continues in the basement, of course. A basic wine is pressed hard, a top wine only very gently, sometimes hardly at all and only the free-flowing juice runs off. The top wine will mature much longer in the wine cellar after fermentation than the base wine, which leaves the cellar around five months after the harvest. The top wine stays there for about a year, a red wine for two years or more.

This wine is often matured in barriques, the purchase of which can cost around 800 euros. Most of them are used for a few years and then sometimes even sold. Nevertheless, the costs for the 225 liter barrel are higher than for the temperature-controlled 5,000 liter stainless steel tank - and around 5% of the wine evaporates per year storage in wood. That too has to be taken into account. A basic wine costs around € 1 in the cellar. For top wine it can quickly reach € 4 or more per liter.

Wine for € 29.99 - from the cellar to the bottle and to the customer

A wine that exceeds a certain price level must also be presented according to the price. The more expensive the wine, the more the winemaker thinks about the bottle quality, the closure and the labels. A cheap industrial cork costs only a few cents. A cork that, on the other hand, should be flawless, i.e. that is guaranteed to leave no cork taste in the wine afterwards, can sometimes cost € 2.50. Good paper, special colors or heavier bottles also make a difference - especially because the wines usually come on the market in smaller editions. The above-mentioned ministry calculates all these costs for a basic wine at € 1.28, for a super premium wine at € 4.40. When the wine is in the bottle, the crucial question arises: How do I sell this wine, which is so far above average in price?

Answering this question can get really expensive again. A bit of sales and advertising is of course incurred for all of the winery's wines, but the expensive wines - and that includes wines that cost well over € 29.99 - need special support. So what does a winery invest in sales? In most smaller wineries, it is the boss, the owner, who essentially masters this task. He is the face of the winery, he is the one that the customers want to see. Sometimes he has the feeling that he is spending as much time on the motorway as in the vineyard and in the cellar. You can meet him at in-house fairs for wine merchants, at major wine fairs, at events organized by interest groups such as the VDP (Association of German Prädikatsweingüter) or consortia in the individual growing areas such as the Bordeaux Association CIVB or the communities of biodynamic winemakers like demeter or biodyvin. In addition, there are always wine evenings in selected restaurants where their own wines are presented. All of this costs time and money. And the expensive wines need something that the base wines need much less: storytelling.

€ 299 or whatever makes a wine stand out from the crowd

If we assume sales costs of € 2 for the basic wine and € 5 for the super premium wine, then we are currently at € 5.56 per liter of basic wine and € 18.96 for the top product. Converted to a 0.75 liter bottle, this is € 4.17 for estate wine and € 14.22 for expensive wine. That would be the ex-farm price without VAT. But, we still forgot something. Because this expensive wine is actually so expensive because it comes from a top location. This is the only reason why the effort is worthwhile. But this prime location cost the winemaker a lot of money. He paid € 300,000 for the hectare and somehow he has to get the money back. So we calculate another € 5,000 per year in depreciation and thus come up with additional costs of € 1.50 per bottle. Now, however, the winemaker wants to earn something from it. Let's treat him to 40% and another 40% for ourselves, because we too have a lot of effort to get the wine to the customer. Then we are at € 30.81 or, because it reads better: € 29.99. For this price, the connoisseur gets a bottle of handmade wine from a good to very good vineyard and everyone deserves what is necessary.

If it should be more exclusive, the effort quickly increases. Because you can turn all the adjusting screws. This of course starts in the vineyard, where there are certain particularly good and correspondingly expensive plots. In some regions - we mentioned it - you can only get to special locations with sums of millions. In addition, top wines are also produced by reducing yield. In the cellar, the barrel can come from a particularly good workshop and the bottle can sit particularly comfortably in the hand due to its quality. If you want to earn a top position and a lot of attention, you turn on PR agencies and ensure that the story of the wine and its creation is told in a particularly emotional way. All of that costs, but should at most double the price of a bottle of wine. However, if wines cost € 100 and more, this can only be achieved in conjunction with storytelling, quality and scarcity. In Germany, it was Klaus-Peter Keller, whose icon G-Max is the most expensive dry Riesling of all time, who managed to do this. Prices? The trend is rising, and above all on the secondary market. At Grand Cru Bordeaux, the price developments, which lack any reality, are known. The interplay of supply and demand has worked extremely well here for a long time. While you could buy a well-known Grand Cru Classé in the 1990s for well under a hundred marks, today you can easily pay several hundred euros. The same applies to the Napa Valley. With these wines, investors are also betting on rising prices and fueling the market. This makes such wines unaffordable for many wine lovers. We don't like that.

Our most expensive wines are those that have been in the cellars of the wineries, some of which have been below optimal for decades. Every price increase is self-explanatory. Otherwise, it is very important to us that everyone involved in the creation and sale of wines can live well. Neither we nor the winemakers can afford golden door handles. It is obvious that a wine trade like a winery must be well capitalized in order to survive a crisis - especially since climate change will not make it any easier for winemakers.

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