Wineonomics: Why Wines Cost What They Do-Part 2

Nikki: Those things are also going to affect price, but just in a much less cut and dry, sort of quantitative way than all of these other elements that I've talked about. But that is like anything, right? Perception of value, cars, jewelry, artwork, you know, boutique clothing, handbags, ladies, right? With all of these things, there is the measurable cost of producing that item.

And then there is the perception, excitement, scarcity, which really comes down to marketing.

Hi, friends. Welcome back to Sip with Nikki. This is the conclusion, part two of pricing and cost of wine. I've made you wait a whole week, but I'm so excited to bring it on home and give you those last pieces of the things that affect how wine is priced. If you haven't already, please download my wine tips cheat sheet off my website at sipwithnikki.com/resource.

Again, sipwithnikki.com/resource. There's also a link right in the show notes of this episode. So here we go with the last two categories of things that drive pricing in wine.

I know the suspense is killing you. You had to wait a whole week to hear what the final two categories of variables are that drive cost of making wine and therefore pricing of the wine. So here we go. The fourth category is packaging. The type of bottle. Is it in a bottle? Is it in a box? Hehe. Is it in a can?

So we know, traditionally, wine has always been bottled in a glass bottle, but that's changing. So that's kind of in progress to be determined because that's changing pretty rapidly where you're seeing nicer, well made wines who kind of, if you think back to last week's episode, are checking all the boxes of Category 1, of, you know, hand farming and small volume and long aging, but Now producers are choosing to put them in less traditional packaging like Bodo boxes or cans just because of lifestyle and people want that.

And then also because of our awareness now and sensitivity to the environment and carbon footprint. The carbon footprint of a glass wine bottle, especially if it's a honker of a bottle, right, you've picked up some where you're like, holy cow, maybe it's empty. And it still feels like it's full because the glass is so heavy.

There is a footprint related to that. And a lot of producers are starting to move. Away from that as well. I think some never will they just the perception of value is there with that heavier bottle But there is obviously cost of packaging that is selected quality of glass versus some of the other non traditional but more gaining in popularity packaging that I mentioned and then also the closure So I'm going to do a whole nother episode about the whole screw cap versus real cork versus synthetic cork.

So stay tuned for that because I get a lot of questions on that. But obviously there are some real and true differences in supply, demand, accessibility, and just cost of those closures. So that will make a difference as well. And then the labels, you know, labels can be really high quality and textured and gloss and, you know, multiple colors and there's a cost to that, um, and that's pretty obvious.

Most people, you know, understand that. But one thing I want to expand upon when we talk about the, the labels and labeling of the wine. And again, I alluded to some of this in the recent episode I did about shopping for wine and sort of using um, clues on labels. So if you haven't listened to that one yet, that's episode number eight about navigating the wine store.

Go back to that because what I'm about to say here will make more sense, um, if you have that piece of it. But labeling of wine, the general rule is the more specific you can label a wine, meaning where the grapes were grown. California. That's not very specific. Napa Valley, okay, that's more specific.

Stag's Leap, which is an AVA, American Viticulture Area, or Appellation, within the Napa Valley, much more specific. The more specific a wine can be labeled, which is directly coming from where those grapes were physically grown, generally, that bottle can fetch a higher price. Why? Because the more specific it is, it shows typicity is one of my favorite words in wine, like typicalness, but typicity, because people know, okay, well, California has this general climate, but oh, Napa Valley, that's like a little 30 mile stretch.

Now I know really specifically they have their own climate and weather. And then, oh, this. stag's leap, which, you know, might be a couple miles wide. Grapes that are grown in that region will have generally notes of something typical about them because of the soil or the fact that it's at the base of a mountain and the alluvial or the runoff from the mountain is affecting the water table and so on and so forth, right?

Again, that could be a whole nother episode. But in my Quest to always be self aware. I know I'm very California focused for obvious reasons, but I will use my motherland of Italy as an example as well, right? When talking about their labeling, they have, for Italian wines, basically three different categories, and you'll hear them and see them on a label.

And depending on which one is on the label, that's going to affect the price as well. So the most restrictive labeling an appellation or region within Italian wines is DOCG, which stands for Denomination of Controlled and Guaranteed Origin, DOCG. What does that mean? Very simply, it means that wines have higher level of restrictions.

Things that they can and cannot do. Grapes that they can grow. It has to reflect, you know, the, the weather, the terroir, the climate of that region. So it's, it's very restricting the things that you have to do if you're gonna be awarded that sort of badge of honor in Italian wines, DOCG, versus another category, which is just DOC.

Denomination of controlled origin. There's no guaranteed piece of it. Well, what does that mean? Well, there's still restrictions on what your wine has to be to be classified DOC, but they're just not as restrictive or intense as that DOCG. So, Generally, you're going to see some trends in pricing with that.

And then the more broad, more general indication is IGT, which is Indicazione Geografica Tipica. Love that. I G T. And that is a little bit more broad and general and, you know, it encompasses larger areas. So almost think of it in, in French wines do this too, and I'll do an episode about like Bordeaux, especially Burgundy, but the way I learned it that was always helpful is thinking of like a bullseye, like a dartboard bullseye, and you've got your outer rings and your inner and your inner and your inner to the center.

Well, with wine, In a lot of regions, it is like that, right? If California was a circle, which it's not, but if it was, you would have in the outer ring the labeling of California, but the next ring you would have Napa Valley, and then the next ring you would have, you know, an AVA like Stag's Leap that I mentioned, or Oakville, or Spring Mountain, or Howell Mountain.

So same thing with these Italian Appellations that I just mentioned, and France does the same as well. So those are telling you that a wine is being made more specifically from a specific region. It's reflecting a soil. It's reflecting a, um, you know, a smaller geographic footprint. And there are certain restrictions that have to be followed to get that badge of honor on your label.

So generally that's also going to drive pricing, but pricing aside. It's also a helpful tool because once you start exploring and drinking these wines, you might say like, oh, I really like them from this little bullseye section or this little bullseye section, right? So now you know to look for that when you're in the store.

So that was the fourth category. That was packaging slash labeling, but then also the, um, restrictions that happen to get. And then the final category, this is the one that I mentioned, is a little bit more ambiguous, right? Everything else that we've talked about in these two episodes, farming and labor and how much a barrel costs and how long you have to age something and how much was the front and back label.

And, you know, those are all very quantifiable. cost of goods cog or cost of production things that really will drive inherently how much that bottle costs to make, which then affects price and perception of value, right? But perception of value is a whole nother topic in wine. I probably could have done a whole episode on that, but On top of the real and true measurable cost to make a bottle, then you have things like scores, right?

Wines traditionally have been judged on a 100 point score. There are wine critics in the world, individuals, but also wine publications and magazines like Wine Spectator and Wine Enthusiast that nerds like me read these. That's my airplane reading. Whenever I go on a trip, you'll find no less than three wine magazines in my carry on.

And wines will get scored on this 100 point score. Well, if a wine is awarded a 99, 98, 100 point score, a lot of times that's going to drive up the price. Why? Because there is a perception of value. Now, this is more loosey goosey, right? It's someone's opinion. They've put the wine through an evaluation, a tasting, but a lot of consumers will use this as guidance, and so it does certainly affect it.

There's also just hype, right? There's a category of wines that we call cult wines. And the people who make these wines not only make beautiful wines, but they're expert in marketing, in limiting the access. You have to be on a waiting list. Get it. You can only buy two, you know, whatever it may be. And, and that's also going to drive perception of value because it's just not easily available to you.

And you certainly can expect there in those colt lines to be a reflection in the, in the price. And then finally, just reputation. This is a big one, and this is really global. This is not just a California or a U. S. thing, but certain estates, certain land, certain winemakers, the people, right, the, the wizards behind the curtain, the winemakers will be recognized for certain wines that they make, and then that reputation travels with them.

So, you know, if they are making wine at a new place, that reputation often can travel with them and because they received scores and accolades and have made a colt wine or two, those things are also going to affect price, but just in a much less cut and dry sort of quantitative way than all of these other elements that I've talked about.

But that is like anything, right? Perception of value, cars, jewelry, artwork, you know, boutique clothing, handbags, ladies, right? With all of these things, there is the measurable cost of producing that item. And then there is the perception, excitement, scarcity, which really comes down to marketing. So That would be the the final piece in there.

So if we're to recap over the last two episodes we talked about farming, labor, production size, volume, length of time to get product to market from aging both in barrel and in bottle, packaging from, you know, the type like a bottle versus a can, the type of closure, What's on the label and what's on the label being driven by the restrictions that have been put on the production of that wine from a certain area that it's from.

And then finally the ambiguous category, perception, reputation, buzz, all of that. So hopefully this was helpful. I mean in the end, here's the guiding principle, right? Drink what you like. And like what you drink, but it is helpful to be armed with some of these things to understand the why Because it can be really off putting and like a turn off when you're like, gosh, why is that wine?

60, 80, 100, 200, like the nerve of those people. Well, there's some of that too, but there is a difference And so it's good for you to know. The next step is for you to be able to tell the difference if you can And then that helps to be able to justify the spending. Again, I'll say it one more time. Drink what you like, like what you drink, enjoy it.

But hopefully this helped to put some of the why and pull back some of the smoke and mirrors around pricing in wine.

So there you have it. In my opinion, those are the five main categories of things that lead to wine being priced the way that it is. Clear as mud, right? Clear as a cloudy Chardonnay, right? Thanks so much for listening. Please continue to like the podcast, share it with people who you think might benefit from it or just get a kick out of listening.

Leave us a review. And, uh, a rating in Apple Podcasts would be super helpful so we can continue doing what we're doing. You can also support the podcast and say thank you by buying me a glass of wine or buying our producer, Catherine, a bourbon. And that can be done right through the support the podcast link in the show notes.

Thanks for listening. Sip well.

Sip with Nikki is hosted by Nikki Lamberti. Production and sound mixing by Catherine Bryan. You can always send your listener questions to Nikki at SipWithNikki. com or find us on the Sip with Nikki Facebook page or visit us on Instagram at Nikki Lamberti. Thanks for listening. We can't wait to sip with you.

This is Sip with Nikki, a production of Take Ten Studios.

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