Expensive wine pricing and snobbery have been institutionalized, legitimized, and even admired

expensive wineCan’t afford to buy one of the world’s great wines? Then lump it

This is the second of two parts looking at the conundrum that is wine pricing today – we’re awash in cheap, often crummy wine, while the prices of the world’s great wines are at all-time highs. Today, part II: How we got to the point where no one but the ultra-rich can afford the world’s great wines. Part I: The grape glut, and what it means for consumers.

The problem with expensive wine prices is not that they are expensive or that wine snobs are eager and willing to pay them. We’ve always had both. Rather, it’s that never before in the history of wine has pricing and snobbery been institutionalized, legitimized, and even admired. We’re at a point where people buy the world’s great wines not to drink them, but to keep them in a vault and watch them appreciate in value, using their acquisitions to prove their superiority to the rest of us.

How screwed up is that?

But that’s where we are, and it’s the reason why the world’s great wines cost thousands of dollars a bottle. Consider: I can pay for a place to live for a month, or I can buy a  2016 Harlan Estate cabernet sauvignon for $1,450 at a Dallas retailer. By one estimate, prices of the finest wines have increased eight-fold since the early 1990s, even after inflation.

On the other hand, the price of decent everyday wine, despite premiumization and inflation, is probably about where it was when I started the blog in 2007. I could buy Domaine Tariquet for $10 then, and it’s more or less $10 today.

So how did we get to this point?

Much of it has to do with the seismic shift in U.S. wealth distribution over the past 40 years, where we’re approaching disparities not seen since the Depression. More millionaires mean more people with more money to spend, so why not spend it on wine? Isn’t that what rich people do? Or, as Sports Illustrated’s Jonathan Wilson has called it, the greed of late-period capitalism.

Besides, as one California winemaker told the San Francisco Chronicle’s Esther Mobley: “I’m starting to come to terms with the fact that wine has always been a luxury commodity. Unfortunately, it’s a beverage of privilege.”

And what better way to leverage that privilege than with Liv-Ex, the stock market for wine? Buy a bottle, put it away, and watch it appreciate in value. Who cares if it spoils or goes off? The point is not to drink it, but to use it to amass even more wealth. And, since the supply of fine wine is limited, the more it’s in demand, the higher the price will go. And, as Eric Asimov pointed out in last week’s New York Times, demand is increasing thanks to all that wealth.

How sad is that? Great wine reduced to a share of stock.

The irony, of course, is that legitimate stock markets serve an economic purpose, to help companies raise capital. Amassing wealth is a benefit, and not a stock market’s reason for being (as it is with Liv-Ex). The other irony? Liv-Ex is a lousy way to amass wealth. Its Fine Wine 50 index has increased 26 percent in five years, or about what an ex-sportswriter who writes about wine could do with a mediocre mutual fund. The Dow Jones Industrial Average, on the other hand, has increased about twice that much.

Long-term effects

So why does this matter to the rest of us? Shouldn’t we happy with our Tariquet and leave it at that? Let the snobs waste their money. And don’t we have more important things to worry about, like the increasing disparity of wealth?

Yes, obscenely expensive wine prices are a result of the disparity, not a cause. But know two things: First, that these prices work their way down to the bottom, so every $1,000 bottle of Harlan ends up raising all prices. The Mulderbosch rose, a pleasant enough wine, now has a suggested retail price of $17 for no good reason at all, save rising prices elsewhere. In fact, that’s the sham of premiumization — we’re paying more money for the same  quality wine and not a better bottle.

Second, and more important, can you imagine a world where only the most wealthy are allowed to look at great art and to read great books? You’re not rich enough for Picasso or Rembrandt or Shakespeare or Jane Austen, so lump it.

That’s not a world I want to live in. Do you?

Photo: “Wine Auction” by alans1948 is licensed under CC BY 2.0

10 thoughts on “Expensive wine pricing and snobbery have been institutionalized, legitimized, and even admired

  • By Alfonso - Reply

    Nice post – thought provoking.
    I opened a bottle of wine yesterday that I’d been holding onto for a while, a 2008 Barbaresco from a very good property. It drank perfectly. I maybe held onto it for 7 years. Looking it up, I found it is now valued at retail for 49.99. It drank like a million bucks. And it has kept the same value as release price. I’m glad it didn’t go the way of many wines with inflated prices. But it was a memorable wine and one I wish I had more of. So, does it make any sense, this wine value idea? I think beauty (and value) lies in the eyes of the beholder.

    • By Wine Curmudgeon - Reply

      Thanks for this. This is part of my argument — we should be focusing on value and quality, not pricing.

  • By Sharon - Reply

    Just throwing this out there…one of the reasons for the escalation of wine prices in the middle tier (under $75 bottle) is the simple fact that most people are not willing to pay the real cost of shipping. They have been spoiled by Amazon’s fast and basically free shipping on almost everything (except wine). As a result, many wineries have increased their bottle prices in order to offer free or reduced shipping.

    • By Wine Curmudgeon - Reply

      Thanks for this — I didn’t know this. On the other hand, it’s not surprising, and not necessarily Amazon’s fault. That wineries have to figure out a way to handle shipping speaks to the problems of the small winery business model, which we have discussed on the blog before.

  • By Mike Dunne - Reply

    Tasty as Harlan is – and I have tasted it, if not bought it – I think I’d rather spend $1450 to live some place interesting for a month, even Dallas; make that especially Dallas. Here is a scene I imagine 20 or so years down the line: The old Heublein auction and tasting have been revived. On the eve of the auction, potential bidders taste through the lots, gradually realizing that all those high-priced Napa Valley Cabernets from early in the 21st century are long past their prime and won’t come close to reaching the expected sales price optimistically printed in the catalog. Comeuppance for those who see wine just as an investment opportunity. Comeuppance, not a bad name for a wine, better trademark that. Insightful posting. Thanks.

  • By Cd - Reply

    This is a topic I’ve been frustrated with quite a bit lately. But, we also forget that costs of barrels and fruit have gone up substantially, so some of those prices are very hard to maintain for small to medium size producers with lower margins.

    • By Wine Curmudgeon - Reply

      Indeed, which — as noted — goes to the heart of the problem with this particular business model. But it’s also worth noting that barrels aren’t that big a price factor in a wine that costs $1,500 a bottle.

  • By Winegrower - Reply

    Nice article. There is no clear relationship between the price point of a bottle of wine and the quality, sophistication and taste of the wine itself. Considering that one ton of grapes is equivalent to 1000 bottles of wine, even the most expensive grapes in the USA, which sell for about US$ 15000 a ton, only add US$ 15 to an expensive ultra premium bottle of wine like Harlan Estate. The wineries spend more money per bottle on the label, the cork, the heavy glass bottle, the tamperproof packaging etc. For marketing and promotion wineries spend even more money than on the grapes. Even the most expensive packaging, marketing and promotion do not necessarily guarantee that the bottle of wine sells for US$1000 or more. In order to increase the retail price of their wines to these levels wineries pursue additional venues. Some wineries change the mouthfeel of their most wines in such a way that it please the palate of wine tastersof major trade journals or influential wine sommeliers . Laboratories sell these profiles for top dollars. It is not a coincidence that the most expensive wines have a mouthfeel that pleases a 50 year old male who has already lost half of his taste buds. For sure the most expensive wines are certainly not refreshing and normally do not pair well with delicate and sophisticated food. Another method is to hire an expensive wine consultant who basically helps wineries to place their bottles on the wine-lists of top restaurants hotels and wine shops and gives inflatedratings in his own wine newsletter. Another innovative method is to ask business partners to place outlandish bids for their own bottles of wine at wine auctions for charity or at professional auction houses. If the auction price of a bottle of wine is higher than its retail/release price, then an exclusive wineclub membership can print money for a winery.

  • By Lee Hodo - Reply

    Region is everything in terms of perception of value. How many Sonoma or El Dorado wines are priced at $1500? Napa Valley is cache and many decades building that reputation certainly pays off for those vintners.

  • By Robert P Behlendorf - Reply

    Let’s see. If I have throwaway money to pay $1500 plus for a “Special” bottle containing who knows what since is too pricey to waste on wine competitions and columnist freebies, I could care less about actually drinking it. I am more interested in possessing rather than using. The “Special” bottle is a badge of honor, showing the world my extreme success and utter disdain for any wine $1499 and under. Perhaps a little too harsh, but certainly true.
    “Special” wines also follow the investing mantra of intrinsic vs perceived value: i.e., if I tell you it is worth $1500 and you believe it, then the intrinsic quality of bottle contents is secondary. You know the odds of actual consumption of the “Special” bottle are low, but, since the investing prospects outweigh any other possibility, you are caught up in the frenzy of mindless readiness to believe the myth and to offer to pay higher for the regal prospect of ownership.
    Beauty, or in this case mindless worship, is in the eye of the beholder. Meanwhile, down here on the ground, I will be seeking my “Special” bottles in the “Special” bottle section at Trader Joe’s. Thank You. Dream On.

Leave a Reply

Your email address will not be published. Required fields are marked *
You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.