Wine Drinkers Need More Transparency in Wine Pricing
Do you pay too much for wine?
In this pricing chart from Wine Folly, the $20-$30 bottle represents the “entry level for great handmade wines from medium to large production wineries. Also, this price point affords good quality for in-demand wine varieties (i.e., Pinot Noir). Expect terroir, typicity and an element of craft in this category.”
While this may be an entry level price point for good quality wine for some wine drinkers, not everyone can shell out $30 for “entry” level wines. The chart assumes everyone agrees with these categories and prices. It does not explain the "why" of wine prices.
At Big Hammer Wines, we’re concerned about the ever-increasing prices of wine, and we believe in transparency about wine pricing. Below we share how imported wine is priced for the retail market in the U.S., complying with the three-tier system.
Imported Wine Pricing Model
Start with a $10 bottle of imported wine:
|Ex-cellar/Ex-chateau/FOB price of wine in country or origin||$10.00|
|Landed Cost in the U.S. (includes federal tax)||$12.00|
|Tier 1: + Importer Margin (Profit) 35-55%||$18.46|
|Tier 2: + Distributor Margin (Profit) 35-50% plus state tax & freight)||$27.69|
|Tier 3: + Retail Margin (Profit) 35-50% (plus sales tax)||$41.54|
Built-in profit: $29.54, 71% of the total price, for a $12.00 landed cost imported wine. It’s no wonder the wine industry has so many lobbyists. There are a lot of profits here to protect.
Big Hammer Wines Pricing Model
At Big Hammer Wines, we remove the middlemen and run on very low overhead with our Direct to Consumer online wine portal.
Here's how the BigHammerWines.com pricing model works starting with the same $10.00 bottle of imported wine.
|Ex-cellar/Ex-chateau/FOB price of wine||$10.00|
|Landed Cost (includes federal tax)||$12.00|
|BHW Retail Price (includes free shipping on 6)||$19.99|
Built-in profit net of shipping costs (which accrue to retailer:) $2.40, 20% of the total price on a $12.00 landed cost imported wine. Consumers should be VERY happy!
More Secrets About Wine Pricing
According to Wine Folly’s bottle price breakdown by component: “When it comes to valuing the worth of wine, we can see that the less we spend, the less money goes towards quality grapes.”
This is true in absolute numbers, percentages tell a slightly different story:
|Cheap Wine||Expensive Wine|
|Packaging||$ 1.08||14.2%||$ 5.25||15.7%|
|Wine||$ 2.58||34.0%||$ 10.71||32.0%|
|Markup||$ 3.94||51.8%||$ 17.54||52.3%|
|Total Price||$ 7.60||100%||$ 33.50||100%|
* assuming ‘wine’ is a proxy for wine raw materials + production costs
The percentage of wine in the cheap bottle is actually higher. It doesn’t mean the cheap wine has higher quality and the level of added sugar isn’t revealed.
But it illustrates the difficulty in knowing how any specific wine is priced. A wine’s price includes not only physical inputs but other considerations such as brand and reputation, marketing costs, transportation, taxes, etc.
The industry has variable standards for pricing. Most every wine likely has a different structure. Knowing if you are paying a fair price becomes almost impossible.
Comparing wines from different regions, states or countries raises more complications. Local taxes, exchange rates, land values, grape prices, costs of other inputs all vary tremendously.
Another Wine Folly point states the three major traits of an expensive wine: oak, time and terroir. Further breakdown of these numbers might reveal that expensive wines have higher margins than other wines. Margin is the major component of a bottle of wine.
Evaluating wine only based on price is a futile effort. The most expensive wine may be the one you don’t like. The same could be said with the cheapest.
What’s a consumer to do?
- Taste the wine and determine what value it has to you at the price offered.
- Ask for recommendations within your price range from a knowledgeable source.
- Join a wine club with friends to share the cost and the wine.
The BHW Real Wine Club Provides Transparency in Wine
Now you know why Bighammerwines.com was named one of the fastest growing private companies in the U.S. in 2018 and 2019 by Inc. Magazine. We're crushing the competition!
We value transparency and educating consumers about wine. Our BHW Real Wine Club offers top-quality wine at the best prices. The club is flexible, includes free shipping for 6+ bottles and you can cancel any time. Learn more about wine from the BHW Real Wine Club.