The price of everything continues to go up (and up), but will the price of wine continue to rise also? And if so, will the growers be able to share the increase? I ask because wine price really has virtually no relationship to cost of production; it’s far more related to “what the traffic will bear” and “where will my ego be satisfied?” I mentioned in a previous column that, when price is known, tasters prefer the high-priced wines, and, when price is unknown or falsified, the less expensive ones are favored. This shouldn’t be a big surprise, since we’re all guilty of thinking something expensive must be good (and if it’s foreign, it must be even better—excluding the Far East).
This human character trait then explains why wineries are forever trying to dress up their marketing packages with fancier labels and big, fat, very heavy bottles. If the wine were as “heavy” as the bottle, it would probably take your teeth down with it (not to mention the hernia you’d get from trying to lift a case of it). Most expensive wines are now coming in fatter, taller, thicker bottles that have increased the weight of a case from somewhere around 35 pounds up to about 50 pounds or more. They’re not only heavy, but also impossible to mix and match in a given case due to varying heights of 11 to 14 inches. That extra 3 inches sure is a pain sticking up in the middle of the carton.
Despite being very environmentally unfriendly—that is, requiring more energy and material to make costing more to haul, and creating more landfill—we’ll probably be stuck with them until the consumer (yes, you) says enough’s enough. I should also note that wineries are still major users of another environmentally unfriendly product: Styrofoam. I nearly filled a 20-yard dumpster a few weeks ago while unpacking about 1,700 wines for a recent wine competition. It was somewhat interesting that most of the wine from Canada came in Styrofoam shippers…and here I thought they considered themselves more eco-friendly than their southern neighbors.
Now, about those production costs for grapes. The UCCE (Agricultural Extension) has, over the years, conducted several cost analyses of North Coast winery production costs. An old rule of thumb was, grapes were worth the retail bottle price times 100, thus in a $40 bottle of wine, the grapes were worth $4,000 per ton. This rule can still be true, but grape production costs vary greatly in the North Coast. The single biggest variable is yield, which is controlled by management (with a big helping hand from Mother Nature—like this year, when frost shrunk most crops). Actual cash costs of production don’t vary much when compared to yield. In other words, it’ll cost me about the same to produce 3 tons per acre as it will 7 tons per acre, except for a higher harvesting cost, which, if done by hand, would be larger (but about the same if machine harvested).
In Lake County, it costs about $2,600 per acre, Napa about $4,800 and Sonoma about $5,100. When all costs are included, cash cultural (all out-of-pocket expenses, including labor, water, vineyard management, harvesting and the like) plus cash overhead plus non-cash overhead, Lake County comes in at $7,400, Napa at $17,000 and Sonoma at $14,600. Land costs are the single biggest difference. Based on a 6-ton-per-acre yield and the previously stated x100 formula, the costs per ton are Lake County $1,204, Napa $2,844 and Sonoma $2,352. So in this example, bottle prices run from $12 to $28 just based on the cost of the fruit. The 6 ton yield I used is generally considered very high, and there’s also the fact many winemakers don’t like anything over 3 tons per acre—which really changes the numbers.
If you live in Napa and hit one of those once-in-a-lifetime years with high yield and high price—say $5,000 per ton and 6.5 tons per acre—your net income would be $16,000 per acre. In Lake County, $1,200 Sauvignon Blanc and 10 ton per acre, your net is $4,600, and in Sonoma, Organic Chardonnay at 8 ton per acre nets you $2,800. I should add that these figures will need a push upward to account for the newest increases in fuel and labor costs. One way to greatly reduce your costs is to machine harvest. That could save about $1,000 per acre with higher yields. The machine doesn’t really care how many tons are out there. Our single biggest problem with machine harvesting isn’t the machine but the winemakers, who won’t let their growers use it (for some ungodly reason that I’ve never been able to figure out). Meanwhile, our biggest marketplace competitor, the Aussies, virtually machine harvest everything. It’s amazing what you can do without a labor force.
The second biggest cost, pruning, would require retrofitting a lot of our vineyards as well as some real mindset changes on the part of growers and winemakers. Tradition is a wonderful thing and very, very hard to change—just ask your local Italian grapegrower. I guess this just enforces the idea that farming even a supposed profitable crop is still fraught with risk and luck…but that’s what makes life interesting.
So where does all of this take us? If you want to drink high-end North Coast wines, I guess you need to be prepared to pay the price, get a hernia lifting it and figure out how to be green when you get rid of that fat bottle and its Styrofoam package. Fortunately, economies of size let several of our larger wineries produce some really good wines for something less that your left arm. Just think, driving to the store to get a bottle of wine will now cost that left arm as well as your first born for the fuel to get there and back. Rice, wheat, barley and corn have all gone up in price also, so I guess Sake, bourbon, whiskey and beer will all be going up soon. How about juniper berries? Can I still enjoy my gin and tonic?
I guess I’ll have to stipulate for your homework that drinking cheaper wines from other areas once in a while is all right. Just to keep your budget intact.
