Every now and then wine merchants, and others promoting wine sales in the UK, will publish a graphic similar to the one below. The point being illustrated is that it is worth spending a few extra quid on your bottle of wine, because a much higher proportion of what you pay then goes into the actual wine production, which is assumed to act as an indication of quality.
The graphic is my own, but the numbers, which use UK current duty and VAT rates, are taken from The Wine Society. The duty and VAT element is precise and clearly defined, and as the bottle price continues to increase, the proportion paid on tax will taper off towards 1/6 – about 17%. But what of the other percentages? The costs are meant to cover the bottle, label and closure, and transportation. As mentioned by TWS, the costs are roughly constant irrespective of the bottle price, though they seems to have allowed for slightly higher costs as the bottle price increases. I am not sure where mark-ups come into the calculations, but presumably they are distributed appropriately between the wine and costs elements. And does the marketing get taken out of the mark-up? It is probably not worth getting hung up too much on the details. As TWS point out, the numbers will vary from wine to wine, and merchant to merchant, anyway.
However, the general trend is doubtless valid in that price range, and worth considering when buying wine. But the trend breaks down for more expensive stuff. Here the price of expensive wine is not determined by the cost of production. These wines are in limited supply, and the price is driven up by demand. Consider Pétrus, with probable wine production costs of under £50 and a UK retail price of around £1,000. In fact, in general terms, if you pay much above £20 for a bottle I’d suggest you are in the realm of diminishing returns in the terms of the percentage of that price that goes into wine production, as very little wine costs more than £10 to produce.
What does all this mean in practice? If we want good value wine, are we condemned to drink in the range £10 to £15 for evermore? Not a bit of it in my opinion. If I had to pick wine from a shelf without knowing anything about it but the price, I probably would indeed go for that range. But in practice I usually buy what I have tasted before, or I take a punt on one bottle, sometimes on the recommendation of a friend or wine critic, and then buy more if I like it. The price will mainly determine the number of bottles; if I like it and it is cheap, I will buy cases, but the more expensive the wine the fewer bottles I buy. I don’t worry about trying to hit any pricing sweet spot in terms of value for money, and suggest you do the same. Remember that the money spent on the wine does not depend on retail price alone. And even if a lot does go on the wine, it does necessarily follow that the wine will be of better quality, even less that you are going to enjoy it.
Remember the Paparuda Pinot Noir I recommended? Last time I looked, it was selling for around £5.50 a bottle. Consulting the chart above that means I should be expecting that only 50p or so of that was spent on the wine itself. Does my face look bothered? But I’m happy if you think it is too cheap to drink – all the more left for me.
Just to be clear, I do also buy wines for considerably more then £20, but not because I believe a high portion of the retail price goes into wine production.