Thursday, January 14, 2016

Winery Decisions that Affect the Price of Wine

The first post on wine pricing focused on the markup of wholesalers and retailers/restaurants. This article will present some of the dizzying array of options wineries face that affect the price you pay. Plenty of food for thought follows and you may be happy to only have to decide which cork to open or cap to unscrew.

The first thing you need is grapes.
Do you purchase them? Potentially cost effective, especially in large harvest years, but your sourcing might change often. This could result in a stable price but dramatically different styles from vintage to vintage.
If you purchase fruit are you paying by the ton or by the acre? Growers paid by the ton have an incentive to maximize the harvest, sometimes at the expense of the quality of fruit. Contracting by the acre means there is an incentive to provide the best fruit possible but you could end up with less of it.
Do you farm vines yourself on property you lease or own? This leads to more a more consistent style but could be costly if they develop disease or do not produce good fruit. A big shortfall could mean you need to purchase more fruit, which increases your costs, or run out of wine too fast which can cost you long-term customers.
If the land is yours, when did you acquire it? Decades ago when it was cheap or recently when costs for vineyard land have increased exponentially? Did you plant your own vines? They take a while to mature enough to produce fruit and, at least according to many, even longer to produce fruit that makes complex wines.
Are you going to dry-farm or irrigate? Dry-farming is easy...until it doesn't rain enough. Irrigation costs money but maybe not as much as missing most of a harvest because the fruit needed more water. Is irrigation even allowed in the region you are based? If not, you could suffer a total loss in extreme years.
How often will you prune, thin crop, manage the canopy (the leaves, which provide fuel for ripening and can protect from sunburnt grapes)? In general how often will you tend to the vines and fruit? All of this takes time and people and money but the more attention to detail, the better the potential result.
How often will you replant? For many varieties, zinfandel and pinot noir in particular, older vines produce deeper, richer, more complex wines. However, they produce much less fruit. Younger vines can be prolific but produce simpler wines. (Reminds me of people...)
Will you protect against frost? How will you protect against frost? Crossed fingers may not be terribly effective but if you have hillside plantings you are more likely to avoid frosts. Some wineries will bring in helicopters to hover over the vineyards a few times overnight to keep air moving and discourage the formation of frost. That's not cheap. Some use a sprinkler system which means you need to install that option.
Will you farm with an arsenal of pesticides at the ready or will you choose organic or biodynamic farming? Chemicals are not free but are often better than losing part of your harvest to pests or disease. They may also accumulate in the vineyards and make your vines less productive. This is also a risk with treatments allowed by organic farming, which eschews the use of synthetic chemicals but allows naturally occurring elements like sulfur and copper, used to control fungus on the grapes. Going organic or biodynamic (think super-organic for simplicity's sake) is potentially wonderful for your vineyard, vines and the earth, but you might have to use some non-approved solutions to save crops (this is why some wineries, even though they farm organically/biodynamically do not pursue certification which is far from free and takes time). Organic and biodynamic farming might produce less expense in chemical purchases but require lots of time and hands-on labor.
Will you cover fruit with nets to keep the birds away? Or fire intermittent shotguns or cannons to do the same? Animals, especially birds, love the fruit and they can eat a lot of it. Even worse, they sometimes eat part of a berry which then allows juice to flow which can lead to the entire bunch developing mold/rot.
Will you machine-harvest or hand-pick? Machines are wonderful and efficient but incapable of differentiating between perfect and sub-par grapes. Hand-picking should result in perfect fruit selection but is much more expensive and time-consuming. Time is often of the essence to avoid rain during harvest.
How will you sort the grapes (or control their sorting if you're buying juice)? Are you only removing MOG (material other than grapes) or are you culling slightly underripe fruit as well. More people as well as time, effort and money is required for the latter.
Will the pressing be gentle or more aggressive? Pressing grapes too hard can crush seeds and release more tannins, especially undesirable bitter ones, but would increase the volume of wine produced, potentially lowering cost.
Will you (are you allowed to) use vacuum concentrators or reverse osmosis to change the juice? The former can remove some water content, beneficial in a rainy harvest. The latter can remove some alcohol if the grapes got too ripe and fermented to a higher degree than desired. These are not inexpensive processes and many debate their effects on wine.
Once you make the wine how will you age it? Stainless steel tanks are expensive but last a long time and preserve freshness. However, they inhibit development of the wine by removing most oxygen contact. Oak barrels have a limited lifespan and cost a pretty penny, especially if you want the best sourcing. Will you air-dry the staves before having them made into barrels? This is costly but results in a more subtle influence of oak. Wines slowly evaporate from oak, but not stainless steel. Although this process is slow, it can add up depending on how long the wines sit in barrel.
Will you opt for stainless steel and add some oak staves, or chips to impart the illusion of time in barrel? This is wonderfully cost-effective shortcut but can be painfully obvious once the wine is in the glass.
Will you fine or filter the wine? Both potentially strip some of the wine's character away but will leave a cleaner (i.e. no, or less, sediment) wine in the bottle. Fining is more delicate than filtering but both cost money and time. Not doing either could result in cloudy wine that concerns customers, even if they love the taste. If they don't buy it again, that's a costly decision.
What kind of bottles will you use? There are recycled options out there that cost less but sometimes lack some clarity. Big, heavy bottles, you know the ones, give the customer the impression of importance and luxury but the bottles are much more expensive and cost more to ship.
Will you use cork or plastic corks or reconstituted corks or choose screwcap instead? Corks have a failure rate that means some customers will buy your wine and dislike it. That's acceptable if they realize it's corked and can return it but a huge risk if they dismiss your winery entirely because they thought the flaw was a house-style. Plastic corks are cheap but make terrible seals and are frustrating to get back into a bottle. You can make a perfectly round plastic cork but not a perfectly round neck of a bottle and they don't change to fit the shape like corks do. (Hint: to get a plastic cork back into a bottle, flip it after you pour the wine, so what used to be the top of the cork goes back in first, and replace it immediately after pouring, don't let it sit on the counter. This should help). Screwcaps are supposed to be free of taint but they sometimes trap air and the wines need to breathe a bit longer to smell/taste right (only a minute or two). However, some consumers still won't even consider a wine sealed in this manner. That will continue to change but, for now, the stigma persists.
Will you risk putting your wine into the cost-effective, earth-friendly bag-in-a-box or Tetra Pak? You will save lots on packaging and shipping but may have to lower your price due to the image of the category.
How will you label the wine? Fancy paper with a logo designed by a famous artist? Or a simpler version with a logo from an online graphic designer that works for a song?
How will you ship the wines? Temperature-controlled rail cars, trucks and ships (reefers) are the industry standard but some producers still take the risk to save money.
Finally, who is your wholesaler? Are you distributing through a wine-focused business with knowledgable sales people or with a giant behemoth that cares more about liquor? Depending on your wine, either choice could be the best one but you better choose carefully because if your wine goes unsold long enough it might be discounted and cleared out at such a low price that your image suffers for years. I have witnessed this first hand with a winery I liked. For two years in a row their wholesaler crashed the price and sold everything at a bargain. When the new vintage was released, customers told them they would just wait for the sale. The brand still hasn't regained any significant presence in New Orleans, more than 15 years later

I will avoid discussing the building of luxury show rooms (tasting rooms) and advertising because this post is already too long and that sort of marketing is more universal whether you're selling wine, clothes or cars.

There is a lot to consider and some choices take years to be understood...and more years to correct in the wine business.
Thanks for reading, please send me some more choices I missed!