How much does that bottle of wine cost to make? Where $13 becomes $500

Simon Staples of Berry Bros & Rudd, a patrician wine shop in London, has an estimate in today’s NYT on the actual cost to make a bottle of Lafite, which sells for about $500 retail (find this wine). To the tape:

Mr. Staples pointed to the example of Château-Lafite Rothschild, a first-growth Bordeaux, which soared from £675, or $955, for a 12-bottle case in the 2002 futures to £4,000 a case for 2005 — which he called “the best vintage I’ve ever tasted.” But despite merely average years subsequently, the price only fell back to £3,500 in 2006 and £2,800 in 2007. He estimated it cost the château €10, or $13, to make a bottle of the wine.

Wow, talk about return on investment! I actually get asked the question a lot about whether a winery’s costs are really reflected in a higher priced bottle. Certainly, there are expensive ways to make wine and there are inexpensive ways to make wine.

But according to a fascinating exposé in the Revue de Vin de France, even the expensive way to make wine is wildly profitable. Consider some of their examples: the cost of Petrus is 30 euros and it retails for 4,500€; Dom Perignon costs 22.80 to make and retails for 129€; a generic Bordeaux wine might cost 1.38 euros to make and retail at a supermarket for 1.86€.

Le veritable prix des grandes bouteillesRevue de vin de France, February 2009.
Bordeaux futures, wine investment, waste, insurance – sipped and spit

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20 Responses to “How much does that bottle of wine cost to make? Where $13 becomes $500”


  1. Good article; I’ve just finished a WSET Diploma project on wine investment/en primeur and the amounts involved are quite eye watering (actually way beyond eye watering). If you can track down this BBC documentary series http://tinyurl.com/azxzkq it delves into this very well (good, grown up television). Berry Bros features heavily.
    Cheers, @abbuffata


  2. I’ll read / watch the story to get the details, but if you have no land costs and grow your own fruit using standard farming techniques…labels made, reputation strong, etc. etc…. maybe you can make fine wine at those costs. But given the all in costs of making fine wine including the land costs / organic farming / etc. etc… things are likely much different. I’d be curious as to the math for farming high-end land in CA, getting 1.5 tons per acre and using biodynamic / organic techniques, building a brand from scratch. Just a slightly educated guess, but I think that those numbers will make our heads spin.


  3. Tim beat me to my point. Namely, that land costs play an important role. As does the size of the winery and case production. There are obvious economies of scale that allow larger wineries to receive better pricing on everything from barrels to corks.


  4. I’ve actually had this discussion elsewhere with some very prominent California (Napa) vintners who have expressed the opinion that the bottom line, even on prime Napa land, is still under $20 a bottle by a good bit. For one thing organic or biodynamic farming shouldn’t really cost more than using chemicals, that is one of the supposed benefits, that the method is naturally effective. As for land costs, you have to remember that to view this as an endeavor the land costs must be amortized at the least. Sure money must be borrowed and repaid, but the land isn’t losing value. If they had to recover all of their land costs in a couple of years then yes, the cost per bottle would be staggering, but then they would reap a huge windfall if they eventually sold, so that should be considered as well. Another important consideration is how, especially in Bordeaux, library wine stock is considered a very valuable asset, and can be used, if necessary, as leverage. I mean, even replanting, though expensive, is very rarely needed.
    I think that when people see high costs they say, “oh, well land is expensive”, but they fail to look at this as a business, where the land is factored in but is also unique in that it tends to appreciate in value while most other business assets depreciate. Guess what, if the land doesn’t lose value, then the only real cost to be passed on from the land to the bottle is the interest on the loan, and that isn’t $487/bottle.
    Oh, and I’m pretty sure that Rothschild has had the land in the family for a bit, so I wouldn’t worry about his land costs. I can’t think of many industries where the customers are treated so badly, that even inferior product (such as a bad vintage) is inflated thousands of times before sale. It makes you respect those producers who exercise even minimal consideration for their public.
    As a last note, I know that I am speaking only of the those rarified wine royalty who are guilty here, and that many others struggle to gain recognition and greatly appreciate their customers. I don’t mean to insult them. And I’ll take it one further and say that I have know idea what I would do if I had such a desired product to distribute. But as a consumer who has watched the stratospheric price increases, it irks, and I want to see the worst of it rolled back, as I honestly believe that it should be.


  5. The Media-Critic and Marketing Industrial Wine Complex


  6. I agree that specific case of ROI is extraordinary, but I can’t say it’s the only case where this happens. Even infomercials which charge only 2 easy payments of $19.99, while giving “a $500 value, absolutely free” pull this off in their own way– almost every form of consumer good charges more than the cost of production and regular profit. As it relates to the demand of the product, if more people are offering a higher demand, then you can charge more.


  7. And, I guess to add to that point. For anyone that disagrees with the price being charged–if people weren’t buying enough of it at that price, then they couldn’t sell it at that price. The consumer group is equally responsible for encouraging the value of the product at that price by showing they’re willing to pay it. Just to show both sides of the coin.


  8. The issue here is in the definition of the terms “value” and “worth”. The fallacy is in the logic of trying to relate cost of goods with an image product like a First Growth (note the caps)…in this category it’s basically irrelevant since the market is driven more by collectors than consumers.

    That said, there is a direct correlation between COG and MSRP for the vast majority of other wines, and not just Bordeaux. My experience as a brand marketer has been that COG is a place you start, but that retail price is based on what the market will bear: the competitive set, distribution channels (e.g. e-commerce, vs. open vs. control state), Advertising/Merchandising/Promotion support funding,as well as indirect costs such as organizational expenses (sales force vs. brokers) etc. Put all that into a blender and you come out with an MSRP, and your retailers and consumers will send you a message pretty quickly if the wine is fairly priced.


  9. Well lets just see how well the ’07′s and ’08′s sell at these prices and see if the bordelais have this right.


  10. Dr. V, this is a great post. Can you point us to a post where you (or someone) discusses what actually goes into the cost to produce a bottle of wine?


  11. Wine prices have little to do with the cost of making the wine. Prices are set by how much the winery thinks people are willing to pay. The winery’s history, people’s perception of quality, wine ratings, all of that has far more impact on price than the cost of land, grapes, barrels, winemaking, etc.

    Winemakers actually will taste their wine against the competition, and set their prices accordingly, taking into account reviews and reputation.

    At one winery I worked, their lowest priced wine was $14, and it cost $4 to make. Their highest priced wine was $60 and it cost $8 to make.

    All wines are worth whatever you are willing to pay for them, and a wrong guess on the winery’s part will cost them either in lost income or in lost sales.


  12. Yes, if any (other) winemakers/vintners would like to chime in with experiences in other countries, that evidence would be most welcome.

    Does it cost more to produce wine in the New World? Obviously that’s a pretty broad brush as labor costs vary from Argentina to California. Land value per se might not matter (Burgundy acreage sure ain’t cheap). But how about how new the winery is?


  13. See Dave Coffaro’cost (also US$ 10.00) in http://www.coffaro.com/BrendansTruth.html.
    See also Hugh Johnson and Jancis Robinson (in The World Atlas of Wine, 5th Edition, page 83 estimates of production costs for a typical AC Bordeaux (A), a typical AC Médoc (B) and a typical well-run classed-growth (C)
    Cost per bottle:
    A: 5 French Francs or € 0.762245086 or 1.02449596 USD.
    B: 10 French Francs or € 1.524490172 or 1.37735009 USD.
    C: 28 French Francs or € 4.268572482 or
    5.737988857 USD.
    These are 1998 estimates. I have used the XE currency converter and the EU Currency Conversion Table (http://www.unitconversion.org/eu-currency/french-francs-to-euros-conversion.html


  14. Definitely not defending first growth Bordeaux pricing. But it must be remembered that Mr. Staples’ estimate of Lafite production cost is provided in the context of price negotiations, not yet concluded, in which he is the prospective buyer, and which he, according to his statement quoted in the same article, does not expect to go well. My guess is that he’s low by quite a fair margin, but that it doesn’t cost more than US $ thirty or forty to produce ANY wine other than teensy production trockenbeerenausleses.


  15. Thanks, Carlo, for that info.

    True, Henri.

    Btw, the NY Times ran a longish piece on the cost of wine in 2003. Seems like a different era now in many ways… Has a discussion of wine price and perceived quality.


  16. [...] 2007, which was not a strong vintage in the region. Our previous discussion highlighted how mush pricing is relative and based on perception, rather than actual costs. And Simon Staples is back again, quoted as saying that he wouldn’t [...]


  17. [...] Wow, talk about return on investment! I actually get asked the question a lot about whether a winery’s costs are really reflected in a higher priced bottle. Certainly, there are expensive ways to make wine and there are inexpensive ways to make wine. via drvino.com [...]


  18. [...] Wow, talk about return on investment! I actually get asked the question a lot about whether a winery’s costs are really reflected in a higher priced bottle. Certainly, there are expensive ways to make wine and there are inexpensive ways to make wine. via drvino.com [...]


  19. Making wine is an awesome investment. My first try at a cab though was a disaster (I think I ended up with some cleaning solution/acid in my batch). Since that

    first attempt, I have found that it is both a science, and an art! My second batch was a success, and a good one if

    I don’t say so myself. I did find a website that helped a ton though (broke down and paid, but it really was well

    worth it) at http://www.how-to-make-wine.com I am sure there are others too. Cheers…(clink)!


  20. [...] How much does that bottle of wine cost to make? Where $13 … [...]


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