Can a cheap wine be too good?

 

I attended a “Spanish Wine on the High Street” tasting recently. The idea was to showcase the best, or most popular, Spanish wines in the ranges of the UK’s top supermarkets and high street wine retailers (or what’s left of them), as selected by their buyers. There were wines of many styles and prices there, including very expensive ones (and lots of Rioja). I have published some of my thoughts from that tasting on my Posterous blog, but I want to explore a separate question here.

What would you expect for 61p?

Supermarket wine shelves UK
Image by casavides via Flickr

We all want a deal. We all love finding a bargain, where the value for money, the “bang for your buck”, is great – especially if we are the ones to discover it and tell our friends and gain ‘kudos’. But sometimes, things might also look, and taste, too good to be true.

One of the wines was from a region already known to make decent, uncomplicated and good value wines. It was not stunning, but it was certainly drinkable, with nice fruit and a clean finish. The surprise was that it was selling for only £2.70 a bottle.**

Normally, if I even tasted a wine that cost this much, I’d expect something virtually undrinkable, simply because it is not possible to make a wine and sell it at this price. So, what does it mean?

I should say I know NOTHING about the deal that got this wine listed in this retailer, but let’s face some basic facts:

In the UK, on a retail price of £2.70 there is £0.40 of VAT and £1.69 of Duty (which is fixed for ALL wine bottles, of any price). That leaves £0.61

That 61p has to cover the cost of:

  • the glass bottle
  • printing the label
  • cork
  • capsule
  • cardboard cases
  • shipping (from the producer to the UK)
  • distribution (within the UK to all the shops)
  • PLUS the retailer’s margin (the supermarket has to make some money!)**

oh, wait …

  • growing the grapes
  • picking the grapes
  • crushing the grapes
  • fermenting the juice and storing it for a period of time
  • all the processes of ‘filtering’ and ‘preparing’ the wine
  • bottling, corking and labelling the wine
  • getting through a great deal of administration and bureaucracy
  • staff to do all this stuff
  • … and maybe leave some money for the winery?

Does that sound likely?

Wineries do their utmost to make a good wine in such a volume that they can make economies of scale and sell it at a reasonable price, but this is extreme. So what are the implications?

These deals are driven by a certain level of desperation. No winery can make money on it, but there are circumstances where “moving” a wine even if it is for almost nothing, is cheaper than the alternative. If your tanks are full of a good wine you have not been able to sell from last year, and you NEED those tanks for this year’s wine, and you can’t simply pour it down the drain … what can you do?

Retailers will gladly take it off your hand if they can make money from it. They’ll sell it cheap and get folks flocking to their shops.

The knock on problem is that we consumers say “Hurrah!” as the value for money is apparently very high, and we love spending so little.

We are then entitled to think, “well, if that wine tastes THAT good for £2.70 then why should I pay £4, £5 or £6, or even £10+?” But it isn’t economic. Wineries and regions will not survive selling wine at that price level.

All the good work by wine lovers to explain the agricultural, artisanal, low-margin, high unique value proposition of wines is lost in a storm of price discounting.

Selling decent wine at throw-away prices changes the expectations about wine as a whole, and particularly the country that it is associated with. It associates it with “cheap” wine, a moniker that is VERY hard to get rid of later (just ask Bulgaria, Portugal, and even Chile).

Too often they become, and remain the “best wines for not a lot of money” instead of the “best value for money” which they aim for.

I totally understand why wineries can end up in this situation in the short term, and that supermarkets are also commercially driven, but it does wine no good. If this becomes the norm (as, arguably, it has), good wineries that have to sell at properly commercial prices will not find space for their wines and are forced to compromise as well, or go out of business.

At the end of the day, cheap wine is usually terrible, undrinkable, nothing more than slightly flavoured, acidic alcohol. You get what you pay for … generally.

But if you buy that wine, and it actually tastes good, then what incentive do you have for spending more? After all, if we keep spending at this level, more wineries will be desperate enough to sell wine at these prices. Until they all close.

How can we change this situation, if retailers don’t care? Whose responsibility is it? Well, the government is poised to create a “law” to stop selling “below cost” … but how do you define that, and where does the money go? A topic for another day.

I think that good wine CAN be too cheap.

Do you agree? Do those who cannot afford more expensive wine ‘deserve’ good wine at cheaper prices despite what it does to the industry – is it just a case of survival-of-the-fittest?

By the way, for a variety of reasons, I am not mentioning the wine, producer or retailer that occasioned this thought. It is a general point I am making.

** I discovered that the £2.70 was a promotional price during a 25% off promotion. However, as this simply removed one aspect (the retailer’s margin), the general point remains although it would have to be taken into account

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