Paying the Price
By James Laube, senior editor
You may think that wine pricing is a sophisticated, profoundly analytical process, but for many fine wines, it's far from it. The price you pay for wine is more likely tied to a winery's own perception of its image and availability than to the costs of land or grapegrowing.
Years ago, I attended an insiders' tasting at Heitz Cellars in Napa Valley, which provided me with valuable insight into how one of California's price leaders determined the worth of its wines. The purpose of the gathering was for the winery's owners to evaluate the newest vintage of Cabernet releases and, more importantly, to set prices for the new wines.
For this annual affair, Joe Heitz, the legendary winemaker, assembled his family and key investors at the winery on a brilliant, sunny January day. Each year, Heitz invited one outsider to participate in the tasting and critique the wines. This time they chose me. I didn't know the ground rules going in, but I accepted the offer nonetheless. It was a rare opportunity to taste with Heitz, one of Napa's Cabernet masters, who made what at the time was America's most collectible wine: the Martha's Vineyard Cabernet.
Heitz typically bottled three Cabernets each year -- Martha's Vineyard, from Oakville; Bella Oaks, from a vineyard in Rutherford owned by winery partners Belle and Barney Rhodes; and a generic Napa Valley blend. The three new releases were poured in a blind tasting that featured a mixture of older Heitz Cabernets along with a couple of rivals.
We sat down to about a dozen wines and tasted through them. I had no idea what wines had been poured. Then we ranked the wines in order of preference. The odds were stacked heavily in Heitz's favor, and of course his wines won.
Moreover, Heitz knew his own distinctive style of wines better than the back of his hand. At least eight or nine of the 12 wines proved to be his, and he had uncorked some old gems from Martha's Vineyard. The two ringers I recall -- a rather anemic Robert Mondavi Reserve and a cheesy-tasting bottle of Château Mouton-Rothschild -- didn't stand a chance in this lineup, particularly in front of the Heitz home crowd.
Heitz's wines routed the rest of the field, and then came the moment of intrigue. Heitz, who had long been a price leader in California, sized up the competitors -- his older vintages, his new ones and the ringers -- and determined that his new wines were as good as his old wines, better than the ringers and worthy of higher prices. The Martha's would still be the most expensive, followed by Bella Oaks. The Napa Valley, which had the largest production, would be priced more affordably. That was it. We adjourned for lunch.
Most winemakers still conduct comparative-analysis tastings, but the markets have changed dramatically. Once there were only one or two dozen serious Napa Valley Cabernets to assess. Today there are hundreds of singular bottlings. Moreover, demand for the elite wines has grown appreciably, allowing for greater pricing elasticity. While Heitz reasoned that his Martha's Vineyard was the most distinctive Cabernet made in Napa Valley -- and therefore worthy of the highest price -- he also felt strongly about having paid his dues through two decades in the wine business.
Now, many wine prices are calculated to create or uphold an image. This is readily apparent in the number of high-priced new wines with no track records. Several Napa winemakers this past year have told me that while they're concerned about escalating prices, they've raised theirs because they don't want to be perceived as cheap. They don't want to sell their Cabernets for $40 when their neighbors are selling theirs for twice that.
This won't come as a revelation to those who watch the market and are turned off by the high prices prevalent today. A few winemakers claim that their wines sell faster every time they raise their prices. Some of them have waiting lists that number in the thousands.
What's important to understand about pricing at these levels is that it has next to nothing to do with quality or the costs of growing grapes and making wine. It has everything to do with a winery owner's perception of image. A winery may charge $100 a bottle and sell out instantly. As long as there's someone willing to pay, prices will continue to rise.
This column, Unfiltered, Unfined, features the opinionated inside scoop on the latest and greatest in the world of wine, brought to you each Monday by a different Wine Spectator editor. To read past Unfiltered, Unfined columns, go to the archives.
(And for an archive of senior editor James Laube's columns written just for the Web, visit Laube on Wine.)
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