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A Record Cabernet Price?

Photo by: Greg Gorman

Posted: Apr 28, 2006 5:23pm ET

How does a wine get priced at $265 a bottle?

One way is to pay $26,500 a ton for the grapes.

Paul Hobbs stopped by my office in Napa today to taste two of his 2003 Cabernets. He’s going to be on my Expressions of Napa Valley Cabernet panel at this year’s California Wine Experience, and we wanted to taste two wines he was considering pouring.

Hobbs, of course, is one of the hottest winemakers in California these days, with an amazing string of great vintages that cut across the board – from single-vineyard bottlings of Cabernet, Chardonnay, Merlot and Pinot Noir, from both Napa and Sonoma appellations. He also makes wine from Argentina, where he is a consultant.

The two wines we sampled were the 2003 Hyde Vineyard Carneros Cabernet ($100), which has a wealth of rich, layered fruit flavors and touches of black olive and herb, with elegant, fine-grained tannins. It’s a cool-climate Cabernet, but achieves enough ripeness to routinely earn outstanding reviews.

The other wine was the 2003 Stagecoach Vineyard Cabernet ($175), which comes from the Stagecoach Vineyard in the hills above Oakville and northwest of Atlas Peak.

It tastes more like the mountain-grown Cabernet that it is. It’s darker, richer, more intense and more structured than the Hyde. "Massive" comes to mind.

Both wines are delicious.

Then I remembered hearing about what Hobbs paid for his 2002 Oakville To-Kalon Beckstoffer Vineyard Cabernet.

First, this is another fantastic Hobbs Cabernet, with wonderful aromas of black cherry, blackberry, currant, violets, mineral and light toasty oak. Those flavors coat the palate with a rich, dense, multifaceted array of flavors. The tannins are bold and concentrated too, though ripe. This is, I wrote last year, a potent young stallion of a Cabernet, with an exotic spicy finish. I rated it 94, but it’s improved since then.

Why the $265 price?

Hobbs explained that he paid the vineyard’s owner, Andy Beckstoffer, $26,500 a ton, which both he and I believe is a record for Napa Cabernet. In 2002, he bought eight tons of Beckstoffer Cabernet, and like many vintners, he uses a price-per-ton ratio to arrive at his retail price. When you pay that much per ton, you simply take the last two zeros off the price, and that gives you a rough bottle cost.

Winemakers who pay $4,000 a ton should be able to price their wines at about $40 a bottle. Those who pay $5,000 a ton would retail their wine for about $50.

Not everyone uses that formula, of course. Supply and demand and image are factors in any winery pricing strategy. Moreover, wineries that grow their own grapes arrive at their per-ton costs based on what it costs to farm their grapes.

“I grew up in the farming business, so I really didn’t have any problem paying Andy that price,” Hobbs said. The crop in 2002 was about 2.7 tons per acre, and Hobbs made about 600 cases.

It’s an expensive wine, he said, but also a wine of exceptional quality.

Adam Lee
Santa Rosa, CA —  April 28, 2006 8:08pm ET
Jim,didn't Andy Beckstoffer head-up one of the Hang-Time Seminars put on by the Napa Valley Grapegrowers Association where growers were complaining about the effects of the longer hangtime desired by wineries on the grapes weight and thier corresponding income? And then you read that he was paid $26,500 per ton and that at a decent sized yield of 2.7 tons per acre! I would think that the Napa Valley Grapegrowers could find somebody in a better position to argue their case that hangtime reduces their income than someone who is bringing in $71,550 per acre. All farmers should be so lucky!
James Laube
Napa, CA —  April 28, 2006 9:30pm ET
Adam,You're right about Andy heading up the seminar. The prices are what they are. People are willing to pay for the wines and for Hobbs and his customers, it's obviously a good enough deal to keep it going.JL
Apj Powers
Dallas, TX —  April 29, 2006 11:39am ET
While I do like the Beckstoffer wines, the drastic price hike from previous yrs caused me to balk at the current offering for our wine list. - the Dallas offering was comparable to the 1st Growth Bordeaux prices.We do have the clientele that can afford these things but explaining the almost 75% increase(here) puts me in a bad spot. They think I'm gouging them. So, I'll wait for some time to pass and maybe look to the next vintage (which I realize will be even more expensive but maybe memories will be short). I don't have the luxury of keeping massive inventory. For now I'll go with the Hobbs Napa Valley Cab and RRV Pinot. --AP
Atul Kapoor
los angeles/california —  April 29, 2006 7:03pm ET
We price our wines in & around winery retail. We did not have any problems serving and selling the wine. But i can guarantee you guys,if the rating ever drops below 90pts. people will balk at the price.
Arshavir Kouladjian
Los Angeles, California —  April 30, 2006 7:03pm ET
2002 is clearly an outstanding ripe JAZZ fest vintage. That is easy to say, but in reality for the future, that quality and price, any rating below 95 would hurt the pocket book!!!! Cabernets saw 2 back to back years and prices are up 20 - 120% across the board. I want to see what 3 mediocre bad - medium years does to those wineries tring to cream off the top!!!!!
Sao Anash
Santa Barbara —  April 30, 2006 9:51pm ET
I don't have a problem with the 265.00 price tag, in a good year, for a wine made by Hobbs, and grown by Beckstoffer....two masters. But, I'd question the integrity of both enterprises if, on off years, they didn't either pratice not declaring the vintage, or they didn't lower the price. If they keep that price the same, year in and year out, irrespective of the vintage, I have to wonder if part of it isn't some marketing scheme. But, as it stands, the wine is worth it on good years.
Steven Aaron
New Jersey —  May 1, 2006 8:33am ET
Sao, so true! Many people will pay the price, with these 2 masters- as long as it is that good and the points remain high. As far as marketing...look only to Opus and what happens there...sells out (in large quantities for a "cult-like" wine) at 120-150 a pop, even when it is mediocre (86 points for 02, 89 for 01 and 00- and with an 85-88 barrel tasting for 03!). Prices never seem to vary, but the quality sure does.
John Wilen
Texas —  May 1, 2006 12:50pm ET
I'm afraid Paul took you and your readers for a ride on this one. Hobbs makes it sound like his wine's price is a function of the cost of the grapes. I'm afraid it is the other way around: once the selling price of the wine is determined, the price to be paid for the grapes is derived. For years Beckstoffer has related price per tonne to eventual bottle price. There are many quotes in the public domain as to how this relationship works. Although not an owner, Beckstoffer effectively wants a percentage of the profits of his client's finished product. "It puts both grower and clients on the same level" he has stated. The mechanism to do that is to work backwards from the wine's selling price to get Andy his "fair" share of the profits. Knowing the yielded cost of the grapes in a single bottle, the math is pretty straightforward. It conveniently works out close to the formula that Hobbs mentioned.Don't get me wrong. I love Hobbs wines and will keep buying them. But Andy Beckstoffer did not set the market price on the wine, Paul did. And there's nothing wrong with selling a bottle for $265 --- just don't blame it on the supply chain if, in fact, they are not the root cause.
Jason Thompson
Foster City, CA —  May 2, 2006 1:12pm ET
Great article. I would love a yearly follow up on this one.
Carlos Gallegos
San Jose —  May 2, 2006 5:16pm ET
First of all, congratulations to Paul Hobbs on his incredible "02 Beckstoffer. It truly is a world class wine deserving of its magnificant critic scores.There is no such thing as "gouging" in this business. It simply is supply and demand. No one is forcing you to purchase.This wine is certainly first growth quality and can stand up to any wine in it's class. If future vintages decline in quality and the price remains the same then it makes life real simple..."Don't Buy"
Randy Kemner
Signal Hill, Ca —  May 2, 2006 6:04pm ET
I really hope people will not buy Paul Hobbs wines, his pricing has gotten out of hand. He first doubled the pricing on his Argentine wines and not wants to do the same with his domestic wines. It's pure ego.
Chris Lavin
Long Beach, CA —  May 3, 2006 12:25pm ET
Ego or not, his wines sell out in each vintage! Cobos 2003 (@$108) vs Cobos 2002 (@$40)!! I too did not buy the '03 - but I have since heard that the wine is sold out! Perhaps 3 vintages in a row with Wine Specator scores 95 and above had something to do with it.

The Bramare wines and the Cocodrilo wines have some on-sale BTG pricing available. Oh, well! There is plenty of other wine available! SALUD
Greg
May 6, 2006 2:02am ET
Why is it that Provenance just released a Beckstoffer/To Kalon Cabernet at $30 to $40 retail ??? Either Hobbs is being taken to the bank by Andy Beckstoffer, or, Mr. Hobbs is taking the consumer to the bank ????Lots of questions there.(given the benefit of the doubt, the Provenance bottling could be only 75% from the vineyard... but even then the numbers do not add up.Crush Pad is buying To Kalon fruit for under $10k... doesn't Paul Hobbs garner more respect than Crush Pad?This stinks Mr. Laube - please do not defend the cause. The wine is good but his ego is greater.

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