I recently hosted a tasting at a retail store that features a lot of wines from around the world. We were pouring the 2006 Affinity and 2006 Mt. Veeder Cabernet Sauvignon. When a customer inquired about the prices, I told him that our suggested retail is $48 for Affinity and $70 for the Mt. Veeder. After some pause, he asked, "why are your wines so expensive?"
That direct question caught me a bit off-guard. For those of us at the winery and others who are familiar with our wines, these prices seem to be very reasonable for a top-level Napa Valley Cabernet – especially when compared to others of similar quality.
So, where do I start in answering this seemingly simple question? First off, wine production is a very unique business. A well-known consultant did a study of the wine industry some time back and found that it has a capital investment requirement that is TWENTY TIMES greater than the average of all American businesses!
Think about it. If you buy a very expensive parcel of Napa Valley land and invest in all of the approvals and improvements to plant a first-class vineyard, you then must wait 3 years to get a small crop, and 5 years to reach full grape production. That’s a lot of money going out before any starts coming in!
Then, assuming that you are making Cabernet Sauvignon, you invest for an additional 3 years in production, barrels, and aging before the wine is ready to be released for sale. That’s another 3 years of cash outlay before you see a dollar back.
Also, wine differs from other beverages in two important ways.
1. The ingredient cost per bottle of beer, soft drinks, hard liquor or, of course, water is very low – often less than pennies per bottle. In contrast, wine has a much greater ingredient cost, based on the investment necessary to grow the best wine grapes possible and to make those grapes into excellent quality wine.
2. Other beverages are formula products. Once the formula is established (like the closely guarded ingredients for Coca Cola), the producer simply follows the recipe, year after year. Wine is an agriculturally based product, with each vintage year creating differences in the grapes from which the wine is made. This adds a risk factor for both the quantity and quality of production, year-to-year.
Finally, there is our commitment to the highest standards for our wines. This is not a meaningless marketing slogan. Such a commitment requires acceptance of the substantially higher investments in farming and production associated with achieving that level of quality.
For example, our Howell Mountain, Mt. Veeder and Spring Mountain Cabernets are more costly to produce due to the added expense of planting and farming vineyards on steeper hillside terrain. Factor into this economic equation the fact that annual grape yields are only about 65% of what is generated in vineyards on the Valley floor and you have a very high cost per ton – but the quality is fantastic!
In the winery, “big ticket” items such as hundreds of expensive French oak barrels (used for only 2 vintages), sorting tables, special tanks, and other winemaking equipment are essential for crafting an exceptional Cabernet. And, of course, all of this outlay would be meaningless without the creativity and skill of a top-flight winemaker and winery team to work their “magic”.
From the time I started making our wines in 1992, I have always been determined that they represent a good value, despite all the farming and production costs involved. When wine reviewer Robert Parker recently described our Affinity as a “steal for a great Napa Valley Cabernet”, he was acknowledging all that goes into a bottle of fine wine.
Enjoy in good health,
Robert Craig