With my background in law and finance it should come as no surprise that I spend hours pouring (pun intented) over the cost of the exceptional wines I'm trying to showcase, such as the small Domaine des Homs below.
I've spent a long time thinking about how to write this post, fundamentally it's quite boring, and probably not the most immediately fun first article on this blog, but it's well worth digging into because I hear a lot of people bemoaning the price of wine with independent retailers compared to supermarkets, and it's a crying shame, so here's the breakdown.
First things first, what is the final price made up of; the wine itself, the bottle, the label, the (usually tiny) margin the winemaker makes, the shipping, the duty, the wholesaler's margin and the retailer's margin, that's even before we get to VAT. So as you can see, there are a lot of parts to this, and some of these costs are essentially fixed. Whether it's an £8.00 Australian Shiraz in the supermarket, to a £40.00 organic small batch wine, from an independent winemaker and merchant they will be roughly the same amount on some things.
Let's get into it, the fixed costs: The bottle itself, glass isn't free, and neither is the label. On average these will represent between 75p and £1.00 on a bottle. Next the shipping, depending on the volumes it will range from around 40p for large bulk orders to around £1.00 for smaller, more bespoke orders. All in, let's say these fixed costs are around £1.30 per bottle on average.
Now the biggest fixed cost, the duty! On a 13.5% still wine, that's now a whopping £3.10! It scales up and down depending on the alcohol by volume (ABV) but let's add that to our fixed cost for a fairly average Australian Shiraz.
Onto the variables now, let's start with margins. Ultimately each winemaker, wholesaler and retailer will adapt their margins to ensure profitability after costs, but a market average of around 30% for retailers isn't entirely unusual.
Nearly there, but onto the most important part - The Wine itself. If you've been following, we've already hit £4.40 before the retailer's margin is even accounted for and I didn't even cover the wholesaler or importer margin! This means that in your £8.00 bottle of wine there's not a huge amount of that dedicated to the wine itself. And this is really where the difference between large scale winemakers and small indepedently, attentive winemakers is.
Having a production capacity of over 200 million bottles a year (like a certain foot based winemaker might) inevitably means lower costs, but also lower quality. No winemaker on Earth could possibly give the vines the right care, the fermentation conditions the right attention and the aging the right detail to produce that much wine every year. This is industrial and robotic winemaking. It's cheap for a reason... it's not made by people passionate about their wine. In that £8.00 of wine, you're lucky if you get 80p of actual wine in there. In your £20.00 bottle, there's a lot more wine!
I didn't even get to the VAT at 20% which is added onto all these costs to round out the final retail price.
Now here's the wonderful bit, all those costs aren't exponential, the fixed costs are just that...fixed. Which means that if a wine is more expensive, there's a very good chance, (although not always as some wines have become luxury brands) you're getting more actual wine in there.
So the next time you're perusing the shelves of the supermarket, maybe think twice and get one from your local independent, online, on the high street or at a market near you.
Supporting the independent sector is more important than ever, it might seem more expensive on the surface, but once you understand what you're paying for we think it's more than worth the effort!
James
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