Is This Good Value
- Thursday 15 February 2007
Value can mean many things to many people – it doesn’t always imply cheap, and it can even mean expensive. MARGARET RAND ponders where it exists in the wine world
What, in this confused modern world of wine, is the meaning of value? On a recent visit to La Rioja Alta, I learned that its delicious 904 Gran Reserva 1995 has a recommended retail price of £25 in the UK; while its delicious 890 Gran Reserva 1994 is £74. It’s better, but not three times better.
A French example: at Cordeillan Bages, a Michelin-starred hotel and restaurant in Pauillac, the wine list last autumn had Le Pin 1998 for t2,000, and a red from Yannick Amirault (Les Malgagnes, St-Nicolas de Bourgeuil 2003) for t27. Is Le Pin 74 times better?
Another Spanish example: there’s a newish wine from Toro called Termantia, which gets 200% new oak (that’s 100% new oak, followed by racking into another 100% new oak); Parker has given it 98 points. Its ex-cellars price is t70, compared with t9 and t16 for the other two wines from the same producer, Numantia Termes. Termantia was on sale in Valladolid this spring for just t10 less than Vega Sicilia: in other words, a wine with a track record as long as your arm and an unmistakable sense of place can only command a premium of t10 over one with no track record at all but with ticks in all the right boxes: extremely low yields, extreme density of texture, and high Parker points. Whether it is as good is a matter of taste, but the dangers of fashion are there for all to see.
At the other end of the scale, a great deal of wine is sold at discounted prices, or ‘on promotion’. Tesco says about 35% of its wine is sold this way; other trade sources put Tesco’s promotional sales much higher, at, 80% or more, but the supermarket’s Jason Godley points out that countries like Italy and Germany are seldom promoted, which brings the figure down. Not all promotions, at Tesco or elsewhere, are Buy One Get One Free (BOGOF); some may be smaller discounts. But if you’re a producer making a wine to sell at £7.99, and half that price on regular promotions, do you make a wine that tastes like £7.99? No, you probably don’t. You can’t afford to. You make a wine that tastes like its promotion price, perhaps plus a pound. And even then, you may be making hardly any profit from the promotion price. You will hope to build up a bit of a war chest from profits when the wine isn’t on promotion but if its sales multiply many times when people can buy two for one, the sums just don’t add up. Nor, all too often, do the flavours. So why do people keep buying? ‘Because they’re gullible,’ sighs one trade source. And because retailers encourage them. Supermarkets want people to buy promoted wines. They make less profit per bottle, but they sell so many more bottles that their total profits are higher. So where does value actually lie?
‘Value’ is a bit of a weasel word. It’s rather like ‘competitive’ when applied to salaries. A competitive salary for someone on the board is one that is higher than elsewhere. But competitiveness, when the board considers the salaries of the people at the bottom, generally means as low as they can get away with.
Imagine a concertina. At one end the folds are tightly squashed; at the other they are stretched open. The squashed end is the cheaper end of the wine market: here a difference of just a pound or two can mean hugely better or worse value. Under £3, you can’t expect anything more than a light, neutral wine; under £4, it will be safe. Only above that price do you get wine with a little character. At this end of the market, price points are close together: they’re more blurred than they used to be, but they generally end in 9 – £3.99, £4.99, £5.49. But at the other end, price points are irrelevant (though Parker points are not). Here a price difference of £50 may mean nothing in terms of quality: a wine at £120 may be no better quality than one at £70, and one that costs £70 may be no better than one that costs £40. Value, at this end, is in the eye of the beholder, and sometimes in the eye more than in the palate.
how it adds up
So how are wines priced? Douro producer Dirk Niepoort explains that, ‘profitability comes from the £2 or whatever you can charge because of your appellation or your name. If you’re in the Douro, it’s probably all because of your name, except that the work Dorli does [Dorli Muhr – Niepoort’s wife, and an effective PR for the region] means that perhaps it’s half the region and half your name. So a Sancerre at £7.99 is bog-standard, once you take off the tax and the Sancerre premium. One at £12.99 is likely to be twice as good.’
But it is not an exact science. Let’s go back to those first examples. I asked Javier Amescua, export manager of La Rioja Alta, just why 890 was three times the price of 904? Well, he said, the selection of grapes was different, with very low production – perhaps just one bunch per vine – for 890. Also there are 150,000 bottles of 904 produced every year, and around 8,000 bottles of 890.
I put the same question to Ricardo Sanchez, technical director of Numantia Termes. He had figures at his fingertips: the yield is just 100kg per hectare, there are all those new oak barriques, the bottle weighs 500g, the corks are the very best, and 25 workers sort the grapes at the winery. So what, I asked, is the cost of producing the wine? That he couldn’t say; nor could he say what proportion of the price was accounted for by the cost.
It is tempting to say that at this level, the cost of producing the wine is irrelevant to the price, and it’s usually true, but not always. The exceptions are things like trockenbeerenauslesen from very steep sites, where labour costs are high and yields tiny and unpredictable. The Rangen de Thann vineyard in Alsace has an average slope of 90%, with parts of it 142%; yields are low and apt to fluctuate. Olivier Humbrecht said a few years ago that even though his Rangen de Thann was one of the most expensive wines in Alsace – he was asking t50–60 a bottle ex-cellars at the time – he wouldn’t be able to do it if he had no other vineyards. His holding there needs six full-time staff, as opposed to two full-time staff for his slightly larger holding in Clos Winsbourg, where the slope is 20–30%.
In such instances costs bear a strong relationship to price. Seña is a different matter. This Chilean red was a joint venture between Errázuriz in Chile and Mondavi (now it’s from Errázuriz alone, and sells for around £35–40), and when it was launched, Eduardo Chadwick of Errázuriz said that if one tasted it alongside cheaper wines, then it was difficult to justify the difference in price. But (and it is a magic ‘but’) if one tasted it with wines at a similar price level, then one would decide Seña is worth it. And how are those other wines priced? Probably in a very similar way.
Chadwick also pointed out that, ‘the difference in quality may be small, but it’s like the difference between an athlete running a distance in 10 seconds or 9.8 seconds. The amount is small, but it’s very difficult to achieve.’ That is true: at the top level, improvements in quality take a hugely disproportionate amount of effort. There is no reason why those efforts should not be rewarded by a higher price. And if consumers go on buying, presumably they’re content with the value offered by the wine.
Price is crucial to a wine’s reputation. Price is status. ‘We have to build a reputation with price,’ said John Kolasa of Château Rauzan-Ségla in the late 1990s. And he’s right: price gets you noticed. It’s hard to rid oneself of the notion that a £200 wine is going to be twice as remarkable as a £100 wine. Dining at Cordeillan-Bages is something one might remember anyway, but how much more clearly and fondly will one remember it if it is the night one drinks Le Pin at t2,000? Yannick Amirault at t27 is, however delicious, always going to seem rather everyday.
But it is this middle ground, away from BOGOFs and away from icon wines, where value lies for most of us. And it can contain unexpected wines. Sauternes, for example: Sauternes has long been undervalued compared with equivalent red Bordeaux because, says broker Bill Blatch, ‘nobody bothers about keeping prices high. Négociants update their lists each month and put prices up if they can, but with Sauternes they don’t bother.’ Prices have risen for the excellent 2005s, and with de Fargues at £580 per case and Clinet from St-Emilion at £590 (Davy & Co prices), they are perhaps closing the gap. But 2005 was an unusual year. Generally speaking, it’s only in good years that Sauternes has been properly profitable for château owners. It has in the past been extremely good value; but if people consider prices for the 2005 reds to be good value, presumably these new price levels for Sauternes are equally good. Except, of course, that Sauternes has seldom been an investment wine in the way the blue-chip reds have been. Buying at a high price to sell at a higher one is good value; buying at a high price to drink may also be good value, but is more difficult to quantify.
Value is very subjective, and is not always to do with money. Your birth year of Mouton-Rothschild, ordered in advance by your ever-loving, and served in a top restaurant on your birthday – how much is that worth? The occasion can be special, or the purpose can be special: a wine intended to seduce can be about the same price as a dress bought for the same purpose, and be considered good value if it succeeds, although of course the same dress can perform the same trick many times – more than can be said for a bottle of wine. But you’d have to be desperate to be seduced by a BOGOF.