For The Love Of Port

This is a really good video of what it costs to make a bottle of Napa Cab. While it isn't Port, it does give one a good idea of how pricing works and, even more important, why reaching at least that 500 case production is so important.

https://vimeo.com/151466168

While it's informative for someone making a vanity project amount of wine with no interest in actually running a winery, I suspect this is not at all close to what folks farming and vinifying in the Douro look like when they sit down and break down their costs.

A few specific points of difference:

- $10k-15k/ton for grapes is something that is only achievable in a tiny portion of high end wine areas. In a quality area of America with a decent amount of mechanization, you're looking at $2k-4k. I'm guessing labor in Portugal is cheap, and that makes up for much if not all of the mechanization losses for Douro grapes.

- Custom Crush facilities have high per case costs because they're making wines for dozens and dozens of customers in tiny quantities, and turning a profit above that. That's an incredibly labor intensive way to run a winery, that's why even small wineries are usually 3-5k cases minimum, and in areas without especially strong pricing (places where prices don't average above 30$ a bottle) you're looking at minimum winery size being more like 5-8k cases.

- While your winemaker is very important, he/she is making more than 1k cases of wine for you in the Douro (and almost anywhere else) because you employ them. Maybe if you have more than 5k cases of wine you'll start hiring assistant wage help to give them more hands, but honestly, it's not that tough to one person show 10k cases of wine if you've got extra help during crush and it's your own business. You make up for it in February when there's nothing (for your winemaker) to do.

- $4 a bottle is stupid. That's how you end up with 50lb cases of wine and bottles with shoulders big enough to not fit in wine racking. Sorry, pet peeve. If you make good wine, I'll buy it even if you sell it in a bag.

- $1-2 per cork something you can achieve significant savings on in bulk, just not on buying 500. Also, it's very up in the air that much of their cork taint technology is as effective as billed. Nicer cuts are definitely worth more, but the testing...?

- Bottling cost goes down exponentially when you do either A) enough volume to own your own equipment
B) rent equipment for less than 10-15k cases
For example, the mobile bottling line rented by many finger lakes wineries cost about ~$150k to assemble in a trailer. You rent it by the day, and depending on how many different bottlings you're doing, can bottle in the neighborhood of 2500 cases a day. It costs something around $1k a day. Yes you provide your own labor, but you're not paying top dollar to people to bottle.

- If someone paid me $45k a year to sell their wine, I'd make sure I could sell more than 1k cases. Both young Somms and 20 somethings that could double as Abercrombie models (of either gender) make great wine salespeople, and can move your wine at a substantially cheaper rate than over $20/hr.

Now, I understand owning your own building and having staff either farm, make and sell your wine also carry substantial costs, but there's a reason why most wines don't cost more than $20 a bottle, and you can regularly find exceptional wines under $40 (world wide, not just Douro). If you're making winemaking your primary business and investing in it as such, your costs go WAY down.

Also, sorry Andy, I don't mean to come off as being very bashy to this guy, I just don't find this representative to most of the wine world, as he clearly doesn't take winemaking as his primary business. Anyone who attempts to have a second business unrelated to their primary will find out quickly that farming out most or all of the aspects of it make it look REALLY expensive. If his costs were anywhere close to what most people spent, wine would be a rare luxury.

Thank heavens it's not!


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Brad,
Roy Piper does make his living off of making wine in Napa. So he's got a pretty good idea what it costs to make a bottle of high end wine there.

It is not meant to be an exact set of numbers, but instead a rough cost breakdown of a small operation making a small amount of high end Napa Cab. And how economy of scale works in wine making.

Some of those costs don't change much regardless of where you are in the world; corks, bottles, labels, etc.

Obviously the bigger you are (Lets say Robert Mondavi, etc) then of course your costs come way down as you own much of the land yourself (and have probably owned it for a long long time and bought it before land pricing went through the roof in Napa), you've got economy of scale, and it's easier to control employee salaries instead of an expensive consultants, and your distribution network is relatively large. Heck, Branco winery (The Franzia's) had planned to build their own glass bottle plant on their property because they make so many bottles of wine it was cheaper for them to build a plant and start making their own bottles than the cost to buy and ship empties to them. That's staggering to even consider doing that!

Again, while this is specific to a high end Napa Cab the breakdown is something that all producers in the world are looking at. Just change some of the numbers

Yeah, it is cool to see someone break their view of the costs down, I appreciate you sharing. And again, I didn't mean to sound so negative, but I guess the remark at the beginning that the old adage about production costs not being above $20 doesn't apply in Napa just really rubbed me the wrong way, because I felt it implied that to make top tier quality cab in Napa, you HAVE to follow such a model. While that $20 barrier he referenced definitely can be broken in areas with more expensive grapes or labor intensive production (think Sauternes), it's possible to be well under his mark even in Napa, without owning vineyards, with a different model of production. I still also strongly suspect that when there's very little pressure to keep costs down because you can charge $150 bottle retail.

I guess it comes down to what aspects you value in your wine and how much you believe it to be worth. The more folks that would like to line up to spend their money on wines of that model, the more of everything else for me .




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Bradley Bogdan wrote:Yeah, it is cool to see someone break their view of the costs down, I appreciate you sharing. And again, I didn't mean to sound so negative, but I guess the remark at the beginning that the old adage about production costs not being above $20 doesn't apply in Napa just really rubbed me the wrong way, because I felt it implied that to make top tier quality cab in Napa, you HAVE to follow such a model. While that $20 barrier he referenced definitely can be broken in areas with more expensive grapes or labor intensive production (think Sauternes), it's possible to be well under his mark even in Napa, without owning vineyards, with a different model of production. I still also strongly suspect that when there's very little pressure to keep costs down because you can charge $150 bottle retail.

I guess it comes down to what aspects you value in your wine and how much you believe it to be worth. The more folks that would like to line up to spend their money on wines of that model, the more of everything else for me .




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My understanding of the main issue for newer producers in Napa is simply the cost of land and/or the cost of buying top tier grapes from more well known parcels that will help garner you high scores right away. Those producers who bought a long time ago are probably making a good profit margin since their costs are so much lower and they can charge more because everyone else is.