Have you ever wondered why one bottle of wine costs $65 and another $15? There is much more to the cost of a bottle than the wine inside. While only the consumer can make the final judgment as to what a bottle is worth, this article highlights some of the factors that are associated with the retail price that you pay.
Alcohol Taxes: According to http://www.tax-rates.org/virginia/excise-tax#WineTax, Virginia has one of the highest wine taxes at $1.51 per gallon. Our state's excise tax on wine is ranked #7 out of the 50 states and is already added to the purchase price of all wine bought in Virginia.
Distribution Costs: For less expensive and mid-range wines, the economics of distribution must cover production cost, taxes, import duties, transport and the various markups. For the pricier bottles the rules are less straightforward and price is more independent of costs.
Oak: Ageing wine in oak barrels costs more than producing it in stainless steel.
Prestige: Brand names dramatically affect price. High end packaging, well-known and respected winemakers, advertising, location (terroir) and grape varietals all contribute to the price. An exclusive wine brand will command a premium, just as it does with clothing or automobiles.
Time: The ageing of wine in oak barrels for a year or more and/or in a winery’s cellar enhances the drinkability of quality wines. An example of a red wine that improves with ageing is an Italian Barolo.
Volumes: Almost all the high-priced wines around-the-world are produced in small amounts and typically command a higher price. The difference in volumes between small production and massive production explains why wines cost less at big box retailers like Costco, where wines from boutique wineries are rarely found and retailers take extremely small margins, but make it up in the volume sold.
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