by Jeff Miller of Artisan Family of Wines (Seven Artisans, Sly Dog Cellars, Red Côte)
For those of you who maybe aren’t as focused on Los Angeles baseball as I am, you might have missed the sale of the Dodgers to a group that paid $2.15 billion dollars for the club. Even factoring in that you get a stadium and some parking lots, the amount paid is hard to get your head around.
But what I find most puzzling about the purchase is that the buyers paid roughly 500 million dollars more than the second highest bidder. So where one group of, I have to assume, pretty savvy investors were willing to pay “only” about 1.6 billion dollars, another group was willing to pay quite a bit more. Roughly 30% more. And this is for an investment that, at least in theory, you should be able to posit an income stream (based on ticket sales, media rights, etc. etc. etc.) for, an income stream that should translate into some fairly definite estimate of value.
If that’s how it is with a fairly tangible assets such as the Dodgers, you can only scratch your head when it comes to wine. What is a bottle of wine worth? This question is much on my mind these days as a result of a conversation with a local winery owner. The gist of the conversation was that we price our wines way too low. In his view, our wines were equivalent in quality to a Napa winery that charges roughly five to seven times what we do for our wines.
If there’s one thing that certain when it comes to wine pricing, it’s that lots of things come into play besides the quality of what’s in the bottle. Study after study shows that there’s scant relationship between how tasters, when tasting blind, rate and wine and how much that wine costs. This puts to one side the fact that one person’s 85 is another person’s 95 (or 75), so that it’s pretty difficult to come to any hard and fast conclusions about the relationship between quality and price.
One possible solution is for me (anointed as the final word on the quality of our products) to decide how good our different products are, and to price them accordingly. I throw this “solution” out more as a “stalking horse” than as a serious proposal, since the idea immediately flounders. Who am I to be the arbiter of how good our (or anyone else’s) products are? Judging by our sales, I’m not that good of a decider when it comes to how our products move. Our Petite Sirah, which is one of my favorite wines, doesn’t move nearly as briskly as other of our products which I don’t like nearly as much.
Now some of this can just be put down to the type of wine. Cabernet Sauvignon, as near as I can tell, will always outsell Petite Sirah, the quality of the two wines be damned.
And there’s no denying that the price which someone will plunk down for a wine can’t be separated from the marketing that drives that wine into the marketplace.
Returning to the subject of studies, one thing that is beyond doubt is that consumers believe that price is an indicator of quality (despite all the evidence to the contrary). Give the same wine to the same consumer, and tell him that one is Lafite while the other is Two Buck Chuck, and he’ll prefer the “Lafite” every time.
It’s always been our goal to produce quality wine at affordable process, but I have to admit that, in a world where value sometimes seems a totally arbitrary thing, maybe higher prices isn’t such a bad idea.