What is something worth?

by Jeff Miller of Artisan Family of Wines (Seven Artisans, Sly Dog Cellars, Red Côte)

jeff-smFor 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.

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6 Responses to “What is something worth?”

  1. SUAMW says:

    Maybe the 30% difference is due to a similar law as in probate real estate sales - where the previous bid must be exceeded by a certain percentage…

  2. jonathan r bates wine broker chatsworth ca says:

    Jeff, great post. 43 years in this business, it has been a fun ride! Really makes you think! I like it. Good show!
    Jonathan R Bates
    Wine Broker
    Chatsworth, California

  3. Tom Wark says:


    This one is pretty simple. If a wine sells out easily prior to the next vintage being released, then it is probably underpriced. If the wine does not sell out by the time the next vintage is released, the it is probably overprised.

    This means that the $300 Napa Valley Cab that sells out is at least price correctly and is worth what it is priced at, if not underpriced.

  4. Mike V says:

    Tom Wark is exactly right. It is supply and demand. If a crappy wine sells out at $50 so be it. People want it. If a good wine doesn’t sell at $25…lower the price. I work for a winery and we do try to price wine to sell out in 365 days. Wouldn’t it be nice if that actually happened!

  5. Zoeldar says:

    As usual, we in the wine industry believe our products are dramatically different than other markets…yes and absolutely no. Who determines the price - it will always be the consumer. sure, we set prices, we decide how to market/position/etc. based on what’s in the bottle…but the consumer has the final vote, as Tom alludes to.

    The difference between vino and CPG is the wide variability of positioning…peanut butter will always be peanut butter, and even Whole Foods, selling a custom crush PB, can only charge so much above Jif and Skippy, even if it is the Mouton of PB. Our market ranges from $1.99 to $1,500 or more…without too much rhyme or reason (if you strip away the hype).

    Always a fascinating discussion full of perils. At the end of the day, for the money/profit, do as Willie Sutton and follow the money - it is all about volume and sub-$8 bottles…aka Barefoot, Moscato, Wine in a Box….and one would never mistake a fine PS or Cab or whatever for the cheap stuff. After that, it is all about Direct Sales and circumventing the (almost criminal) 3-tier oligopoly we all live with…that, with a well-run biz, can allow one to survive and sometimes even make a modest profit in today’s wine world.


  6. Wait a second Tom. What if the wine doesn’t sell out before the next vintage (setting aside volume variations) at , say, $50 a bottle. Then they hire some genius (or maybe you or me instead) to help them with their PR or Market Research, make some changes in their marketing, and the next vintage sells out in 3 months, again at $50. Was the first vintage under-priced or over-priced, for that wine?

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