Why is Grocery Store Wine Cheaper Than It Is At A Winery?

Barefoot. Arbor Mist. Yellow Tail. Sutter Home. These are the big name brands of wine that dominate the wine aisle in your local grocery store. A 750 milliliter (ml) bottle of one of these grocery store brands costs you a measly $10, but the same size bottle of a concoction made special at a local winery has no cost limit — $10, $30, or more than $50.

The Price Of The Contents

How much does the wine cost to make? The cost of raw materials is typically a solid guide for the cost of the end product. Wine is made using grapes, barrels, and bottles, and each piece is variable. What variety of grape is the wine made of? Certain grape varieties are simply more expensive than others, which explains why certain wine varieties end up being more expensive than others. What kind of barrel is being used for aging? Stainless steel tanks are typically larger and yield the most product. Is the wine bottled or boxed? Boxed wine is always cheaper to produce.

As with most rules, there are exceptions. Wineries offer specialty or limited edition bottles only available at locations priced higher than a bottle that can be ordered online or bought through a distributor. The raw materials might not necessarily be more expensive, but the perceived value is higher. For this reason, the winery is able to charge significantly more than a standard bottle

Everybody Profits, Everybody Overcharges

When you buy a bottle of wine from a grocery store, you pay the winery, the distributor and the retailer. Each exchange comes with a cost increase. To keep the product at a fair price on the shelf at the retailer, the original supplier must sell the product for less than its worth. A commercial winery will sell the bottle to a distributor in exchange for about 50% of retail value. A retailer will buy from a distributor at wholesale or about a 33% markup from the original price. Finally, a consumer will purchase from a retailer at another 50% markup.

You are probably already thinking, “Why have the middle man? Wineries would make more money if they sold directly to the consumer.” Well, yes, that is true. Many wineries would prefer to sell directly to consumers. However, if you plan to open a winery, you probably expect to make wine — not to operate a full-scale business complete with a marketing team. In selling to a distributor, the responsibility of advertising a product and measuring sales is lifted from the winery; the winemaker can focus on their intended responsibility: winemaking.

After all of these transactions, it is hard to believe wine in a grocery store ends up more affordable — and it is the winery that sets the standard. The reason why commercial wineries are able to sell wine at a loss of value is because the product is mass-produced. When a producer is selling as much product as a commercial winery, selling at a loss makes sense because the mass-produced wine reaches more consumers. In turn, these commercial wineries yield the largest return.

Why do small wineries refuse this system? Many winemakers resent distributors. Winemakers are not entirely off the hook when it comes to sales. A distributor is not guaranteed to know any information about fine wine. Because distributors are required to understand business and not the product itself, there is a certain role winemakers have to play in selling their bottles. Representatives from wineries often travel with their distributors to different locations to host tastings at retail locations. Many family-owned wineries might prefer to stay out of the three-tier system and stick to small business operations, especially if they might have to put in the same amount of work anyhow.

Not to mention, the cost of a larger-scale business can grow too big. Distributors might push for more wineries to open. Wineries will need to hire more workers to run new locations, which entails a larger budget. The operation becomes too much to manage if the location we are discussing is a family-owned winery.

The Price Of A Winery Wine

Unlike commercial wineries, small wineries might not disperse wine in large quantities, ship their wine long distances or even distribute their wine at all. The search for that special wine from the local vineyard in the midst of your weekly grocery store trip could leave you empty-handed. After splurging on a weekend wine tasting, you might have no other option but to pay the winery price in order to take home that Cabernet Sauvignon you could not stop sipping.

After factoring in the cost of raw materials, there is no limit to the price a winery is permitted to charge for a bottle of their own concoction. Small wineries almost always package their wine in bottles, which increases the price of raw materials and energy costs. Despite the added cost, the decision is informed. While boxed wine is cheap to produce, the average wine drinker believes that cheap wine means bad wine. Not to mention, boxed wine has been associated with poor quality wine. Bottled wine is much easier to market and sell.

Rightfully so, the reputation of winery wine is higher than that of grocery store wine. Consumers are willing to pay more for that reputation and the skills that follow. Purchasing wine from a winery ensures a bottle stored at cellar temperature and a solid pairing recommendation from a winemaker as part of the experience. A grocery store clerk is not guaranteed to know sufficient information about fine wine to provide a solid recommendation to a consumer.

At the end of the day, it is Do not be fooled — an expensive wine does not ensure a delicious wine. Maybe the highest quality wine you ever tasted is a $10 box of mass-produced Zinfandel from a grocery store. Maybe it is a $40 bottle of pumpkin wine sold exclusively in the fall months at a local winery. Either way, indulge. Taste is a subjective experience, and the true value of a wine comes from your enjoyment.