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Why is Napa $o Expen$ive?

A few years ago, I took my wife through Napa Valley as she had never been to the California wine region so I figured “What better place to start than the famous Napa Valley”? I remember getting back and having friends ask me what we thought of the trip; I replied, “I’ve never had so much over-priced, crappy wine, served by snooty people in all my life”.

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I guess it had been so long since my first trip to Napa (which was in 1996) that I was really in for a bit of culture-shock. The arrogance by most of the folks we ran into there was appalling, the wine was way over-priced and the overall experience was really bad.

Stay with me – I still have a lot of love in me for a great deal of folks and wineries there – it’s not all doom and gloom!

What had changed in the span of a decade? In my opinion, a few things and I’ll outline them here:

100-point scale:
For far too long, Robert Parker and Wine Spectator have essentially controlled the prices of wine – mainly to no direct fault of their own but largely due to an industry whose marketing folks longed for a rating system.  Robert Parker delivered it, Wine Speculator used it, the marketing folks ran with it and guess what? We’re now paying for it.

Wines that rate high drive a demand that soars  and the wineries only have so much wine to go around so it rapidly turns into a supply and demand issue. Wineries can pretty much charge whatever they want to from that point and the clamoring patrons will gladly pay it to sip on a 95+ scoring wine.

The pattern that this combination of scores and winery supply created a huge fervor of consumers who were and are so willing to pay top dollar for a “Napa Cab” etc that we now find it the norm to see new wineries releasing wines at $75 or more. In fact, there are many who think that if a bottle of wine doesn’t cost X-amount of dollars, then it must be crap.

Real estate catches up:
Thanks in part to the huge cash-flow running through Napa, there was more demand than ever for land; however, there is only so much land to go around in Napa which in turn jacked up the cost of real estate to stratospheric levels.

This means that any winery buying or growing grapes in the region now have a higher inherent cost of doing business and the only way for them to recoup that cost is by hiking the prices up of their wine. Unfortunately for all too many wineries, however, there are better wines out there to be had at the same or even lower prices.

Home-biased palates and the trusting of scores:
Finally, most – if not all the blame – comes squarely down on us, the wine lovers. Bottom line  is that  if we had a more widely adjusted palate and a broader scope of what’s going on in the world of wine, we wouldn’t be so ignorant as to keep paying for wine that’s not worth anywhere  near what’s being asked for it.

Just because a wine gets a certain score from Parker, Spectator or Vaynerchuk (appreciate ya Gary!), doesn’t mean that we should clamor to that wine so much that we’re willing to pay 2-4x what it’s worth.

Remember, wineries can only get away with overcharging for wine just as long as we gladly keep paying for it. The fact that over 1-million people live about an hour away in San Francisco has funneled a lot of wealth into Napa which unfortunately includes a lot of people who have too much money and very little wine knowledge but love to brag about how much money they spent on a bottle of wine. It’s these people that we need to reach out to and help educate – we’re all in that effort together.

We the people, have the power to “take Napa back” from the snobs that have spoiled that great wine region and there are a few suggestions I have:

  • Start drinking wines from other USA regions and the world
  • ALWAYS embrace your palate over ratings – never trust reviews at face value!
  • Remember, you are the only person in the world with your palate
  • If you insist on supporting Napa, fine, but each time you buy a bottle also buy one from a different region, state or country

Conclusion:
Is Napa the only area caught up in their own stardom? No, but they’re clearly the 900lb gorilla in the room and the region that most people think of first when you bring up California or even USA wine production.

Additionally, I believe they are the worst offender in the area of over-priced wines and it’s my hope that they can come back down to reality and get it right.

It’s not the prices that offend me, per se, it’s the lack of quality for those prices as there are so many other areas – even within California – that generally deliver a far better value for the money. If Napa producers want to keep charging the prices they do, don’t you think it’s about time we wine drinkers ask them to match those prices in quality?

If you enjoy wines from Napa, have no ambition of expanding your palate and don’t mind paying whatever they charge for then knock yourself out!

Finally, there are indeed good wine producers from this area so please don’t think I’m throwing the baby out with the bathwater – to all you quality-minded Napa producers out there, keep doing what you do best – we don’t mind paying for your wine because at the end of the day you make wine that’s Worth Every Penny.

  • http://cavemanwines.com Michael Wangbickler

    Overall a good posting Duane. There are a few points I’d like to address.

    1) There are additional factors that can affect the price of the wines. In fact, just about everything is more expensive in Napa. They have highly paid winemakers (some celebrities) and cellar staff. Vineyard workers are generally paid more in Napa. Napa winemakers are more willing to use costly techniques like harvesting by hand, at night. Vineyard plots are typically smaller than elsewhere, so they don’t have economies of scale. Napa makes predominantly Cabernet Sauvignon, which requires barrel aging and more Napa winemakers use very expensive French Oak. I’m sure I’ve missed a few.

    2) Quality is subjective. Many would argue that they use the highest methods of quality control and quality materials. Are these wines flawed? No. Just because you don’t like a certain style of wine, doesn’t make it lower quality.

    3) The fact is, unless they are selling all their wines direct-to-consumer, a winery only makes about 5% profit on a bottle of wine. 5%!!! Most of the cost of the wine goes to taxes, wholesaler markup, and retailer/restaurant markup. For a small winery that produces maybe 10,000 cases a year, 5% on a $100 bottle is a lot more sustainable than 5% on $20.

    4) A very small percentage of all wine made in California comes from Napa, only about 4%. Yet there are over 400 wineries there. That makes for a lot of boutique, artisan producers with small 20-acre parcels or purchasing grapes to make wine. So, in essence, you are paying for small-lot, hand-crafted wines, which by default are more expensive that those mass produced.

    Ok, sure, there are wineries in Napa that are gaming the system. But, really, most are just trying to make a go at it. Yes, there are plenty of wines that are great and less expensive. But, if you can afford them, Napa wines are worth the extra coin.

  • http://winefoot.com Duane Pemberton

    Cool – thanks Michael! It’s great to read your comments!

    I believe I addressed the fact that quality is very subjective in that I asked people to stop trusting ratings and go with their own tastes.

  • http://www.1winedude.com 1WineDude

    You know what – Napa had this post comin’! :)

  • David Falchek

    Duane.

    If a publication offered you $3 per word for your flawless prose I guess you would … you would… well, based upon you post, you would turn it down on principle and accept far less, right?

    I’m surprised that many people who otherwise support capitalism and free markets in every other sector (insurance, tuition, fuel) want to deny free commerce to the wine industry, or at the very least, fault wineries for participating in a free market driven by demand and willingness of consumers to pay a certain price for a certain product.

    Are cult wine prices excessive? Sure they are. But so is the price of diamonds and saffron. The market will correct itself, and already has. I see the case club mailings and many of $80 cabs of 2 years ago are offered for $600 per case.

    The free market knife cuts both ways.

    Dave

  • http://winefoot.com Duane Pemberton

    I totally agree David – the point here is to underscore how important it is to get everyone to expand their palates and wine horizons! :)

  • http://www.ericross.com Eric Luse, Eric Ross Winery

    AT the end of the day the taste of wine is about your palate, “It’s your palate, it’s your dime, make it your decision.” I’ve been talking that up every sense (proper spelling for this glass) I started making wine when one person just falls in love with one and another, “There is something about that wine I just don’t like.” Doesn’t matter what “that” is the important thing is following your taste preferences. Some folks love the taste of Oak. In our wines I want you to taste the vineyard so guess what, Eric Ross won’t be selling any wine to that person and that’s ok.

    I just finished a photo shoot with Gary Vaynerchuk and while tasting through our wines out came the classic comment, “People don’t smell their wines enough” and he’s right. SO put your nose in your tasting glass of a wine you’ve never tried before and then let your sniffter do the deciding and have some fun with it! Explore explore explore and then explore some more….

  • http://www.grapeleafgraphics.com Karen Lucia

    Have you been to Sonoma Lately? If you think Napa is bad, take a ride over there for some more bottle shock.

    Regarding the arrogance comment…you must have been referring to the tourist and not the Napan’s who have to put up with all of that crap. The true Napa folks could give a damn about what wine you drink and would prefer you to drive over to Sonoma and clog up there quaint city streets and highway.
    Cheer’s
    KL

  • http://winefoot.com Duane Pemberton

    Karen! LOL! Love your spirit and spunk! :)

  • Janet

    The market determines the price. If a winery can sell a bottle of their wine for $60/bottle, then their wine is worth $60 to that person. If they can get a lot of people to buy their wine for $60/bottle, then I guess their wine is worth $60/bottle. Over the past 6 months I’ve seen quite a lot of Napa Cabernets from pretty prestigious wineries being sold for anywhere from 25% – 50% discount, so it seems at the present time there are not enough people who are willing or able to pay $50+/bottle for them.

  • http://winowithoutacause.com winowithoutacause.com

    On a per bottle basis;

    How much are you paying for the expensive land?
    How much are you paying for the Marketing & Branding? (the hype)
    How much for the Celebrity Wine Maker or G4 Consultant?

    How much better really is the product in the end? It might be marginally better than most but not 2 to 3 times better, if you are using price as a gauge.

    The Majority of the Valley suffers from Illusory Superiority.

    So it is up to the wine blogger, the food and wine commentators, and the Gary Vaynerators to get people to try other wines from different regions with unique flavor profiles and expand their palates, the democratization of Wine if you will.

    In the end though, we will probably end up paying more for our favorite Monastrell or Touriga National as the American palette expands.

    WWAC

  • wine speculator

    beautiful! i work there and agree. it is indeed a dunken disneyland. but there are some good wines coming out of there. they ARE indeeed overpriced though.

  • wine speculator

    sorry, that would be “drunken disneyland”, but after further review, i would offer that they are a gaggle of”drunken donuts”

  • Sheri Hirsch

    I am a little annoyed at this article but like every palette, everyone is different. I love Napa and every trip has been a great learning experience and a chance to see old friends. Overall, the wines I purchased that were highly rated in Napa were worth every penny. You can assuredly go into plenty of vineyards and find wine that is both wonderful and affordable. Sales exist at many vineyards now and they’ve been cognizant of the recession. Solution.. be a little pickier about what you buy in Napa and check for specials on-line. You will find they are abundant! Try something new at your local wine bar. When in Napa ask the bartender to introduce you to some of the local wines that are a little less expensive. You will find if you ask, the bartenders and those that serve wine will know what is good and of good value. Expand your palette to the wines of the world. Your choices are endless!

  • Bacchus

    Agree! However Napa still pales in comparison to the French for over-priced, over rated vino.

  • Susie Marino

    Nice article. In Cali, there is wine beyond this region, where you won’t hassle with many of the complaints sited here. I’ve been enjoying Livermore Valley Wines: Wente Nth Degree, Murietta’s Well Red Meritage, Les Chenes Duex Blancs, La Rochelle Pinot Noir and for the deal of the century – Concannon Syrah.

  • Donut Holestein

    I wonder how many truly blind tastings folks have done. I’d bet dollars to…donuts…folk would pee themselves in anger over how much GOOD wine they are passing by, due to it’s price point, in favor of wines which are ‘highly rated’. Ppl buying on scores are like folk who buy based on Consumer Reports. They are “just”consumers, not enthusiasts. They are sheeple.

  • NapaWineGuy

    Love the Post.

    I guess all I can say is the iPhone is not the best phone on the market.
    And many people have shelled out $400 – $500 bucks to be the first to have one.

    While many phones out there do the same principal thing “Makes a call”
    I could even get a phone for free if need be.

    I kind of like me iPhone and all it’s silly truly useless features.

    Oh back to wine, who in the hell would pay to much for a cheap bottle on Napa wine.

    Cheers!
    The NapaWineGEEK

  • Mike Ferguson

    “The true Napa folks could give a damn about what wine you drink and would prefer you to drive over to Sonoma and clog up there quaint city streets and highway”

    As a born and raised Napa guy I agree. We would have to think long and hard about driving up to Yountville or Calistoga on the weekend because we knew Highway 29 would be clogged with yuppies in their BMW’s and Mercedes. We just wanted the tourists to go away.

    But the Napa wine industry gave my Mom 15 years of a good job at Mondavi so it is kinda one of those things that you like and hate.

  • Celia

    Fantastic post coupled with some interesting comments.

    As someone who began their wine education with Italian wines, I found Napa to be incredibly disappointing for the price. As a young wine enthusiast, I’ve never been able to afford the some of the truly spectacular examples to satisfy my everyday drinking needs. At the $20 price point I find that South America fully satisfies my occasional craving for big over-extracted wines.

    The points made regarding why the cost of Napa wine is so high was well written. Cost of land, labour and vinification methods certainly contribute to the price we pay. These are great points to explain to customers appalled with wine prices in general. However, while it may not be fair to expect Napa to produce wine with the finesse and complexity(and balanced alcohol) of say, Barbaresco, at comparable prices, I know where my palate would rather invest $100.

  • http://www.SonomaSom.com Robert O’Maoilriain Wine Critic

    Great article, many of the points are spot on. Please allow me to add two reasons that I feel are the most important factors. I have directed and generated Tasting-Room-Only wine sales in Napa Valley of over $20,000,000.00 in 2007 and 2008.

    1) Resort Money- In Provence, France they get similar prices as many Napa Cabernets for poorly made Roses because rich German tourists are happy to pay for them while they sit on the beach during their yearly outing always from the cold weather. Sonoma Valley and Livermore for example will never get the same prices because there are not enough thousand-dollar-plus-a-night resorts to support the high prices paid by their high spending guests. Other regions would charge the same if they had the traffic demographic to support it generated by these exclusive worldclass resorts.

    2) Perception of Value- (Belief by the consumer that you get what you pay for) If your neighbor’s Cabernet is $100 and yours is $50 (pre-recession) than most guests would consider that your neighbor’s Cab was twice as good as yours because the price was twice as high. So as a Winery you then raise your Cab price to $125 so as to not look like a discount or lowly schmuck producer to your visitors. Your neighbor hears about it and suddenly his Cabernet is priced at $175. So this madness has happened over and over in Napa and Bordeaux until the prices do not reflect the wine. Status and image is everything to high dollar wineries in Napa and Bordeaux, the product is a far second as marketing and brand positioning in the market come first. Low prices are often a sign of weakness and inability to true trophy hunters (those spending 100k to 250k+ a year on wine for personal use, i.e. not us poor wine geeks who buy a few measly $100 bottles at a time,lol) and the financially elite who don’t waste their time on “cheap wine,” or wines that don’t score 99 to 100pts in WS and WE.

    Robert O’Maoilriain – Wine Critic, SonomaSom.com

  • http://winemiser.com WineMiser

    Excellent post. I totally agree that Napa has priced itself out of the market. I have been disappointed too many times by paying up for some Napa “Name”. Nickel and Nickel, Stag’s leap, Heitz to name a few.

    In the end a wine is not worth some intrinsic value, it worth whatever someone is willing to pay for it.

    If you want value skip Napa – go to Lodi, Portugal, Wa. State and Georgia (The Country)