Beyond the Wine Aisle


Why Is Wine So Expensive?

Why wine is less expensive in Europe
by Katherine Cole of The Oregonian
March 24, 2009

If you're lucky enough to be able to take advantage of this season's economy-driven discounted airfares to Europe, you'll probably discover a sad truism: The wine seems to taste better and cost less over there.

This can be difficult for West Coast denizens to understand. After all, Oregon, Washington and California are all wine states. So we should be awash in the same sort of sea of cheap, delicious drinking options that European wine-producing states are, right?

Wrong. So where's the disconnect?

Let's take a look at why wine is cheaper there, and what we can do about it.

Foreign travel: Before you complain about the American price of that simple Spanish wine that was so cheap when you were frolicking in Ibiza, consider this: Wines imported from other nations are subject to tariffs, taxes and cuts for the importer and distributor. All of these factors pad the price.

Pre-sub-prime: An old vineyard in Europe has been owned by the same family for centuries. An old vineyard in the U.S. has been owned by the same family for decades. And most American vineyard owners are much newer to the game. Which means that -- whether they paid $30,000 per acre in the Willamette Valley or $300,000 per acre in the Napa Valley -- they've got to pay the mortgage. Ask a European vineyard owner about his mortgage, and he'll look at you in confusion: Mortgage? What mortgage?

Vanity wines: Here's how the American story goes: Rich person buys prime vineyard land, builds fancy winery, hires prominent "consulting winemaker" and, a few years later, releases an overmanipulated wine made from the fruit of juvenile vines, complete with a ponderous price tag of $75. There are hundreds of these new hotshot labels every year, but with the economy in its current nosedive, some of these vanity wineries are going to have to take an honest look at themselves and consider what the market wants. Which is an inexpensive and honest bottle of wine in the European style.

Federal funding: Wine is an important agricultural product for Europe, which is why, until last summer, the grape-growing business was heavily subsidized over there, keeping prices artificially low in the same way that American corn and wheat are cheap. As the wine subsidies are phased out and redundant vineyards are ripped out in accordance with new European Commission regulations, the prices of the lowest-tier European wines may rise a bit.

The good news -- the exchange rate is getting even:

The Euro celebrated its 10-year anniversary by peaking in July of 2008 at $1.60, up from $1.50 in 2007. This means that for the past couple of years, a wine that was a mere 8 Euros over there was $13 over here. But now that 2009 imports are starting to arrive, the Euro has plummeted to approximately $1.30 (which means that same wine would be priced at $10 per bottle). So look for prices on European wines to drop -- despite the aforementioned cessation of subsidies -- as the year progresses.

What you can do: Why is there so much good, inexpensive wine in Europe? Because Europeans drink simple wines on a nightly basis. We could drive our own wine prices down -- and, some might argue, improve our collective health -- by getting in the habit of drinking a glass of wine every night with dinner, as they do in the old country. As long as wine is seen as a special-occasion beverage here, it will be priced as such. But if we create more demand for cheap, well-made, every-night wines, the supply will follow.


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