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What does it cost to produce a glass of wine?
By John Bergman & David Ashcraft
Revised March 2002
Special Thanks to Jim
The next time you are enjoying your favorite glass of wine, think of how that 6 ounces of sweet nectar got into the glass and actual production cost. Lets have a look at this phenomenon from the very beginning.
Start With The Vineyard
The first thing that is needed to begin the process is the land to plant vineyard. The cost in Napa and Sonoma Counties for quality vineyard land runs from $50,000 to $120,000 per acre with an average cost of approximately $70,000 per acre. Once the land is acquired, it must be planted. This will cost from $29,000 to $50,000 per acre with an average cost of $35,000 per acre. To maintain the vineyard it will cost approximately $3,500 per acre / per year. Maintenance costs will run over the first three years with the first harvest in the third year being approximately 2 - 3 tons of grapes per acre. When the vineyard reaches full maturity (in approximately 5 years), it should begin to produce from 4 -7 tons of grapes per acres, figuring an average of 6 tons per acre.
Here is a typical cost and cashflow breakdown to buy the land, plant a premium Cabernet Sauvignon Vineyard and sell the grapes.
| 10 Acre Premium Napa Cabernet Sauvignon Vineyard Example |
| Year |
1 |
2 |
3 |
4 |
6 |
7 |
8 |
| Purchase Land @ $70,000 / Acre |
<$700,000> |
0 |
0 |
0 |
0 |
0 |
0 |
| Vineyard Development @ $35,000 / Acre |
<$350,000> |
0 |
0 |
0 |
0 |
0 |
0 |
| Acres Planted |
10 |
10 |
10 |
10 |
10 |
10 |
10 |
| Tons Per Acre |
0 |
1 |
2 |
4 |
6 |
6 |
6 |
| Total Tons |
0 |
10 |
20 |
40 |
60 |
60 |
60 |
| Price Per Ton |
0 |
$3,700 |
$3,700 |
$3,800 |
$3,800 |
$3,800 |
$3,800 |
| GROSS INCOME |
<$1,050,000> |
$37,000 |
$74,000 |
$152,000 |
$234,000 |
$234,000 |
$240,000 |
| EXPENSES |
| Vineyard Management @ $3,500 Per Acre / Year |
0 |
<$35,000> |
<$35,000> |
<$35,000> |
<$35,000> |
<$35,000> |
<$35,000> |
| Harvest Costs @ $175 / Ton |
0 |
<$1,750> |
<$3,500> |
<$7,000> |
<$10,500> |
<$10,500> |
<$10,500> |
| Miscellaneous |
<$10,000> |
<$10,000> |
<$10,000> |
<$10,000> |
<$10,000> |
<$10,000> |
<$10,000> |
| ESTIMATED EXPENSES |
<$1,060,000> |
<$46,750> |
<$48,500> |
<$52,000> |
<$55,500> |
<$55,500> |
<$55,500> |
| NET OPERATING INCOME |
<$1,060,000> |
<$9,750> |
$25,500 |
$100,000 |
$178,500 |
$178,500 |
$184,500 |
| *The aforementioned numbers are not warranted but we feel are fairly accurate based on toady's economy. |
Here Come The Grapes
Once the grapes begin to grow it's time for the farmer to think about selling them to a winery. The varietal, County of origin and quality will determine the price per ton sale price. The charts below will spell out the actual sale prices for various varietals in Napa and Sonoma Counties.
| 2001 GRAPE SALES BY THE TON |
NAPA COUNTY
|
| - |
Low |
High |
Weighted Average |
| Chardonnay |
$500 |
$5,000 |
$2,298 |
| Cabernet Sauvignon |
$900 |
$12,606 |
$3,703 |
| Merlot |
$700 |
$12,606 |
$2,756 |
| Zinfandel |
$400 |
$5,000 |
$2,605 |
| Pinot Noir |
$110 |
$6,189 |
$2,137 |
| Syrah |
$1,000 |
$12,374 |
$2,610 |
SONOMA COUNTY
|
| - |
Low |
High |
Weighted Average |
| Chardonnay |
$357 |
$6,000 |
$1,906 |
| Cabernet Sauvignon |
$300 |
$6,000 |
$2,698 |
| Merlot |
$300 |
$6,000 |
$2,137 |
| Zinfandel |
$600 |
$3,600 |
$2,455 |
| Pinot Noir |
$300 |
$6,010 |
$2,217 |
| Syrah |
$700 |
$5,000 |
$2,201 |
| *Statistics from the "Final Grape Crush Report 2001 Crop" California Department of Food and Agriculture |
The Next Step: The Grapes Are Sold To A "Premium" Winery
A ton of grapes makes 140 - 165 gallons of wine. It takes 2.37753 (2.4 rounded off) gallons of wine to fill a case of twelve 750ml bottles. Another important thing to know is that each ton of grapes will make 60 to 65 cases of wine (62 cases rounded off.)
The Juice
Once the juice is made, it will have to be fermented either in steel tanks or oak barrels. At this point the wine is known as "bulk wine." The storage will cost approximately $00.20 per gallon per month to store. If the winery is making a white wine like Chardonnay that doesn't require much aging, the storage cost will be less (figure about one year.) If the winery is making Cabernet Sauvignon, that requires two to four years to age properly, making it more expensive. To age the wine for best taste results, oak barrels are used. You can buy a new American Oak Barrel for approximately $400, or you can buy new French Oak Barrels for about $750 a piece. It's not always important to use new barrels, so lets look at the cost of using "preowned" French Barrels: A one year old French Oak Barrel will set you back about $400. A two year old French Oak Barrel will cost around $300. A three year old French Oak Barrel will cost $150. Four years old is $100. Ofcourse the more the barrel is used the less the oak flavor permeates. Top premium wine makers may use an oak barrel 2 to 3 seasons most.
Blending and Bottling
Once the wine has been properly aged, it's time to blend if need beand begin the bottling process. It is important to know that it will cost from $6.50 a case to bottle the wine. This includes the bottles, corks, foil, label and the box. Now that the wine is bottled and cased, it is known as "cased goods." It needs to be stored until sold. If the winery has no refrigerated storage warehouse, you can rent the space from one of several facilities in the valley. The cost to rent the space will be approximately $00.15 per case per month. On top of that cost, they will spend another $00.10 per case for each move, known as a "raking charge." Raking means to move within the storage area, in or out as well.
What is the difference in making Chardonnay vs. Cabernet Sauvignon wine? Quite simply, the answer is time. Once Chardonnay is fermented it can be bottled in a few months and sold. Different "Premium" levels of Chardonnay will be held in the oak barrels longer, but they are usually bottled and ready for sale within the following year of harvest. Conversely, "Premium" Cabernet Sauvignon will be held in oak barrels for up to 3 years before bottling. It will then be stored for at least 6 months before they are sold to the public. Once the wine is bottled, it must settle down before drinking. If opened too soon you will discover "Bottle Shock" and not be happy with the wine.
Wine Country Trivia
| One Case of Wine |
= 2.4 Gallons |
| One Ton of Grapes |
= 149 Gallons |
| 149 Gallons of Wine |
= 62 Cases |
| 1 Acre of Mature Vineyard |
= 6 Tons |
| 6 Tons |
= 894 Gallons |
| 894 Gallons |
= 372.5 Cases |
| One Case of Wine |
= 12 Bottles |
| 1 Acre of Mature Vineyard |
= 4470 Bottles |
| A Barrel |
= 60 Gallons |
| A 12 Bottle, 750 ml case including: glass, box, labels, corks & foils is approximately |
= $6.50 |
| *These numbers are not warranted but we believe they are a close approximation for our intended use. |
The charts that follow will outline the difference in costs of making "Premium" Chardonnay versus "Premium" Cabernet Sauvignon wine.
CHARDONNAY
| Cost To Produce A Bottle / Glass Of Premium Chardonnay With A Retail Bottle Price Of $40.00 |
| Purchase Price For 1 Ton Of Grapes |
= $2,500 |
| 1 Ton Of Grapes = 62 Cases |
= 744 Bottles |
| Bottle Cost For Purchase Of 1 Ton Per Bottle |
= $3.36 |
| |
|
| Storage For 1 Year Per Case |
= $1.80 |
| Rake Cost For 1 Year Per Case (3 Moves) |
= $0.30 |
| A 12 Bottle, 750 ml case including: glass, box, labels, corks and foils is approx. |
= $6.50 |
| . |
= $8.60 |
| Number Of Bottles In A Case |
= 12 |
| Storage, Rake And Case Packaging Cost Per Bottle |
= $0.72 |
| |
|
| 3 French Oak Barrels |
=$2,250 |
| Premium Wineries Use Barrels 3 Times before Recouping each Barrel |
= 3 |
| Cost To Use 3 Barrels Per Season |
= $750 |
| Number Of Bottles Per Case |
= 12 |
| Barrel Cost Per Bottle |
= $1.01 |
| |
|
| TOTAL COST PER BOTTLE |
= $5.08 |
| Number Of Glasses Per Bottle |
= 4 |
| TOTAL COST PER GLASS |
= $1.27 |
| *The aforementioned numbers are not warranted but we feel are fairly accurate based on toady's economy. |
CABERNET SAUVIGNON
| Cost To Produce A Bottle / Glass Of Premium Cabernet Sauvignon With A Retail Bottle Price Of $60.00 |
| Purchase Price For 1 Ton Of Grapes |
= $3,750 |
| 1 Ton Of Grapes = 62 Cases |
= 744 Bottles |
| Bottle Cost For Purchase Of 1 Ton Per Bottle |
= $5.04 |
| |
|
| Storage For 4 Years Per Case |
= $7.20 |
| Rake Cost For 4 Years Per Case (4 Moves Per Year) |
= $1.60 |
| A 12 Bottle, 750 ml case including: glass, box, labels, corks and foils is approx. |
= $6.50 |
| . |
= $15.30 |
| Number Of Bottles In A Case |
= 12 |
| Storage, Rake And Case Packaging Cost Per Bottle |
= $1.28 |
| |
|
| 3 French Oak Barrels |
=$2,250 |
| Premium Wineries Use Barrels 3 Times before Recouping each Barrel |
= 3 |
| Cost To Use 3 Barrels Per Season |
= $750 |
| Number Of Bottles Per Case |
= 12 |
| Barrel Cost Per Bottle |
= $1.01 |
| |
|
| TOTAL COST PER BOTTLE |
= $7.32 |
| Number Of Glasses Per Bottle |
= 4 |
| |
|
| TOTAL COST PER GLASS |
= $1.83 |
| *The aforementioned numbers are not warranted but we feel are fairly accurate based on toady's economy. |
How Wineries Sell Their Wine
Wineries sell their wine in various ways. The best way for a winery to sell its wine is in it's tasting room at a full retail price. The second best way for the winery to sell it's wine is to sell to their favorite customers via a mailing list.
Most wineries will offer a "Club Membership" which will allow the customer to buy at a discount. This usually entails a guarantee from the favored customer that they will buy several bottles or cases on a quarterly or biannually basis. One will normally receive a 20%-30% discount and the winery can forecast on a base of sales over future years.
Then there are the distributors that usually will represent several wineries at one time. They will go to the retailer and / or restaurant to sell and deliver the wine for the wineries.
In Conclusion
The next time you are drinking that $12.00 glass of "Premium" wine your favorite Four Star restaurant, remember that the actual cost to produce that glass of wine was under $2.00.
However, this price does not take into consideration millions of dollars of wine making equipment, the time that it took to grow the "Premium" grapes, and all of the people that had a hand in getting it to your lips. Just enjoy it for what it is. It's well worth the $12.00 you paid.
If you are interested in becoming involved in wine making or growing "Premium" wine grapes in Napa or Sonoma Counties, let me know. We would be very happy to get you on the right path. You may wish to fill out the Vineyard Shoppers Questionnaire and let us know what your dream of living in the wine country is all about.
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