Why Does Napa Valley Wine Cost so Much?

Grapes

Question from Rick: Why does Napa Valley wine cost so much?

Reply: Good question – I’ll bet lots of people wonder the same thing. The short answer is supply and demand. But, seen through that lens, the best of Napa Valley Cabs are quite a bargain compared to their European counterparts.

You can expect to pay just over $200.00 a bottle for Shafer Napa Valley Hillside Select Cabernet – a wine that many think of as one of Napa Valley’s unofficial first growths. A current vintage of Chateau Latour, a first growth from Bordeaux, is $1000.00 a pop, give or take, depending upon where you buy it.

I don’t think any tasting panel would come to the conclusion that Chateau Latour is five times better than Hillside Select or that the Hillside Select is seven times better than Robert Mondavi’s Napa Valley Cab.

But, the quality has to be in the bottle in order for this supply and demand situation to develop. What single thing boosts production costs the most? The grape price. Mid-valley Napa Cabernet Sauvignon grapes run around 4-6 thousand dollars a ton. You could buy Cabernet grapes from Fresno to make an inexpensive, basic Cabernet for about $300/ton.

As it happens, the grape price is also driven by supply and demand. Napa Valley is a tiny region that produces just 4% of California’s wine. Because the quality is reliably very high, everyone wants to grow grapes here – so there go the real estate and grape prices! 

You could get into the cost of other facets of production like barrel aging vs. flavoring with oak chips and so forth. And, the cost of labor is much higher for fine wine production – not necessarily the hourly rate, but the amount of care taken in the vineyard and the winery is, literally, at work there. For instance, you’re not going to see painstaking shoot and cluster thinning or sorting of the grapes before crushing them in the production of $8.00 Cabernet. But, these factors can figure in anywhere.

Just over the hills, to the west of Napa, is Sonoma County. You’ve probably noticed slightly friendlier wine prices there. Well – the grape prices and real estate are moderate, compared to Napa Valley. You can buy Cabernet grapes for a little over $2000.00/ton.   

 So, Rick, as with so many things, it really comes down to location, location, location!

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