What Determines Wine Prices?

What makes certain wines of high quality, or as the Italians would say, 'perfecto'? Can the price tag of a bottle act as an indicator of what's good (expensive) and what's not (cheap)? There are many wine experts out there that can tell us what they think is a quality bottle of wine, but can we trust their advice? Haley and I looked at an article that questioned these same things. "What Determines Wine Prices: Objective vs. Sensory Characteristics" discusses this price puzzle in the wine industry. It discusses the relationship price has on what we believe is the quality of wine.

There are two main opinions on this price/quality discrepancy for wine. The first says that price differences very clearly reflect quality differences. They believe that the market forces adjustments in prices and consumers can’t be fooled. However, the other side would disagree with this claim because they think it is a weak argument. This may apple to some wines, but not the majority. The vast assortment and types of wines makes it difficult for prices to be strongly correlated with quality.

Our class went and visited the renowned winery Villa Della Torre, where we were able to tour the historic grounds and taste some of their popular wines. Before we tasted these well-known wines, we were told about how prestigious one of them was, the Amarone. The Amarone has won many awards over the years and has been among the top wines across the world as well. A man who worked for the vineyard told us that it is “a wine you must have before you die.” After tasting the wine for ourselves, and hearing about some of the other high-status wines we were given the option to purchase these wines. Many of us heard earlier that these bottles of wine were roughly $100 or more in the US. But, when we looked at the price at the vineyard for a bottle, it was only 25 euros. Seeing this many of us decided to buy a bottle… or two… or even a case. I sat there watching this process happen and wondered if we were victims of this price-quality relationship.

The article describes a situation that occurred with Ernest Gallo many years ago while he was selling wine. He offered a customer two glasses of the same wine, and after the buyer tried both the glasses he asked for the price of the “two” wines. Gallo said 5 cents for one and 10 cents for the other. The buyer bought the 10 cent one. This shows that they believed that the more expensive was of higher quality, when in fact it was the same wine. Other studies have also shown that less experienced wine tasters tend to prefer cheaper wine when doing blind tastings. Also, in the auction room you will notice that higher priced wines act as a “stimulant rather than a deterrent.”

After conducting a more controlled study with blind tasting, the article was able to conclude that the initial characteristics that are found on a bottle of wine (ranking, vintage, and appellation) explain the price difference. However, sensory variables also have a large impact on how wines are ranked. So perhaps we were influenced to buy the Amarone and other wines at Villa Della Torre because of external factors such as the price and awards. But, if the awards were given based off of sensory characteristics then you could say we truly were purchasing “quality wine” whether we actually knew or not.  -Amy Wooten