Has the wine bubble finally burst?

For the last year at least the wine world has been rife with rumours of big price increases and the un sustainability of cheap wine.

Now with the huge 14p a bottle duty increase announced in the recent budget, the days of the ‘Bog off’ (buy one get one free) are definitely numbered.

Uk shoppers love a bargain but this ‘mind set’ has largely been indoctrinated by the supermarkets that much prefer to deal in high volume at the cheap and sometimes not so cheerful end of the market.

The storm clouds have been gathering for some time.

Drought, frosts and poor harvests in Australia is one factor.

Up until a few months ago a wine shortage in Oz was unthinkable. But so bad is it that even they have had to import wine to fill their wine boxes! Australia has traditionally supplied the UK with much of its bulk

Branded wines.

Cheap wine revolves around volume. Restrict that volume and producers can no longer afford to take a hit on the discounting demanded by the supermarkets. In reality the only people who have footed the bill for our cheap wine drinking habits is the producer, and the supermarkets have squeezed the life out of them!

There are also increased production costs, transport and the fact that for over a year now UK wine importers have been losing on average 10% against the Euro.

In the past the supermarkets have managed to sustain the £4.00 price slot by sourcing ever-cheaper sources of supply. Remember Bulgarian Cabernet Sauvignon? That was over twenty years ago. When that dried up they went to Chilli, Australia, Argentina. Where next?

The fact is to make cheap palatable wine from pretty poor grapes you need a lot of expertise, good infrastructure, good trade links and money to invest.

There are not to many wine producing countries left that you can trust to come up with the goods on a consistent enough basis.

So is the demise of cheap wine a bad thing? Well we think not.

If the average price of a bottle can nudge through the £5 barrier (it is currently £4) it may well encourage more people to ‘Trade up’ and throw off their ‘Price Shackles’ leaving them free to explore the wonders that await them in which quite frankly is another world!

Have you ever asked yourself ‘How much actual wine am I getting for my £4? After all you’ve paid £4 shouldn’t you get £4 worth of wine?

Sadly not.

The costs associated with making a bottle of wine can vary enormously, and have a profound effect on how the wine will behave once bottled and ultimately drunk.

Let's start by looking at the typical costs of a bottle of wine from Australia to see where the money is spent.

Retail Price

Retail Price £3.00 £5.00 £7.00 £12.00 £20.0 £25.00

Duty* + VAT £1.92 £2.35 £2.69 £3.57 £4.97 £5.85

Shipping Costs £0.20 £0.20 £0.20 £0.20 £0.20 £0.20

Retail mark-up £0.90 £1.50 £2.10 £3.60 £6.00 £7.50

Winemaking cost £0.04 £1.09 £2.15 £4.77 £8.97 £11.59

*Duty based on 2008 £1.47/bottle

You can see that for a £3 bottle of wine the winemaker has 0.04p to grow the grapes, make and bottle the wine. To produce wines on the scale required to be profitable requires a total focus on costs and producing large volumes of cheap grapes.

Your challenge here is to do the maths and try and work out the value of the wine left in the bottle after everyone has been paid. You may struggle?

It stands to reason that you really do get what you pay for and that it is an absolute certainty that the more you pay the better quality you get.

There is also the question of additives. If you find you are waking up with a nasty hangover after a glass or two of pub wine, or any cheap wine for that matter. You are probably justified in feeling unfairly treated. After all you were not drunk? Far from it. No, but you unwittingly drank a cocktail of chemicals and additives!

It stands to reason that if you start out with a poor quality base product. You are going to have to use short cuts and other tactics to cover up those short comings and turn your product into something saleable. Whether it be veneer on chipboard or additives in wine.

There are far less additives (if any) in good quality, relatively expensive wine because the producer doesn’t need to use them. Simple as that.

There is an old French saying in the vineyards

‘Great wine is the result of an exceptional climate and gifted people’

And it is rarely sold cheaply.