I’m a lover of wine in pretty much all of its forms as the shameful clink of my recycling bins regularly reminds me.

But I’m less of a connoisseur of fine wine: more a drinker of lots of cheap wine. Special offers from the supermarket fill my wine rack, rather than expensive bottles of Chablis. I wouldn’t say no to the Chablis, but I can get three ‘basic’ wine options for the same money.

I’m not alone with my less-than-discerning ways. According to the World Health Organisation, the average Brit drinks half as much beer as we did 50 years ago, but ten times as much wine – an average of 37 bottles a year. That worked out at 1.28 billion litres of wine in 2022, making the UK fifth on the list of most wine consuming nations.

Yet only 4% of wine retails at over a tenner. And (clutch your pearls, wine aficionados) the biggest selling brand in 2023 in the UK was Hardys, with 120 million in sales.

What makes certain wines expensive?

Back in 2018, a bottle of Romanée-Conti 1945 sold for a world record price of $558,000, vastly outperforming the estimate of $22,000 to $32,000. That’s a lot of cash for a single bottle of red wine, even by the standards of the often over-inflated wine collectors’ market.

This demonstrates one of the key truisms about the price of wine: it’s only worth what we are prepared to pay for it. However, there are a number of factors that make certain types and brands cost more, including:

  • Scarcity
  • Type
  • Vintage
  • Quality
  • Brand
  • Where you purchase it

That last point becomes particularly relevant when you buy wine at vastly inflated markups in posh restaurants.

Many vineyards are brands in their own right, producing a maximum (limited) number of bottles of wine each year. This creates considerable demand annually, leading to high prices, waiting lists and investor interest. It’s common for crates of wine to be bought solely for investment purposes and for the most in-demand vineyards to limit the numbers of bottles available to each customer or dealer.

But as with any harvested goods, wine is subject to the whims of the weather and seasons. There are good years and bad years for wine makers. That leads to exceptionally high demand for wine from years considered to be the ‘best’.

This demand isn’t just limited to the top end of the wine markets. Wine buffs and reviewers obsess over the best wines each year by regions, vineyards and countries. So if you know your stuff, you could pick up an excellent bottle of wine for £10 to £15 if you know what to keep an eye out for. But is it any good?

Is expensive wine better than cheaper wine?

Despite endless blind tastings, research and heated arguments at dinner parties, wine is very much appreciated in the tastebuds of the beholder. So while sommeliers and experts can explain in detail why premium wines are better quality and taste nicer, if you are partial to a glass of Blue Nun or Mattias Rosé then a Pouilly Fuisee is unlikely to tickle your fancy.

What’s interesting is there are a range of studies that suggest we tend to consider wine to be better tasting based on price.

A study from the INSEAD Business School and the University of Bonn looked in to this by exploring the reactions in the decision-making centre of the brain in an MRI scanner. The scientists found that the brains of subjects became convinced that a bottle of wine labelled at $25 tasted better than one that cost $15, even when the wines were exactly the same. [source]

The theory is that the higher price of premium items (not just wine) increases the expectation that the goods will taste better, which then affects how your brain processes the taste. This is known as the ‘marketing placebo effect’. Try it on a friend or partner by sticking a pricey tag on a mid-range bottle of wine and let me know how it goes.

Conversely, other factors, like snobbery, can also affect our perception of wine. We may have a favourite wine from the cheap section of the local supermarket, but don’t forget that millions of people will have filed past similar shelves around the land and will have formed judgements about that brand. So if you turn up to a party with a wine that’s been £5.99 in the sale section of the fridges for a few months, not only can people’s perception of the wine be lower – they might have a lower opinion of you too.

What price should we be paying for wine?

Let’s talk about vinonomics – the facts about what goes in to the price that we pay for wine.

In the UK, wine duty is currently £2,23 per bottle. Astoundingly when all costs have been removed that means only 21p out of a £5.50 bottle of wine goes on the wine itself. When you think about wine in these terms, that bottle of wine in the off licence for a fiver seems less enticing. Once you spend a tenner, you’re paying £2.48 for the wine, which suggests the quality (and value) of the wine increase just by spending a few pounds more. [source]

What makes us buy certain brands of wine?

Experience has a lot to do with the wines we remain brand loyal to. Humans are creatures of habit, so once we’ve tasted something we like we stick to it.

But getting us to taste the wine in the first place is something of an art form. According to David Schuemann in his book ’99 Bottles of Wine: The Making of the Contemporary Wine Label, there is an enormous amount of strategy and marketing designed to “tickle our subconscious and coerce us in to grabbing a bottle off the shelf”

Everything from the colour of the foil on the bottle (to imply what flavour to expect) to the weight of the bottle is designed to give the consumer an impression about the wine that might not be related to how mass-produced it actually is. Labels are the big marketing tool with wine, with simple or striking images used to suggest more luxurious quality.

However, this level of marketing suggests that all wine drinkers are aspirational – which they most certainly aren’t. Research conducted by KAM on 500 wine drinkers in the UK found that just under half of drinkers found the perceived rules and complexity about wine to be off-putting and 35% agreed that the descriptive terms around wine were confusing or ambiguous. 31% of people ordering wine while on a night out didn’t feel confident when ordering wine either.

So a label with a light hearted joke, image or accessible information is going to appeal to people who find the whole process of choosing wine intimidating.

Is investing in wine worth it?

The volitivity of events over the past few years has encouraged many people to get creative with their investment strategies.

Investing in wine has been more mainstream and less exclusive for the last decade or two, but it’s worthwhile pointing out that it can be an expensive form of investment for somebody who wants to dip their toe in to the market.

First things first, it’s not just about buying the wine. Wine must be correctly stored, either through a (long-term) specialist facility or through a pricy home storage system. You’ll need to take advice from wine experts on how best to store your purchase, in what climate and over what time period (it’s a long-term investment for many). You might want to partner up with a fellow collector to cut costs.

Investing in wine, like gold, other minerals and collectable assets, is not a regulated activity. So if something goes wrong you don’t have the protection of the Financial Ombudsman or Financial Services Compensation Scheme. Wine is, however, a ‘tangible asset’ which means it exists in the real world and isn’t likely to vanish down the back of the internet, like cryptocurrency. These assets also tend to perform relatively well against inflation rises. But ultimately, it’s all about investing astutely and being willing to accept a loss. Plus you can always drink it.

However, thanks to new companies like Cult Wine Investment, you can potentially get involved in wine investment with as little as £25,000.

Featured in Times Money Mentor – Martyn James

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