What makes for cheap and expensive wines?

And a note on a few good bargains at the lower end

From Business Day, 7 May 2008

While the more expensive wines are not necessarily better, does it follow, either, that the cheapest wines are indisputably worse? There is a compelling logic to the producer argument that if you want a finer, hand-crafted product, you must pay for the care, labour and attention to detail that goes into the production process.

Wine production costs are relatively well documented. If you exclude recoupment on capital investment and deal only with grape farming and the transformation of fruit into wine, it’s difficult to spend R100 a bottle in SA. Even in Bordeaux, where labour costs are substantially higher, the best wines cost less than R200 to make.

It may seem a little glib to wave aside the cost implications associated with wine estate ownership, but it is usually argued that capital gains over time provide more than adequate compensation for the price of tying up capital. Top Bordeaux properties have seen a hundredfold increase in value over the past 30 years. High-performing Cape estates are now worth 15–20 times more than they fetched in the late 1980s.

Still, even allowing that good wines cost more to produce than their more ordinary counterparts, does it follow that all cheap wines are inferior? Often growers who have taken great care of their vineyards are unable to obtain the kind of revenue their grape qualities deserve.

This is certainly true of the current trading environment. Five years ago very ordinary shiraz sold for R4500 a ton. Nowadays, even superb fruit sells for about R3500. Astute buyers can therefore source grapes for much less than the overheads of farming their own vineyards — and can process this fruit at the marginal cost of handling additional tonnage at an established facility.

Of course there are consumables — of which imported barrels are the most important. But very few producers of popularly priced wines use new oak. They may use staves or chips and they probably apply micro-oxygenation techniques to simulate the effect of barrel ageing, but they don’t invest R10000 in 225l casks. So you can make some pretty smart wine without throwing a fortune at the process.

Diemersfontein created a new style of Pinotage a few years ago by steeping the fermenting juice and maturing the wine in the presence of oak staves. When wine maker Bertus Fourie left the Wellington property to take up a position at the KWV, he brought the technique with him, but used the bought-in fruit available to KWV. Now KWV offers a wine with a similar coffee-mocha-chocolate taste profile at half the price of the Diemersfontein original.

Is it an inferior product? Diemersfontein is the undisputed market leader in this style of pinotage. It costs more for the same reason that Moët & Chandon enjoys a pricing premium over brands such as Marguet Bonnerave. But just as Marguet Bonnerave sells all its fizz — evidently to very satisfied customers — so KWV’s Café Society is finding its own following.

Finally, low-priced wines often come to market because in every industry there are the vendors of “distressed stock”. These may be producers who are great wine makers, but lousy wine sellers. Opportunistic brokers pick up parcels — usually in bulk — arrange the bottling and labelling, and then move the newly branded line through a retail environment at low margins.

I recently tasted a couple of classic South African white wines — the Nederburg Lyric and Theuniskraal Riesling. Both retail for under R30 — in fact buying them for close to R20 a bottle is not an achievement that will win a McTavish Award. The former is made with purchased fruit, the latter with estate grapes.

The Theuniskraal is not as dry as I remember it in the days when it was one of the Cape’s most prestigious wines — but it is still a pretty good bottle of wine. The Lyric is frankly exceptional: ample, harmonious and articulate. If this is the value offered by real brands, it is clear that some speculative shopping at under R20 a bottle could yield a few gems.