Why Cheap Wine is Too Expensive!

When something seems too good to be true it generally is! Despite the pound's recent travails, supermarkets still seem to be full of cheap wines. We say cheap, because there is a huge difference between cheap and good value wines in the UK today.

Let's suppose you've been seduced by that nice looking bottle retailing at £4.99 in your local supermarket. Ever wondered who gets what of that fiver?

The Chancellor takes the lion's share. £2.16 is duty, and another 83p of the price is VAT. The cost of the bottle, the foil, the cork and the label is typically around 28p, whilst distribution costs (vineyard to your local store) add about 33p per bottle. Assuming both the retailer and producer take a modest 10% margin each that's another pound gone in total. That leaves the actual liquid in the bottle worth about 39p. All things being equal, that's unlikely to be a great drink!

The good(ish) news is that most of these costs are fixed or semi-fixed; duty for instance is based purely on the alcohol content and is the same for the cheapest plonk as it is for Chateau Margaux. The equivalent figures (assuming a 10% margin for seller and grower) on a bottle costing a tenner would leave you with about £3.60 of wine. Twice the price and potentially nine times the quality - sounds good value to us!

Pierpaolo Petrassi (Master of Wine and head of buying at Waitrose) warned recently that retailers are "dumbing down" the message of the true cost of wine by concentrating on low priced wines, failing to help consumers understand why they need to pay a sustainable price. He argues that retailers have a duty to articulate what people are paying for, and warning that the trend for lower prices across retail was squeezing margins and ultimately threatening sustainability of wine producers.

"If retailers are not paying a price to cover costs of production, paying staff a sustainable wage, then provision for some investment - new bottling lines or tractors are expensive - then the equation is not sustainable. You have to allow people to make enough money to invest." he said.

At HC Wines, we'd like to play our part in spreading this message about the difference between value and cost. If you'd like to discover some great wines, learn about the producers and be convinced that they're worth an extra couple of pounds, do have a browse!