Dissatisfaction with the rise in local wine prices seems to have reached unprecedented levels, but I would like to suggest that consumers need to adjust their expectations of the wine drinking experience. For any one producer, the margins on his flagship wines will not necessarily be the same across his entire range. While there might be healthy profits to be had at the top of the range, in all probability there will still be value at the bottom end.
Price point is perhaps the most direct way a producer has of communicating the wine’s potential to the consumer. It serves to fix consumer expectations, if you will. A wine at entry level is intended to appeal to the mainstream consumer who does not know much about wine, other than that it is red or white. To expect a wine selling at R19,99 a bottle to offer huge complexity is optimistic in the extreme.
As price points increase, consumer involvement necessarily must increase too. At around R40 a bottle, it seems to me that consumers start to take an interest in varieties, but are not inclined to pursue the subject much more. Many times I have had wine novice friends regale me with accounts of the great Merlot or whatnot they had with dinner last night, only for them to have absolutely no recollection of the producer when pressed for more information. I, on the other hand, can remember just about every bottle of wine I have drunk in the last week – perhaps an indication of the lack of balance in my life.
At higher price points, the wine starts to carry some provenance, and the price becomes a vital cue in conveying some relatively higher level of quality. When does the price of a wine become unreasonable? It is not about whether a wine is expensive or not. It’s about whether a wine offers value: is the quality that the wine offers in proportion to its price? It has to be acknowledged there is value at every price level. If an expensive wine is impressive enough, its price is justified. Conversely, a wine that is less good may represent even better value it its price is lower too.
Complicating the issue of value is consumer expectation. If the individual’s involvement in wine is low, it becomes impossible to convince him that the experience to be had from Vergelegen 2001 at R200 a bottle is so much more profound than other red blends selling for far less. Of course, prestige pricing might well be a factor at the top end of the market, with the ultimate selling price greatly exceeding production costs. Wine, however, is hardly the only product category where this principle applies: a pair of Levi’s 501 jeans cost significantly more than those from Mr Price, even though they are essentially the same garment.
Ultimately, some psychology must be applied. For the uninitiated, there will be a price point beyond which they will not be prepared to shop. For the true wine lover, great wine will be worth almost any price. Develop this point further, and it can be argued that as long as South African wines fail to match the going rate for top international wines, this can be taken as an indication that the international market does not yet view them in the same class.