Let’s occupy Hill of Grace

It’s hard not to get cynical about luxury-wine pricing.

Remember the old joke about the Lacoste shirt? (when Lacoste was fashionable): you paid $10 for the shirt and $20 for the alligator.

Within a few weeks I tasted the 2007 Penfolds Grange ($625+ tasting), 2007 Henschke Hill of Grace ($620 tasting), 2006 Torbreck The Laird ($725 tasting), 2003 Dom Perignon ($225-295 tasting), and the Krug range (tastings – Grande Cuvee $300, Rose and 2000 Vintage $500, 2000 Clos du Mesnil $2,000), and found myself wondering who buys these wines. What makes them worth such prices?

The short answer is that no wine is worth those prices. The liquid in the bottle seldom costs more than a fraction of the price (some winemakers have suggested to me that $20 is the maximum any red wine costs in raw materials). The rest is composed of tangible and intangible marketing factors. Things like reputation – for quality, longevity and price appreciation over time; and scarcity. Scarcity is probably the most important factor in wine prices after the actual cost of production and marketing. Small volume, high price; big volume, lower price, is the general rule (there are always exceptions. Did anyone mention Dom Perignon?). Single vineyard wines like Hill of Grace are limited by size of vineyard and yield per vine, yield in turn being closely related to seasonal factors.

Then come emotional factors, which impact increasingly on wines made from single vineyards or single blocks, and old vines. For example, South Australia has a priceless resource in very old vines – probably the largest in the world – some as old as 165 years. They’ve survived partly because they’re lucky enough to have escaped Phylloxera. Some people find the combination of single vineyard, ancient vines and extremely limited production irresistible.

Then we run into other very intangible factors, such as what we might term the Mine’s Bigger Than Yours syndrome. Many in the Barossa Valley accused Torbreck of this when it released its first The Laird (tastings), which trumped Penfolds’ Grange by a considerable margin. This has a parallel in the extraordinary salaries paid to top corporate executives such as the heads of major banks. The usual defence is that if these people aren’t paid in line with their peers in other countries, Australia will not be able to attract executives of their calibre. And we would be much worse off without the Sol Trujillos of this world, wouldn’t we.

The wine parallel is, if Australia’s finest wines aren’t priced somewhere near the greatest wines of the rest of the world, this will somehow impact on their perceived quality. If you buy Chave Hermitage or Guigal’s La-Las, you might also buy The Laird.

It also attracts attention. What other reasons could there be for Penfolds releasing a new wine, 2008 Special Bin 620 Coonawarra Cabernet Shiraz (tasting), at $1,000 a bottle? Often in the pricing of such wines, it seems that someone simply threw a dart at a board.

The fact that it was launched in Shanghai (last November) – the first time Penfolds had launched outside Australia – invites the observation that it was a cynical bait for wealthy Asian collectors.

Why do Chinese buy these wines? Mainly to use as gifts to grease palms in business; to collect as investments; and occasionally to drink at lavish banquets. Nearly always, there’s a strong component of ‘face’ involved. Luxury wine is used – like jewellery, cars, clothes and houses – as a status symbol. Chateaux Lafite, Le Pin and Petrus and Domaine de la Romanee Conti are at the top of their shopping lists.

The breathtaking wealth and extraordinary buying-power of the Chinese and Russians distorts the market, and means that most wine-lovers will only ever get to taste these wines if they have a generous, wealthy friend.

So, maybe we paupers should start a protest movement. Occupy Hill Of Grace vineyard, perhaps. Just kidding.

I guess my dad was right. I’ve got Champagne taste and a beer budget.


First published in Gourmet Traveller Wine, June – July 2012.

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