Find Me a Wine

Clear

We Also Sell

WHAT'S THE REAL COST OF A BOTTLE OF WINE?

18/07/2014

What's the real cost of a bottle of wine?

This is a question I get asked repeatedly, especially in an age of austerity and the constant bombardment by supermarkets of "deals", BOGOF offers, half price wines and the like.

I'm not here to talk about supermarket selling practices*, thats a whole new article that I'll get round to soon. Instead lets actually look at what the bottle of wine you have just bought actually costs and where the money is going. As a wine merchant I often tell customers that the value for money in an £10 bottle of wine is significantly higher than a £5 bottle of wine, even though you'll be spending £5 more. 

Here is the breakdown of costs for a £5 bottle of wine. We'll work backwards from the £5 price tag:

Chateau Plonk Red Wine = £5

VAT at 20% = 83p

Retail mark up at 35% = £1.30

Duty = £2

So by doing these sums, we can see that after the Tax man has taken his share and the retailer has taken his fair profit, then all we have left from a £5 bottle of wine is around 87p. This 87p though has to cover the costs of not just the wine, but the bottle, the label, packaging, the winemakers profit, transportation and wholesale profits (if suplied to the retailer by a wholesaler). There's not much room for manoeuvre in 87p with all those factors part of it. 

All in it means the actual value of the wine in the £5 bottle is somewhere in the region of 5p

Lets now look at a £10 bottle of wine. 

Chateau Plonk Superior Red Wine = £10

VAT at 20% = £1.67

Retail mark up at 35% = £2.59

Duty = £2

We can now see the difference. After the tax man and the retailer have taken their share from a £10 bottle of wine, there is still £3.74 to cover the wine, the bottle, the label, packaging, the winemakers profit, transportation and wholesale profits.

The cost of bottling and labelling, packaging and transportation won't really change much between a £5 and £10 bottle of wine. Throw in the winemakers profit and the wholesalers profit and the value of the actual wine is in the region of £2.10

 

Thats quite a difference, the value of the wine in a £10 bottle of wine is around 42 times higher than in a £5 bottle of wine. Simple really, spend twice as much and get 40 times or thereabouts the value. 

The conclusion is simple as these numbers work all the way up the wine prices, if you are prepared to spend a little more on your wine, the value for money you're getting increases significantly. 

* I know I said i am not here to talk about supermarket selling practices but this is an important brief note. Some of you will sat that the £5 bottle of wine we talked about above was bought in a supermarket on a half price deal and it should actually be £10. So for £5 your still getting £2.10 worth of wine. don't be fooled by that, there are strong arguments that I'll cover in the promised future article that say the £10 bottle of wine discounted to £5 by a supermarket is only worth £5 in the first place, and often less than that. 

T