Napa, wine prices, and the economy

On a recent visit to Haber Family Vineyards on Howell Mountain in Napa Valley, Ron Haber brought up a recent comment I had posted on Duane Pemberton’s WineFoot.com. The comment was in response to Duane’s question on why Napa wine are so expensive. Duane’s assertion is that Napa wineries “overcharge” for their wines. While I understand the perception that Napa wines are expensive, there are reasons. Here was my response:

1. There are additional factors that can affect the price of the wines. In fact, just about everything is more expensive in Napa. They have highly paid winemakers (some celebrities) and cellar staff. Vineyard workers are generally paid more in Napa. Napa winemakers are more willing to use costly techniques like harvesting by hand, at night. Vineyard plots are typically smaller than elsewhere, so they don’t have economies of scale. Napa makes predominantly Cabernet Sauvignon, which requires barrel aging and more Napa winemakers use very expensive French Oak. I’m sure I’ve missed a few.
2. Quality is subjective. Many would argue that they use the highest methods of quality control and quality materials. Are these wines flawed? No. Just because you don’t like a certain style of wine, doesn’t make it lower quality.
3. The fact is, unless they are selling all their wines direct-to-consumer, a winery only makes about 5% profit on a bottle of wine. 5%!!! Most of the cost of the wine goes to taxes, wholesaler markup, and retailer/restaurant markup. For a small winery that produces maybe 10,000 cases a year, 5% on a $100 bottle is a lot more sustainable than 5% on $20.
4. A very small percentage of all wine made in California comes from Napa, only about 4%. Yet there are over 400 wineries there. That makes for a lot of boutique, artisan producers with small 20-acre parcels or purchasing grapes to make wine. So, in essence, you are paying for small-lot, hand-crafted wines, which by default are more expensive that those mass produced.

I can’t deny that there are some wineries in Napa that are gaming the system. But, really, most are just trying to make a go at it. In this economy, if a winery can’t deliver on the promises their prices make, they won’t last long. Yes, there are plenty of wines that are great and less expensive. But, there are great small, family-run wineries making small-lots of outstanding wine.

Which brings me back to Haber Family Vineyards. My arguement is particularly poignant in their case. Currently, they make two Cabernet Sauvignons, one from Diamond Mountain (380 cases) and one from Howell Mountain (50 cases). That’s not a lot of wine, and it costs a lot of money to grow grapes on these two mountains. The suggested retail price for their wines is roughly $80 per bottle. Are they price gouging? Hardly. Ron and Sue-Marie will be lucky to break-even. Very lucky. But, they love Napa and love wine, and do it because they love it.

A group of us bloggers sat down with Ron and Sue-Marie at their Howell Mountain summer home to try their first release and enjoy some lunch. The wine tried was the 2006 Diamond Mountain Cabernet Sauvignon. This wine shows how good mountain cabs can be. Inky and intense, it exhibited aromas of blackberry, cassis, chocolate, mint, and toasty oak. It showed that earthy, limestone character that seems to me to make Diamond Mountain cabs unique. Firm tannins and balance acidity round it out. Loooooonnggg finish. I expect that this wine will age quite well for years. In my humble opinion, the wine is well worth the price.

There are dozens of wine brands from Napa in similar positions to Haber Family. They do it, because they love it and produce excellent wines. I think they deserve a fair shake.

I’d like to thank Ron and Sue-Marie for hosting us at their place. It was an enjoyable afternoon and the spread they put out was fantastic.