Thursday, October 08, 2009

Virginia Pilot: Virginia Wine Month question: Why so pricey?

The Virginian-Pilot© October 7, 2009
By Jim RaperColumnist

Of every 100 bottles of wine sold in the commonwealth, only four are produced in Virginia.

One reason: price.

Keswick Vineyards 2007 cabernet sauvignon, winner of the 2009 Virginia Governor's Cup, fetches $60 a bottle, the same price that Williamsburg Winery charges for its 2006 Adagio Super Merlot. The latest vintages of Octagon from Barboursville Vineyards and Hardscrabble from Linden Vineyards, two of the state's most ballyhooed bordeaux-style red blends, cost $40.

Yet the average price Americans pay for wine is less than $8 per regular-sized bottle, according to industry statistics. Even at the state's ABC stores, which are known for stocking inexpensive wines, the Virginia reds average nearly $13. Virginia whites are just a little less.

So why do Virginia wines cost more than many of the popular bottles from Australia, South America and parts of Europe and California?

The answer is complicated. It includes a lack of seasonal labor, high marketing costs and the fact that Virginia wineries raise mostly noble grapes on sites deemed high in quality. But when those in the Virginia wine business talk about the reasons for the high price, they usually begin by mentioning size. The commonwealth's wine trade operates at a boutique level. The cheaper wines often come from industrial-sized operations.

In all of Virginia last year, about 370,000 cases of wine were produced from grapes grown on 2,500 acres of vineyards, according to the U.S. Department of Agriculture. To put that into perspective, E&J Gallo Winery alone has 15,000 acres of vineyards in California and sold about 75 million cases in the United States last year.

"The average Virginia winery has less than 30 acres of grapes and produces less than 3,000 cases of wine annually," said Annette Ringwood Boyd, director of the Virginia Wine Board Marketing Office.

"Even Virginia's largest wineries have winemakers who are personally involved with grape growing, harvesting and working every day in the cellar to create hand-crafted artisan wines. I doubt that our state's wineries will ever choose to compete where economy of scale dictates massive acreage and wine production for single wines blended in large batches."

Although a ton of prized Napa Valley grapes may bring upwards of $5,000, the average price of a ton of wine grapes in California is about $500. This is because so many of the grapes come from expansive, flatland growing sites where the land is cheap and bountiful yields of mediocre fruit come easy. The average price in 2008 of a ton of wine grapes in Virginia was $1,530.
"There's an old rule of thumb that the retail price of a bottle of your wine should be about 1 percent of what you pay for a ton of grapes," said Shepherd Rouse, owner and winemaker at Rockbridge Vineyard north of Lexington. So if grapes are $1,500 a ton, the wine would cost $15 in stores. "That sounds about right to me," Rouse said. He noted that he has always been price conscious even though his wines have won two Virginia Governor's Cups and numerous gold medals in competitions all over the country.

Virginia wines that cost more than $15 are usually made from the most sought-after grapes. The average price of a ton of petit verdot, the popular red grape recently introduced in Virginia, topped $2,000 last year. For cabernet sauvignon and merlot, both reds, and for viognier, the trendy white variety, the ton price was around $1,800.

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Jim Raper,