Are expensive wines worth the price?

There suddenly seems to be an awful lot of Australian wines with very high prices, some well over $100 a bottle – more if you drink them in a restaurant. Are they justified?
N.A., Waverley, NSW

A: Probably not. The grapes are still the most significant component in the cost of producing a bottle of fine wine, but they don’t vary that much between most premium wines: it’s the multiplier effect of various margins and taxes piled onto the initial cost that makes these bottles expensive. The winemaker doesn’t actually see much of the money that you and I pay. This is why wineries are trying like mad to sell as much of their wine as they can directly. It bypasses the middle people.

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Here’s a shocking fact. If you buy an average bottle in an upmarket restaurant and give a 10 per cent tip, the person pouring your wine could pocket about half as much money from that tip as the winemaker who grew the grapes and made the wine.

Let’s take an upmarket Barossa shiraz from a fancy restaurant’s wine list. Say that bottle left the winery at a price of $50. If it went through a wholesaler, it might add 25 per cent, taking it to $62.50. The federal government’s 29 per cent wine equalisation tax (WET) is also added, taking it to $80.62, and 10 per cent GST goes on top of that, making it $88.68. Finally, the restaurant might add a 150 per cent mark-up (anywhere between 100 and 200 per cent is usual), which means an overall price of $221.70. And that’s before the tip. That’s how a $50 bottle magically becomes a $220 one.

Restaurateurs will say that they have exorbitant costs to cover, such as rent, skilled staff, buying and maintaining expensive crystal stemware, and so on. But don’t forget the winemaker has to cover his or her costs of production, too. It’s not a great system. And the government’s WET, widely seen as a “sin tax” on alcohol, doesn’t help.

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