What would you rather drink: a $500 Burgundy, or a higher-quality wine from Germany that costs a mere $100? Don’t worry, there’s no wrong answer. Most of us, surely, would say “it depends”—on a multitude of factors, including who’s paying. But also, we understand the question: it makes sense. After all, there is one wrong answer to the question. Someone who says “that’s impossible, a $500 wine is always going to be better than a $100 wine”—well, that person has no idea what they’re talking about.

Of course, it’s reductive and simplistic to flatten all wine onto a one-dimensional quality scale. But even people who shudder at the 100-point rating system have to concede that all wine is priced along a one-dimensional line. And the main (if not the only) reason to pay more for a bottle of wine is that by doing so you end up drinking better juice. 

For that reason, the snobbish French wine merchant being quizzed by Columbo wasn’t wrong. There is a broad sense in which willingness to pay is correlated to quality, and obviously the greater the willingness to pay, the more the merchant can charge. 

And yet, the broad correlation between price and quality does break down, all the time. When it comes to German Riesling, for example, “people don't buy into the idea like they buy into Burgundy,” says importer Lyle Fass. “Burgundy has the monks, and every vineyard’s different. You can stand in this vineyard and it's a $50 wine, and the vineyard two feet away makes $300 wine. That's the mystique of Burgundy. In Germany, that’s impossible,” despite German winemakers being notorious for slicing their properties up into tiny microparcels and creating a dizzying array of cuvées at dozens of different price points. 

When The Price of Wine Doesn't Reflect Quality

“If I find a wonderful wine that I love from Savoie, or Beaujolais, or the Loire, there are unspoken price ceilings,” Fass continues. He gives the example of Gilles Berlioz in the Savoie. He was able to sell those wines when they were in the $30 to $40 range, but now they cost between $50 and $70, and “they’re dead in my portfolio.”

“These are amazing wines,” says Fass. “He's one of the greatest winemakers in the world. But the problem is that people will not pay up past a certain amount [for Savoie wine], no matter how rich they are. And these are the same people willing to pay $500 on a bottle of grand cru red Burgundy.”

Similarly, in much of America, Riesling is still an incredibly hard sell. At Angelo’s Wine Bar in Chicago, for instance, you won’t find high-end Rieslings on the list. Not because the owners don’t love them, but just because, per its managing partner Scott Graham, “people don't understand what Riesling is.” 

Thus can entire swaths of the wine world end up effectively absent from the U.S. market. Try to find a German Spätburgunder for sale at retail for more than $80, for instance. There’s a handful of merchants in a few big cities who might do such a thing, but broadly it just isn’t done. That’s not because there’s any shortage of such wines in Germany, and yet only the cheaper wines tend to make it across the Atlantic, just because there’s precious little demand for anything more expensive. Then, because no one is importing the high-end Spätburgunders, few Americans even know they exist.

That’s why a $100 Bernhard Huber Spätburgunder from Baden is so much harder to sell than a $500 Charles Lachaux Côtes de Nuits-Villages, even if it’s a better wine. Price is a function of supply and demand, and there’s just a lot more global demand for high-end Burgundy than there is for high-end Spätburgunders. 

Basking in Reflected Glory (And Other Pricing Perversities)

There are factors other than geography that affect demand. One reasonably robust finding in the wine economics literature, for instance, (yes, there is such a thing, and it’s extensive) is that entry-level wines from producers famous for making extremely good top-level wines tend to be more expensive than similar-quality wines that don’t benefit from the so-called “basking in reflected glory”—or BIRG—effect. Think of Y, for instance, the dry Sauvignon Blanc made by Château d’Yquem. It’s a good white Bordeaux! But it’s not intrinsically a $200 wine, which is how much you’ll pay to buy it at retail. The price, and the demand for the wine, come from the reflected glory of its much more famous sweet sibling. 

That’s rational, given that the utility of wine encompasses more than just its taste. Just like art, wine can be a way of showing off as much as of self-gratification. Which means, for some people, there’s extra value to serving a wine from a producer your guests know and admire. Especially if they’re not wine geeks themselves. One wonderful finding is that when a star winemaker like Helen Turley comes in and brings a winery up a notch or three, that doesn’t just increase the prices of the wines made by that winemaker. It also increases the prices of the wines that were made before she came along. She has burnished the brand, and demand for the brand, and the brand extends back in time—regardless of whether she or some long-forgotten predecessor actually made the wine. 

Similarly, almost all of us are willing to pay substantially more for a wine at a restaurant, especially a nice restaurant, than we would be willing to pay for the same wine at our local supermarket. (Or, quite possibly, for any wine at our local supermarket.) The experience we’re paying for is different, and our internal price/quality calculations get naturally recalibrated for a very different context. But the fact that value is so deeply context-dependent is a pretty clear signal that a hell of a lot more goes into pricing than wine quality.

At the very top of the market, for instance, demand can come from speculative motivations; that is, the desire to buy wine that can be sold at a premium in the future. Those motives are deeply intertwined with interest rates, which is one reason why en primeur prices tend to fall when rates rise, as happened with recent vintages. More broadly, speculative bubbles tend to inflate and burst at roughly the same time, which helps explain why the markets in Rolex watches and Sterling Ruby paintings and investment-grade wine all collapsed simultaneously.

To be sure, if you control for the myriad of other variables that enter into wine pricing, there is a pretty strong correlation between price and quality. If you look within a certain region and only at wine made from a certain grape; if you look only at non-discounted retail prices that are visible to wine search engines; if you look on a certain day and within a certain import market, and so on and so forth, then most of the time an experienced professional will be able to take a pretty accurate stab at how much the wine costs. (Or so those wine professionals tell The New Wine Review, anyway.)

The rest of us NWR-reading wine lovers, intelligent and good looking as we are, often aspire to something akin to what in the academic world is referred to as needs-blind admission. Let the masses follow brands and trends; we will just follow our palates, wherever they might take us. Wines, like college applicants, should be judged and rewarded objectively, without regard to where they come from. 

In reality, however, no one really buys that way. 

The first thing worth noting is that we almost never judge how much we’re willing to pay based on the taste of the actual liquid we’re buying. Wine is a living thing. No two bottles are alike. Yet our buying decisions are made before the bottle is uncorked, the wine is tasted, and its quality can be known. After all, we tend to want to buy bottles of wine, ones where the cork is ideally still in the bottle.

As a result, we use the label on the bottle as a proxy for quality. We might, for instance, look at a label, recognize it as being identical to the label on a wine we drank a few months ago, and then operate on the assumption that what we’re going to experience upon drinking this wine will be pretty much the same as what we experienced upon drinking that wine. 

This is, of course, perfectly rational. But it also turns a question of connoisseurship and taste into one of branding, and explains a lot of things about labels that can seem elitist and off-putting, especially to novices. After all, the label contains, to a first approximation, the entirety of the information that determines the financial value of the wine inside the bottle — a sum that could range anywhere from $2 to $2,000 or more.

It’s the label, of course, that tells you, first and foremost, where a wine comes from. The BIRG effect doesn’t just apply to winemakers. It also applies to regions. Burgundy is more expensive than Switzerland; Napa is pricier than Lodi. If you’re spending a fixed amount of money on a range of wines—$35, say—then, broadly speaking, the Lodi Sangiovese will be better than the Napa Cab, and the Swiss Chasselas will be better than a Bourgogne Blanc.

Pricing is in large part determined by a series of region-brands, going all the way down from the country to the appellation to the village to the domaine to the cuvée. Even individual vintages regularly become brands unto themselves, complete with their own pricing power. Naturally, all these brands appear on the label, alongside other indicia of quality like prizes won or who the importer is or whether the wine counts as Grosses Gewächs. 

The bottom line is just this: a wine professional who knows exactly what’s in front of her—who knows all of the information on the label—is always going to be better at guessing the price of a wine, even if she hasn’t opened the bottle, than the most sophisticated blind taster could do with the liquid but not the label. Knowing how the wine tastes is important, but it’s not necessary; the label alone can do all of the heavy lifting. 

Here’s how things broadly work: a group of people who know a lot about wine, including the winemaker, the importer, and other wine industry professionals, will drink a certain brand’s wines. (Remember that winemakers themselves are brands.) A consensus will develop with respect to how good the wines are, and the domaine’s reputation will spread. That’s the first way that price goes up: the more people who know about a wine, the more demand there is for it, and the more demand there is, the higher the price that can be charged for that particular label. 

Subsequently, when each new vintage is released, it will generally be priced not off its intrinsic quality but rather off the price of the same cuvée a year previously. (In that sense it’s similar to artists’ gallery shows or venture-backed companies: no one ever wants a “down round,” where the price is lower than it was the year before.) 

This dynamic creates a natural tendency for wines to only ever get more expensive over time, even in the face of a global wine glut that’s stretching from Australia to France to California. A lot of wine just gets poured down the drain, or sold quietly at a discount, but outside investment-grade wine, which fluctuates with the market, the chances are that nearly all of the vintages in your cellar are more expensive than they were in the past, and sometimes a lot more expensive. 

How Wine Turns Money Into Happiness

When that happens, the only thing to do is to console yourself that spending more money on wine has been scientifically proven to make you enjoy it more. 

After all, nearly all of the time that we taste wine in the real world, we know (at least roughly) how expensive it is. In those situations, the evidence is clear: when we know how much we spent on what we’re drinking, then the correlation between price and enjoyment is incredibly strong. The more you spend on a wine, the more you like it. You’ll find things in that bottle which you love, things which you might have missed entirely if you thought you were drinking $12.99 plonk.

There is such a thing, then, as reassuringly expensive: in a wine store or wine list, the more you pay, the more you’ll like the wine, especially if it comes recommended. 

Ultimately, however, everybody’s taste is different, which is the best news for you. You might find, for example, that you get much more enjoyment from exploring Greek whites than you do from Napa Cabs. Price can be a useful guide in any region, but exploring the less-expensive byways can end up guiding you to profound discoveries. Markets aren’t even close to being perfectly efficient—and thank goodness for that.