The best way to start on how to pick a good wine will be to review the basic price structure.   The retail price of wine is far removed from the cost at the winery.  If a bottle costs $5 at the winery it will cost about $20 on the shop shelf and $25-30 a bottle in a restaurant.  The high mark up comes from the system for alcohol sales adopted to replace Prohibition.   The system was essentially a rearguard action by the “Dries” to make alcohol harder to acquire.  If they could no longer ban sales, they would make them dificult, or at least expensive. 

Alcohol sales must go through a “three tier” sales chain.  The first link is the manufacturer or importer who collects the federal excise tax.  Believe it or not the excise tax or duty on imported wine is about 25 cents a liter,  a tax on volume, not value.  The next link is the distributor who collects state taxes on alcohol.  The highest state tax on wine is in Florida with about $1 per liter.  The last link is the retailer who collects the  sales tax and miscellaneous local taxes.  Those taxes are on value.    An importer may be a distributor but importers and distributors may not be retailers.  The big problem comes from internet sales of wine.  The collection of the various taxes becomes very complex and is still a work in progress.

And while the system is devised to insure proper collection of the tax, the tax is not the reason for the high mark-up.  That comes from the fact that each link in the chain adds a profit margin to his price, typically 50% at each stage.  

What all this means is that the price you pay is alot more than the cost of the wine.  The fact that most taxes are charged on volume, and not value, also means that the more expensive the wine, the lower the tax, and thus the mark-up on the bottle, figure as a  percent of the final price.  In other words, cheap stuff pays a higher ratio in tax and mark up, than expensive wine.   For this reason I never imported really cheap wine, and I was offered wine at 50 cents a bottle at the winery, since you wound up selling tax and profit, rather than wine.

Now that you have some idea of how the wine is priced, we will turn to defining the market by price.  In the USA we have three identifiable wine markets set by price.  The first market is under $10 a bottle.  Here the buyer just goes down the aisle looking at labels and varietals to make a decision.  I usually buy 1.5 liter bottles in this price range.  I recommend any Malbec from Argentina, a good Carbenet Sauvignon from California, and if you find them, a Chardonnay from Australia or a Sauvignon Blanc from New Zealand.  Again, I am speaking of a 1.5 liter bottle at less than $10.

Skip the middle range and we find a market for wines priced $30 a bottle and up.  These are special wines for experienced drinkers with significent knowledge.  Most of the wines from Portugal that I am now working with fall into this catagory.  My only recommendaton here is to avoid these wines until you consider yourself somewhat expert in the field.  In any case, you will not go wrong with a top Bordeaux or Burgundy from France.  In fact I tell people who are going to France or to a fine French restaurant, and who do not want to make a mistake ordering wine, to simply ask for the wine list, scan the Bordeaux’s and pick the cheapest one from the list.  You will not go wrong and will look like you know what you are doing.

The real competition is in the $10-25 a bottle market.   Funny thing, wine is the only beverage for which most sales come from specialty shops, i.e. liquor or wine shops, instead of large retailers such as supermarkets and hypermarkets.  I say this in spite of the fact that Costco is the single largest wine seller in the USA.  The reason for this is that the shopper looking for wine in this price range is buying for a dinner party or other social event where he does not want to make a mistake.  He needs to consult the shop staff about his choice and thus most sales take place where such staff are available. 

I will leave my recommendations in this sector of the market to my next article on grapes.