Put a Cork in It: How Price Influences Our Perceptions of Wine

Over Thanksgiving break, I found myself at a recently opened wine and spirit shop on the northside of Indianapolis, Indiana. Taking the place of a former grocery store, Total Wine and Spirits says it stocks between 8,000 and 10,000 bottles of wine per store — an astonishing selection that would overwhelm any consumer — plus at least 3,000 types of beer and spirits (Orr, 2020). How could anybody pick out a bottle of wine here?

Price, for better or worse, is an indicator of quality in the minds of consumers. From jeans to smartphones to meat, and everything in between, price can be seen as a determinant of quality. Taking this one step further, if we hold everything else about two products equal, I would guess most people would assume something that’s more expensive is of a higher quality. Wine, a drink humans have enjoyed for thousands of years, is not immune to this phenomenon. In fact, I believe it’s the best representation of this phenomenon. Let me explain. Most consumers aren’t experts on the nuances of wine production. They could probably tell you which kind of wine they prefer and describe characteristics of it. They might even throw out $10 words to describe the aromas and flavor of it. At the end of the day, however, I’d reckon they wouldn’t be able to tell the difference between an expensive glass of wine and a bottom shelf one. Now, this is not to say that there aren’t differences between expensive and cheap wine. There are. However, the complicated nature of wine makes these differences harder to discern than other products. While the average consumer might trust the seller to price its wine fairly, the price actually shapes their expectations of a product — something that sellers are keenly aware of.

Why is wine so difficult to grasp?

Humans’ obsession with wine can be traced back from prehistoric times to ancient times to the medieval times and, of course, to the modern era. It’s an alcoholic drink that touches major world religions. It survived America’s Prohibition Era. You’d think with all this wine drinking experience, we would all be better at judging its quality. It should be second nature to us, right? Well, why aren’t we? The short answer is a long one: It’s complicated.

Wine is an incredibly complicated drink, despite being just fermented fruit juice. Wine is a delicate mixture of sugar, acid and alcohol. When we taste a sip of wine, receptors in the olfactory bulb — where our brain and nasal passage meet — tell us the taste, not our taste buds, according to The Guardian (Derbyshire, 2013). Gordon Shepherd, a neuroscientist from Yale University, takes it a step further with his claim that wine flavors “engages more of our brain than any other human behavior” (Schatzker, 2017). Whether it’s a glass of Barefoot or a glass from France’s Bordeaux region, a lot goes on in our heads each time we take a sip.

Wine tasting is also just an inherently subjective field. There’s no real way to objectively score subjective traits such as taste or aroma. While I prefer a white wine, others prefer a red. Even within the same type of wine, there are so many different variables that will affect one’s perception of a white wine, for example. When it comes to wine, our senses need context. When it is so hard to grasp why a wine tastes the way it does, our brains search for reasons to think higher of something — things such as price. New Yorker writer Jonah Lehrer sums this phenomenon up perfectly when he writes, “Our senses are vague in their instructions, and we parse their inputs based upon whatever other knowledge we can summon to the surface. It’s not that those new French oak barrels or carefully pruned vines don’t matter—it’s that the logo on the bottle and price tag often matter more” (Lehrer, 2012).

“Our senses are vague in their instructions, and we parse their inputs based upon whatever other knowledge we can summon to the surface. It’s not that those new French oak barrels or carefully pruned vines don’t matter—it’s that the logo on the bottle and price tag often matter more.” — Jonah Lehrer

There are also external factors that make pricey wines a bad deal. The location of consumption matters, too. Research from Cornell University shows that people will rate food better if they eat it in a “fine dining” environment versus a fast-food joint (Gonzales, 2013). In practice, this means that upscale restaurants can take advantage of this by charging more for wine. Diners will think they are getting a great glass of wine, but the ambiance of the restaurant will play into this perception. At the risk of sounding too cynical, the restaurant tricked the diner into thinking they were getting a nice glass of wine. The wine could be great, yes, but the location of the wine consumption paired with the price more than influenced what a diner thought about it.

Why do our brains associate price with quality?

If we were to step foot in a store we have never visited before for a bottle of wine and didn’t recognize any of the brands on the shelves, we would naturally look for something to differentiate the bottles from one another. I witnessed this when I saw customers browsing at 21st Amendment Wine and Spirits in Indianapolis. I asked a customer how she made her decision. To her, it boiled down to style and price. She wanted a white wine and to spend more than $5 but less than $20. She, like many other browsers, avoided the super cheap wines. She felt the quality would go up as she spent just a little more money.

Conversely, wine producers who want to be known for producing top-shelf wines know they can’t price too low. We would hesitate if we saw a new Mercedes-Benz priced at $5,000. We would, understandably, question the quality of the car. We would think we were getting a lemon. Even if the car really was just $5,000 in parts, we’ve come to equate the price of a Mercedes with the quality of it. It’s no different when setting the price of a bottle of wine. “‘If I made the best wine in the world and charged $1 for it…no one would believe it was the best. They’d say it’s a great bottle of $1 wine,’” Vic Motto, a California wine consultant told the New York Times in an interview about wine margins (Hesser, 2003).

Whether it is a pair of jeans or a bottle of wine, price tells us a lot about something. Personally, I expect a $50 pair of jeans to last longer than $20 ones. For $50, I expect higher quality denim and solid stitching. In 2008, Stanford University researchers published a study that proves that our brains think the same for wine. Lisa Trei, a spokesperson for the university, wrote, “If a person is told he or she is tasting two different wines — and that one costs $5 and the other $45 when they are, in fact, the same wine — the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage” (Trei, 2008). Most of us are casual drinkers of wine. Naturally, producers have accounted for this by investing in good design for labels and packaging. In 2001, Frédéric Brochet, a French researcher, investigated the effect of labels on perceptions of wine. According to his research, “When tasting a supposedly superior wine, their language was more positive – describing it as complex, balanced, long and woody. When the same wine was presented as plonk, the critics were more likely to use negatives such as weak, light and flat” (Derbyshire, 2013).

“If a person is told he or she is tasting two different wines — and that one costs $5 and the other $45 when they are, in fact, the same wine — the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage” — Lisa Trei

While consumers might have a sweet spot for a particular wine, producers have found a sweet spot for a price that will signify both quality and value. Information asymmetry exists here because of the gap in what consumers think they’re getting versus what producers are selling them. This leads to some cool profits for producers. When I was at 21st Amendment, the discounted wines were the ones in the $15 to $25 price range — a sign the store could earn more money selling more of these bottles. According to BinWise, a restaurant and store inventory management service, the average profit margin for on wine sales is 30-50%, significantly higher than the average grocery store chain (BinWise, 2019).

So, how can we be smarter about buying wine?

The difference between what producers know and what we know is quite the gap, but the gap is worth closing. We can be better consumers, and can save money, by being smarter about how we buy wine. In most cases, the law of diminishing returns applies as the price of wine increases. The price of a wine fools expert tasters all the time. While the most expensive wines use fancier grapes, for example, an untrained taster— and even trained ones — could not tell much of a difference between a $50 bottle of wine and a $500 bottle in blind taste tests. As an aside, four bottles of $50 wine will lead to more enjoyment than a single $200 bottle. However, as research has shown, knowing the price of a bottle of wine does influence our perception of it. It’s up to us as consumers to try to shake that perception.

Trust your gut

Assuming you’re at least 21 and have had a few glasses of wine, you probably know what style and brand you prefer. There is nothing wrong with sticking with what you know. For me, Oliver Winery’s Camelot Mead – the country’s best-selling honey wine, according to the winery – does the trick. I know I like it and it is usually $10.99. If you don’t know what you want, you aren’t likely to go wrong if you’re buying a style you enjoy. I’m a sucker for pretty packaging and research proves packaging that appeals to us makes us more likely to enjoy what we’re drinking. (That’s permission to get the prettiest bottle).

Don’t spend more than $25

For people on a budget (like me), spending less than $25 on a bottle of wine is an easy task. For those who have come to see price as a determinant of quality, this habit might take a little work to unlearn. Fear not, however, because your wallet will thank you in the long run. According to Eric Asimov, the New York Times wine critic, “Generally speaking, for ordinary drinking, I believe the best ratio of price and quality at wine shops is in the range of $15 to $25” (Asimov, 2020). At this price point, you’re not going to regret it your purchase if you don’t like the bottle of wine you bought.

“Generally speaking, for ordinary drinking, I believe the best ratio of price and quality at wine shops is in the range of $15 to $25” — Eric Asimov

For the unfamiliar, wine tasting is an intimidating art. But, and this may come as cold comfort to aspiring professional wine tasters, there should not be much need to worry because the so-called experts are often just as in the dark as the rest of us. Wine producers know how easily fooled we are by the price tags and price their wines accordingly. They know that price will shape how we view their wine…

…and they’re banking on us to fall for it.

References

Asimov, E. (2020, February 24). How to Buy Wine: Five Questions to Ask . Retrieved from The New York Times: https://www.nytimes.com/2020/02/24/dining/drinks/buying-wine.html

BinWise. (2019, December 17). Wine Industry Growth Rate & Wine Profit Margins. Retrieved from BinWise: https://home.binwise.com/blog/wine-industry-growth-rate

Derbyshire, D. (2013, June 23). Wine-tasting: it’s junk science . Retrieved from The Guardian: https://www.theguardian.com/lifeandstyle/2013/jun/23/wine-tasting-junk-science-analysis

Gonzales, R. (2013, May 8). Wine tasting is bullshit. Here’s why. Retrieved from Gizmodo: https://io9.gizmodo.com/wine-tasting-is-bullshit-heres-why-496098276

Hesser, A. (2003, April 9). Why Wine Costs What It Does. Retrieved from The New York Times: https://www.nytimes.com/2003/04/09/dining/why-wine-costs-what-it-does.html

Lehrer, J. (2012, June 13). Does All Wine Taste the Same? Retrieved from The New Yorker: https://www.newyorker.com/tech/frontal-cortex/does-all-wine-taste-the-same

Orr, S. (2020, October 15). Total Wine & More liquor superstore to open in Nora. Retrieved from Indianapolis Business Journal: https://www.ibj.com/blogs/property-lines/total-wine-more-liquor-superstore-to-open-in-nora

Schatzker, M. (2017, April 3). The Taste Of Wine Isn’t All In Your Head, But Your Brain Sure Helps. Retrieved from NPR: https://www.npr.org/sections/thesalt/2017/04/03/521415892/the-taste-of-wine-isnt-all-in-your-head-but-your-brain-sure-helps

Trei, L. (2008, January 16). Price changes way people experience wine, study finds . Retrieved from Stanford News: https://news.stanford.edu/news/2008/january16/wine-011608.html