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When you’re choosing a new wine, what do you notice first? We bet the first thing you pay attention to is the label. You are not alone, 9 out of 10 people are attracted to a wine because of its label. Then, normally what most people do is look at the price. And talking prices: when you compare Mexican wines with imported wines, do you think Mexican wines are really more expensive compared to those from other countries?
Many factors influence our wine selection: label, the varietal, the region, the country, the appellation or denomination, etc, but surely in the end the price strongly influences our decision.
Today we are going to talk about the price of Mexican wines – what affects the pricing, and how they compare with labels from other countries.
The Mexican Wine Industry Today
If you have followed our blog or news about Mexican wines, you probably know – Mexican wines are trending like never before, and the industry has experienced a BOOM in the past 15-20 years.
Today, there are hundreds of Mexican wine labels, many of which have won international awards. In the year 2021 alone, we cataloged 369 award-winning Mexican wines in international competitions.
In other words – it’s undeniable at this point that Mexico is producing high-quality wines.
The industry also generates jobs and income to the country. The wine industry generates about 550 million pesos a year, and this number continues to grow.
Just in the state of Baja California, where the famous Valle de Guadalupe wine region is located, the wine industry generates 4,500 direct jobs and 10,500 indirect jobs.
So, are Mexican wines really more expensive?
We’d love to give you just a straight “yes or no” answer, but things are a bit more complicated than that.
If we look only at the wines of the lower price range (the everyday wines, usually priced below $200 pesos), than yes the Mexican wines are more expensive. There are many more options available from countries where the wine industry is more well established, and wines are produced in mass scale, such as Chile, Argentina or Spain.
But, if we focus on boutique and artisanal production wines, the disparity in prices and quality between Mexican and imported wine is much smaller. If we only compare artisanal wines (those produced on a small scale and with a bigger focus on quality rather than quantity), the Mexican wines become much more competitive.
Now, to understand why there are so many options of imported “everyday wines” with better prices than Mexican labels, we have to keep in mind the different factors that affect the price of Mexican wines.
Other fun reads: if you’re interested in learning more about what’s going on with Mexican wines right now, check out our 12 surprising facts about Mexican wines and our Top-selling full-body Mexican reds
What influences the price of Mexican wines
1 – Winemaking is an emerging industry in Mexico
Although Mexico has the oldest winery in all of the Americas, the wine production was stopped in Mexico for centuries.
From colonial times where there were restrictions on the grapes that could be planted, through the wars of Independence and the revolution, to the economic crises of the current history of the country, Mexico has not had a wine moment until recent years.
2 – Small production
The wine production in Mexico is still too small compared to other countries with more established industries.
Just to give you an example: in 2016, the Chilean winery Concha y Toro produced 2.2 million cases of Reserva Cabernet Sauvignon, its most recognized label which surely we have all seen in stores and supermarkets all over Mexico. It’s a huge number: 2.2 million cases is a total of 26,400,000 bottles of only ONE label.
By comparison, in 2017 Monte Xanic, which is one of the largest Mexican wineries, had a total production of 100,000 cases of wine counting all its labels.
Obviously, the mass production of wineries such as Concha y Toro (and others of the same rank) allows production costs to be lowered considerably and, as a result, the final price to the customer.
3 – High taxes
Wines are taxed at 16% IVA (Impuesto sobre valor agregado) plus a luxury tax of anywhere from 26.5% to 30% IEPS (Impuesto Especial de Productos y Servicios).
Adding the two taxes to the cost of producing a wine, the taxes comprise almost half the price of a bottle of wine.
Just to give you an idea of how that compares to other countries, in the United States the wine sales taxes consist of state sales taxes, city and county rates. The average wine taxes in California are 8.2%, in Oregon 0% and in New York 8.6%.
These taxes apply to all national and imported wines, so it affects the price of all wines. However, the high tax burden (and consequently the prices) makes wine an exclusive “luxury” product, as already mentioned, accessible only to a limited market with a higher than average purchasing power.
While in Europe, Chile and Argentina wine is considered a food supplement and part of everyday culture, in Mexico wine is still considered a luxury item, which limits its market reach and the growth of the industry.
Don’t believe us? Check out how wine consumption per capita in Mexico in 2021 compares to some other countries around the world:
4 – Lack of government support
Unfortunately, we find ourselves in a country where support for the wine industry is neither sufficient nor comparable to that of other countries, where other governments contribute to its growth
In Mexico, all the growth of the wine industry is financed by private capital, and those producers need a quick turn around in order to continue producing. Without economic solvency within a short period, it is not possible to continue investing in improvements to the field, buy machinery or develop infrastructure and technology for wine production.
5 – Climate change
Climatic phenomena such as water scarcity, temperature increase,and soil erosion have caused harvest times to become unpredictable, and have harmed the quantity and quality of the grapes produced annually.
This is a common theme amongst winemakers circles: climate change directly harms the wine industry, increasing production costs due to missed harvests, scarcity of labor due to variation in harvest times, etc.
6 – Raw wine production materials are imported and subject to exchange rate fluctuation
Another huge challenge wine producers in Mexico is that most of the raw materials needed for the production and bottling of wine are not produced in the country.
In other words, the barrels and fermentation tanks, machinery, glass bottles, cork, etc have to be imported and usually have their price tied to US Dollars.
The costs of the machinery for each winemaking process, as well as lab equipment for quality tests, all depend on economic factors such as the wildly fluctuating price of the dollar against the Mexican peso.
Are Mexican wines worth a shot?
At Uncork Mexico, we are an online wine shop committed to promoting the Mexican wine industry, so take out opinion with a grain of salt.
However – we strongly believe that in the long run we all win by supporting the local industry.
As we mentioned earlier – if you’re looking for quality wines, you can find artisanal Mexican wines that compete head-to-head in pricing and quality with the imported wines. If you have tried Mexican wines in the past and they left you disappointed, give them another shot! Things have changed A LOT.
It’s much easier to find Mexican wines right now, than it was 10 or 15 years ago. Many shops, bars, restaurants, grocery stores and specialty wine shops offer Mexican wines in their lists and are committed to promoting the local industry.
In a few decades, the Mexican wine industry has managed to be competitive, increasing production, quality and consumption.
The growth of the Mexican wine industry has also allowed the development of other industries. Mexican wine regions are going through a wine tourism boom, which allows us all to visit the many Mexican wine regions and discover first-hand all the amazing work done by Mexican producers.
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Cathy
Interesting piece! Thanks for the explanation re taxation!
When eating traditional Mexican food (almost daily) we always opt for Mexican wine and I’ve actually been impressed with the pairing and flavours in even the cheapest Mexican wines. I assume this is down to the lack of strict rules when compared to old world wines – a bottle of which might be cheaper (in the UK at least), but can be a shock to the system! I was assuming that the cheap new world wines give the producers room to manoeuvre and tweak them to the extent that they can make even a mediocre harvest produce a drinkable wine. Here’s to the continuing success of Mexican vino!