Paying for fine wine, layer by layer.

Ask why fine wine is so expensive and the answer is several prices stacked on top of one another: what it cost to grow and make the wine, the years it waited before release, its scarcity, its reputation, a critic's score and the margins of everyone between the estate and your glass. Only some of those layers change what is in the bottle. Knowing which ones is how you stop overpaying for the rest.

The common mistake is to read price as a measure of pleasure. It is a fair guide at the lower end of the market and a poor one at the top, where more and more of the money buys things you cannot taste. Expensive wine can still be worth it. You just need to know which part of the price you are paying for.

The curve of diminishing returns

Move up from the cheapest wines and quality improves quickly: riper fruit, more care in the vineyard, fewer shortcuts in the cellar, more concentration and length. Keep climbing and each step up in price buys a smaller step up in pleasure. Near the top, price rises much faster than enjoyment and the extra money pays for rarity, reputation and the capacity to age.

The research points the same way. A study of more than 6,000 blind tastings, published in the Journal of Wine Economics in 2008, found that people without wine training did not rate the more expensive wines more highly and, on average, liked them slightly less. Tasters with wine training did not share that slight preference for cheaper bottles, which hints that some of what the premium buys takes experience to notice.

Price also changes the experience itself. In a brain-imaging study published in the Proceedings of the National Academy of Sciences, volunteers tasted the same wine presented at different prices and reported enjoying it more when they believed it cost more. Activity rose, too, in a part of the brain associated with pleasure. Part of what you pay for is the expectation. A blind tasting strips it away and is the quickest way to find where your own curve flattens.

Where it bends is personal. It depends on how often you drink, how closely you pay attention and which styles you love. A bottle that seems absurdly priced to one drinker is the whole point for another and neither of them is wrong.

Why fine wine is so expensive to make

Some of the price is real cost. It rises with ambition.

• Land. A vineyard in a famous village costs far more than one a short walk away and the estate must earn a return on it. Grand cru vineyards give only about 1% of Burgundy's wine, which is one reason Burgundy's hierarchy reads like a map of land values.
• Yield. Fewer bunches per vine can mean more concentrated fruit. It always means fewer bottles from the same land.
• Hands. Picking by hand and sorting bunch by bunch, sometimes berry by berry, costs labour a machine harvest would not. Steep slopes that must be worked largely by hand cost more again.
• Oak. New barrels are expensive and give less flavour with each use, so an estate that wants that effect buys new ones every year.
• Time. Barolo must age for at least 38 months before release, red Rioja Gran Reserva for five years and vintage Champagne for three. Every month in the producer's cellar is money spent and not yet earned.

Scarcity, reputation and the score

The most sought-after wines are often made in small quantities and wanted everywhere at once. Importers and merchants receive allocations, a fixed share of each release. The scarcest bottles tend to go to customers who also buy the rest of the range. That queue has a price.

Reputation compounds. Bordeaux's 1855 classification was drawn up on the basis of price and it still shapes what the listed estates can charge; how Bordeaux is classified explains the ranking and its limits. A name that has been great for generations carries that record into the price of every vintage, including the weaker ones.

Then there is the score. A high mark from an influential critic can bring a rush of demand. The premium it creates comes from that demand; the wine in the bottle is the same as it was the day before. Scores given to unfinished wine tasted from barrel are estimates with wide margins of error, yet prices often move on them as if they were settled. Buying en primeur is where that gap matters most.

From the estate to your glass

Between the estate and you stand several businesses, each adding its margin to the price before it. In Bordeaux the chain typically runs from the château through a broker to a négociant, then to importers and merchants around the world. Sometimes a restaurant comes last, with a margin of its own for service, glassware and a cellar. Freight, insurance and storage are added wherever the wine is held or moved.

The route matters for another reason. Every extra link is another warehouse, another van and another chance of heat, so a bottle with a short, documented route from the estate often sells for more than the same wine with a long or unknown one.

Hong Kong charges no duty on wine, which removes one layer. It does not remove the others. In this climate, storage and careful delivery are real costs. A merchant who has held a wine for years to sell it mature has also paid for the space, the insurance and the money tied up in it. It is a fair charge when the storage was good.

Where the value hides

The best drinking value sits where quality and fashion part company.

• Great producers in lesser appellations. A top grower's regional or village wine gets the same care as its most famous bottling, from land that costs far less.
• Second wines. Many classed Bordeaux estates make one, often from younger vines or from lots not chosen for the main wine. They are usually ready sooner and cost much less.
• Unfashionable regions. The Loire, the Beaujolais crus, German Riesling, Sherry and Sauternes all offer more quality than their fame suggests.
• Unfashionable vintages. Good producers make good wine in difficult years and those wines are often ready sooner. Reading vintage reports well helps you find them.
• Mature wine from good but unglamorous names. The cellaring is already done and, away from the famous labels, the premium for age can be modest. Buying mature wine sets out when it is worth it.

Pay for the producer before the appellation and for the wine before the score.

When paying up is worth it

Three reasons justify spending more and each is about more than the liquid.

The occasion. A wedding, a birth year, a dinner that will be remembered. The bottle becomes part of the event and the extra money buys a memory as much as a wine.

Provenance. A bottle with a known history from a sound source is worth more than a cheaper one with a gap in its past, because the cheaper one may not deliver in the glass what its label promises.

Maturity. Paying for years that someone else waited through, in good storage, can cost less than doing the waiting yourself. It also removes the risk that your own cellar lets you down.

For everything else, taste blind to find the price at which your own pleasure stops rising steeply and buy most of your wine around it. Spend more only when one of those three reasons applies. When you do, spend it on the producer rather than the label.