Read an interesting article on Wine and money by Matt Kramer in wine spectator magazine :
One of the great myths about wine and money : How good can a wine be if it is cheap ?
The actual cost of producing an indisputably great wine is surprisingly small ($15 a bottle for everything to do with creating and bottling a first growth Bordeaux or a fancy Napa cabernet wine.)
The wines are priced higher due to the following reasons:
1) Marketing costs and overheads.
2) Emerging wine nations like Portugal, Chile, Hungary, South Africa, Greece, Argentina feel that unless and until wines are dressed in high price, nobody will believe how good their wines are.
3) Consumers value more what costs them more. So, better to charge as high a price as possible.
Price and quality co-relations exist at lower price points e:g $15 to $20 a bottle. But above that level, the relationship between wine quality and high price is a marriage of convenience: your lust and their calculation.
Retailers minimize the stock of inexpensive wines, because margins on inexpensive wines are slim & shelf space is limited.
Moreover there is more money in selling high priced wines, so since retailers are in business to make money, they do not like to stock inexpensive wines.
After all why would you pay $40 for a bottle if you are tantalized by something selling for $10? And once the consumer discovers how good the $10 bottle is, he will not buy the $40 wine. So in every sense, there is no money in selling cheap wine.
Source: Winespectator magazine April 30 2011