Wine, unlike other beverages, requires the special Beracha of "Bore Peri Ha'gefen." Since wine has the unique quality of providing a degree of satiation, and does not serve merely to quench thirst as do other drinks, it earns a special Beracha.
One recites this Beracha over both wine and grape juice, and even over wine that has been boiled. Even if the wine had been boiled to the point where its content was diminished, it nevertheless requires the Beracha of "Ha'gefen." It should be noted, however, that over cognac, which is produced from the vapor rising from boiling wine, one recites "She'hakol" like he would on other beverages. Since cognac is produced only from the wine's vapor, it is not considered like wine itself and hence it does not warrant the special Beracha of "Ha'gefen."
If wine is diluted with water, what proportion of wine is required for it to retain its status as wine with respect to this Halacha?
The Rama (Rabbi Moshe Isserles, Poland, 1520-1572), in his glosses to the Shulhan Aruch (Orah Haim 204:5), asserts that one recites "Ha'gefen" over diluted wine so long as it consists of at least 15% actual wine. Only if the water comprises more than 85% of the overall content does it lose its Halachic status as wine and thus require "She'hakol." This is indeed the common practice among Ashkenazim.
The Shulhan Aruch, however, does not present a clear ruling on this issue. He writes merely that the proportions mentioned in the Talmud do not apply nowadays, when the wine is not as strong as the wine used in Talmudic times. Thus, the Shulhan Aruch writes, the proportion that determines a wine's status depends on the prevalent practice of each locale. As mentioned, he does not give a specific proportion.
The Peri Megadim (Halachic work by Rabbi Yosef Teomim, 1727-1792) writes (204:16) that in his view, if the water comprises the majority of the drink, then the beverage loses its status as wine and requires "She'hakol." The Kaf Ha'haim (work by Rabbi Yaakov Sofer, 1870-1939) understood this to mean that one recites "Ha'gefen" so long as the wine comprises half or even a bit less than half of the overall content. Only if the water comprises the clear majority would the Beracha be "She'hakol." Hacham Ovadia Yosef, however, in his work Hazon Ovadia (vol. 1, p. 80), rules that one does not recite "Ha'gefen" over wine or grape juice unless the wine content comprises at least the majority of the overall content. Even if the beverage consists of 50% wine and 50% water, one who drinks this beverage must recite "She'hakol," rather than "Ha'gefen." This is the proper ruling for Sepharadim to follow.
Accordingly, Rabbi Moshe Halevi (Israel, 1961-2001) writes in his work Birkat Hashem (vol. 3, notes on p. 124; listen to audio for precise citation) that before drinking wine or grape juice one must examine its composition to verify that its wine content exceeds its water content. Otherwise, he must recite "She'hakol" over the beverage. He adds that if there is any uncertainty concerning the beverage's composition, then one must recite "She'hakol" in case the water content exceeds the wine content.
Nevertheless, Rabbi Moshe Halevi rules (in note 177) that if a Sepharadi hears an Ashkenazi recite Kiddush over wine that meets the standards of the Ashkenazim but not those of Sepharadim, he has fulfilled his obligation. Even though the wine used by the Ashkenazi does not have the Halachic status of "wine" according to Sephardic custom, a Sepharadi can still fulfill his obligation of Kiddush by listening to an Ashkenazi recite Kiddush over such wine.
Summary: One recites "Bore Peri Ha'gefen" over wine and grape juice, even if it had been boiled. Over cognac, however, one recites "She'hakol." Ashkenazic practice is to recite "Ha'gefen" over diluted wine provided that the wine content comprises at least 15% of the overall content, whereas Sepharadim recite "She'hakol" over diluted wine unless it has been ascertained that the wine content exceeds the water content.
