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Mark Up on Restaurant Wine


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i originally posted the following in another thread,but thought it might warrant a new one...

Just a wee message to say that 300% mark up on wine is what i charge at my small Bistro.I wont bore you with the details, but after the vat, staff, insurance, maintance, income tax, accountancy fees, bank charges, credit card charges,wages,rent, national insurance,buisness rates and feeding the dog.NET profit runs about 10 %. So a bottle of wine i buy for £3 and sell for £9 makes me a net profit of 90p

Unfair?????? Discuss   :confused:  :confused:

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I must admit that one of the first things that sent me into a rage, upon moving to the UK from Australia, was the make up in wine at restuarants. From what you have said, it seems to be unfair on both sides of the fence. This being the case, why aren't more restuarants in the UK BYO (or is it BYOB here?), this would certainly encourage me to go out more often, as I would love to find a Bistro that prepared good food in which I could bring decent wine. I am an Post-Doc. so I often end up going out for work related meals with post-grad. students, the net result of this is that I end up drinking rubbish Chenin Blanc, for about twelve quid a bottle, as this is often the cheapest wine.

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300 per cent mark-up I could live with, although I would vastly prefer some sort of sliding scale that means you get a better deal on more expensive bottles. It's all very well to say a £3 bottle sells for £9. But if a £20 bottle sells for £60, that's rather more painful. And drinking decent claret or burgundy in a restaurant becomes completely impossible for anyone who isn't an investment banker.

But it isn't a 300 per cent mark-up in so many places. If we go back to my experience at Midsummer House in Cambridge, a bottle which is available RETAIL for £12 cost me £57. Now, the resto will NOT have paid retail price. That bottle will probably have cost them no more than £8. That's a 700 per cent mark-up, and it's totally outrageous.

Shouldn't this thread be on the wine board?

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Basildog, I think we all understand that there are additional costs in running a restaurant but as Adam says, why such large mark ups on the more expensive bottles. Surely the staffing cost of a waiter pouring a £12 bottle of wine and a £60 bottle of wine are exactly the same (please correct me if I'm wrong).  This would also apply to the accounting costs on that bottle of wine, national insurance etc. etc.

Wouldn't it be fairer to build in the necessary charges to the food cost and a standard mark up  on each bottle of wine (e.g. £10).

Also, as Adam says, most restaurants seem to charge a 300% mark up on the retail price not the wholesale price, is that fair?

"Why would we want Children? What do they know about food?"

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Matthew, I think the problem with a flat-rate mark-up is that it makes cheap bottles unrealistically expensive. I think the ideal is some kind of mixed system - say twice wholesale plus a fiver (or whatever, I haven't done any calculations to see whether that would work).

Of course, the ideal, in terms of transparency, would be for restaurants not to price food as a loss-leader, but that's a prisoner's dilemma.

Adam

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Wine has a unique position in our price-consciousness. The problem is that we know how much it costs in the shops and are able to make comparisons. For some reason many people think that they know what a 'reasonable' mark-up is. Everything we buy is marked up, but no one seems to notice unless it's wine. The next time you have a slice of foie gras, calculate that the 100g serving has cost the restaurant two pounds fifty, if you pay twenty five quid for that dish that's a 1000% mark-up and foie gras is an expensive ingredient. The mark-up on things like pork cheeks is closer to 3000%. So what? If you don't like the prices don't buy it, whether it's food, wine or whatever, but don't be outraged that restaurants want/need to make a profit.

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Adam, the £10 markup was just an example, however, I don't see that it will make cheap bottles too expensive, it would only become uneconomical (compared to the 300% mark up) for the consumer on bottles costing under £5.

"Why would we want Children? What do they know about food?"

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Michael (may I call you Michael?), wine at the level we are discussing is a little more easy to store/prepare/source (sauce too) then either pig's cheek or foie gras. Have you calculated the cost of taking cork out of a bottle, compared to preparing pig's cheek? Happy to pay twenty quid for braised pig's cheek, angry to pay twenty quid for crappy Australian Colombard-Chardonnay blends.

It would be interesting to know how much variation between different restaurants there is in how they mark up wine. Basildog, any idea on this?

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I agree.The food has been through a process,even if its only taking it out of the package and arranging it on the plate.That process constitutes the value added by the chef/restaurant which is the whole point of eating out.Therefore we don't resent the mark ups in the same way as wine,which has been bought and stored(not always properly)but otherwise has had no value added to it.

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I think the variation in mark up from place to place is also the cause of much consternation.  

Once example, in Foiliage a bottle of ( excellent BTW ) Qupe Syrah ( cost at the one place I could find it, Selfridges, £20 ) was marked up to £50.  At the top end of being fair.  At L'oranger ( the only other place I have ever seen it on the list ) it was £75 and this was a couple of years ago.

Unless, like most of us, you eat out a great deal, it is very difficult to make comparisons.  

There is also the question of "pushing"  In MPW places, I believe it is practice to push wines on which they have the most mark up however suitable they may be for the food.  I know at the soon to close ( yippee! ) Criterion, they were mysteriously " out of stock of all the wines I asked for under £30 a bottle.  Strange that.  They seemed most put out when I said I would be happy with a beer and even more  mysteriously suddenly found a bottle.  £30 being better than £3 for a pint, I guess.

S

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Basildog - I think your logic is flawed. The cost of entrees in your restaurant is in a fixed range and what you make as profit doesn't vary much. So for each entree you have an average profit of X. But wine is different because the price per bottle can vary so much. For example, if the average check in your restaurant is 60 GBP for two people and a bottle of wine for 9 GBP is on the tab, or even for 20 GBP your theory works. But once the price of a bottle of wine vastly exceeds the cost of an entree, the scheme is a ripoff. That's why what is ultimately fair in a restaurant is for them to figure out the purchase price of the average bottle of wine sold, and then add a markup that is commensurate to how much profit a bottle of wine should add to the bill.

The same argument applies as to how much a place should charge for BYO. Restaurants who charge high amounts (say like 40 pounds) make the argument that they lose business by allowing BYO. But that argument is sort of hollow because not everyone orders wine. So who gets penalized in both of these examples are people who drink expensive bottles of wine.  There is no reason for you to make 200 pounds on me if I bought a bottle that costs you 100 pounds, when you are willing to make 6 pounds at the next table for a bottle that cost 3 pounds. Other than your capital cost for holding onto the inventory, which is just the cost of money multiplied by a number of days and which can be easily added to the sales price, your transactional costs are exactly the same, whether the wine costs 3 or 100 pounds. Why you should make more money from one transaction than the other defies logic. But admittedly is the custom and the practice.

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But once the price of a bottle of wine vastly exceeds the cost of an entree, the scheme is a ripoff. That's why what is ultimately fair in a restaurant is for them to figure out the purchase price of the average bottle of wine sold, and then add a markup that is commensurate to how much profit a bottle of wine should add to the bill.

The same argument applies as to how much a place should charge for BYO. Restaurants who charge high amounts (say like 40 pounds) make the argument that they lose business by allowing BYO. But that argument is sort of hollow because not everyone orders wine. So who gets penalized in both of these examples are people who drink expensive bottles of wine.  

Steve -- It's all a question of supply and demand. There's nothing wrong with applying the same percentage mark-up to higher priced bottles (e.g., $200 on $200 bottles, with $15 on $15 bottles; using a low mark-up % as an example) if that is the wine pricing methodology that the restaurant believes will maximize its profits.  

Consider an example where Diner X is willing to buy a $400 (200+200) bottle and Diner Y is willing to buy a $30 (15+15) bottle at the same restaurant.  Let's say, under your proposed "add a set mark-up per bottle based on average profits" pricing methodology, each bottle would have to have $23 added to it. Well, obviously, X would still buy the bottle he was willing to pay $400 for at $223 and would be happy about the situation. However, depending on Y's resources and preferences, Y may not be willing to pay more than $30 for his bottle and might forego that bottle at $38 (15+23). The restaurant loses out because only one bottle is sold (and at a markedly lower absolute dollar amount of profits), and Y loses out too because he does not get the bottle he wants or does not drink at all. This is just to illustrate that there are pros and cons to different wine pricing methodologies.

On the BYO point, I see some validity to the "loss of business" argument. You mention that the argument is hollow because not everybody orders wine. That may be the case, but the people who are going to go to the trouble of BYO may have a greater concentration of people who might otherwise order wine (or who might otherwise order expensive wine). To be clear, I am not arguing that that is the case, just that that is conceivable. Also to be clear, I enter this discussion with significant weakness in my understanding of wine.

:wink:

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Cabrales-While my point doesn't discount that a restaurant can charge what a customer is willing to pay, my response to Giannone was in the context of whether what he is doing is fair. And while he might be able to charge 150 pounds for a bottle that cost him 50 pounds, it is hard to call that fair when he doesn't make anything close to 100 pounds on any other transaction. If one were to take the actual transaction costs of buying a bottle of wine, storing it and serving it, the cost of providing that service is exactly the same regardless of whether it costs 5 pounds or 150 pounds. The only variable that is different is the capital investment. And that is easy to calculate in. And if a restaurant wanted to, they could look at wine as something they should sell for cost plus a small markup for profit. The Francois Clerc bistros work on that prinicpal. Sell wine at cost plus 30% and it turns like you are selling it wholesale. That's a "fairer" approach to wine service. But that doesn't happen that often because most people who like fine wine are willing to pay the markup. But if restaurants took the other approach, they would probably sell more higher quality wine at better prices.

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my response to Giannone was in the context of whether what he is doing is fair. And while he might be able to charge 150 pounds for a bottle that cost him 50 pounds, it is hard to call that fair when he doesn't make anything close to 100 pounds on any other transaction. If one were to take the actual transaction costs of buying a bottle of wine, storing it and serving it, the cost of providing that service is exactly the same regardless of whether it costs 5 pounds or 150 pounds. The only variable that is different is the capital investment. And that is easy to calculate in.

Steve -- In referring to "fairness", your post addresses one aspect of fairness -- the costs to the restaurant of providing the wine (i.e., the supplier).  But "fairness" could also be considered from the perspective of the diner -- the party on the demand side of the equation. If the fulfillment Diner X in the previous example receives from his bottle of wine is high and would therefore leave Diner X willing to pay $400, why shouldn't Diner X be made to shoulder that amount?

For me, a bottle of wine taken at a good restaurant (for the sake of simplicity, without a BYO policy) is not fungible with the same bottle taken at home or anywhere else. That's part of why I don't think it's unfair for bottles of wine to be priced expensively, regardless of pricing methodology. And it's not just a question of how the wine is served and the attentions of the sommelier. One way of looking at things: Part of what a diner pays for, and part of what is reflected in the wine mark-up, is the opportunity to have the wine woven into the textured fabric of the applicable restaurant meal. When a given wine is taken in together with the restaurant's cuisine, that wine has almost become a different product -- it's that wine in the context of the particular meal at the particular restaurant. As such, I would see a certain element of fairness to the restaurant being able to control how its prices a product which is so specific and so personal to it.

Consider my dinner last night at Ubon by Nobu. I had, among other things, the black cod with miso, usually good regardless of which Nobu location one visits. I bought Puligny Montrachet. Now, that bottle of Puligny Montrachet is not something I can replicate because (1) I can't cook, (2) even if I could cook, I could probably not cook the black cod as the restaurant did, and (3) other restaurants don't tend to have this particular dish.  Thus, Puligny Montrachet became "Puligny Montrachet Taken at A Nobu-Affiliated Establishment", justifying a higher price.

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to be unfair on both sides of the fence. This being the case, why aren't more restuarants in the UK BYO (or is it BYOB here?)

Could members provide input on good (to be clear, tasty) restaurants in London and Edinburgh that permit BYO (with indications of corkage, if known without further effort)?

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Cabrales - part of the dining experience for me is the social aspect. If you remove the subtle marriage of food/wine bit from dining then that is mostly what you are left with. I would happily pay for a food that was perfectly complimented the wine I was drinking, but that is a very rare thing to find at the cheaper end of the dining spectrum. In France, Italy, blimy even Australia you can by cheap wine that is great for casual socialisation. But, so very often in the UK I have been out with friends and drank overpriced swill and second rate swill at that. I realise that this is not necassarily the restuarants fault, but I am sure that it is possible to provide cheap wine that is also pleasant to drink. There must be money to be made from tracking down lesser known, good quality wine and providing these to restaurants? Most likely not, otherwise somebody would be doing it.

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I would happily pay for a food that was perfectly complimented the wine I was drinking, but that is a very rare thing to find at the cheaper end of the dining spectrum.

Adam -- How do you choose wine when you have dinner parties at home? Are you able to locate wine that is reasonably priced, and do you try items that you would not be willing to pay for at restaurant mark-ups? As I'm developing a stronger interest in wine, I'm finding that that's another reason (along with so many other reasons) to learn to cook.  :wink:

You also mentioned the social aspects of the dining experience, which interests me because Wilfrid dines alone with some frequency, as do I. At a restaurant, do you find you are better able to enmesh yourself in the social aspects with the dining companions at your table than if you had to be thinking about preparing the food as well? 

Robert Brown has discussed, I think under "Scarcity Factor" in "General" (?), how diners at adjacent tables or otherwise in a restaurant might matter to him. I found that interesting too, given that diners at other tables do not matter much to me (except when they have access to special dishes I am denied).   :wink:

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Depending on what level I am cooking on, I choose the wine accordingly. Casual meals get casual wine, meals that have some thought put into them have wine chosen in the same way. I guess I have a mental "map" of what wines I think go with particular types of food. eg. I like old Sauternes and smoked salmon or wild strawberries (not that I have the former or the latter very often :wink: ), Pinot gris with poached salmon, aged cab. Sav. with lamb etc. I think that these mental combinations can only be gained by experience. For example I was served Moscato di Asti with warm chicken liver mousse a few years ago, I loved the combunation, but I would never have come up with it independently.

Dining is the same, if it is casual then it stays on that level. I could happily dine by myself, if I purely wanted to focus on the food/experience. For instance all my friends have refused to go to St. John, so I will most likely eat there by myself. However, the dining I most enjoy is being at a never-before-tried-good restaurant with my wife. Friends I prefer to cook for or have them cook for me.

Other diners do not matter at all to me unless they are intrusive, but I don't think I would eat alone in an empty restaurant, unless for a special reason.

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Cabrales - All you're saying is that the price of wine should be set by supply and demand. And I'm saying it should be set by how much capital cost and the cost of the wine service costs the restaurant. That argument is a draw from what I see. But when you add the component into the mix that not every table orders wine, and those tables bring down the cost of your average check, in reality what has happened to wine drinkers is that they are "picking up the tab" for the tables who don't drink. If I am at Jean-Georges and I order a bottle of mineral water it costs something like $5. But if I BYO there, aside from the fancy stems they give me to drink out of, the cost of their pouring my wine, which is the same amount of work as their pouring my water, is $85. Now their argument is that they are losing money by my not buying off their list. But they lose the same amount of money at a table of tea drinkers. And even if I do not bring my own, there is no guarantee that I will order wine. Maybe I will think there list is crap and overpriced? So there is no logic to their argument if you ask me, other than they can get away with it.

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Steve --  I appreciate where you're coming from :wink: If it's subsidization of non-wine-drinking diners that you consider unfair, however, that's counterbalanced by the reality that every diner could choose not to drink wine, accept wine by the glass or decide to purchase a less expensive bottle. So there's at least procedural fairness, in that every diner has access to the same set of options (including the no-wine option). If a given diner's subjective preferences are such that he experiences a lot of enjoyment from wine, going without wine might be effectively precluded in practice, but it is not actually precluded in fact.

Since most diners enjoy wine (?), a diner who goes without wine saves money, but suffers the opportunity costs associated with not drinking the wine. He might be getting subsiized by wine drinkers, but that subsidy comes at a "cost" of its own (and, in my view and likely yours, significant cost). :wink:

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OK i,m back after a hard day at the stoves .....where do i start??????????.. The 300% mark up does not go all the way threw the wine list..the more expensive wines are a better deal for the customer, with less mark up.I run a set price menu, so there is an inbuilt "unfairness" for people who choose cod to turbot, goats cheese to scallops.But i,m playing for an average, and luckily i,m blessed with a clientel who choose what the fancy that night, not what the best deal is.My food costs run higher than average,mainly due to not serving anything "tired" ,but i trade that off by not having huge wage costs..i work my ass off! My job is to make people happy, with food, wine and service and i'd hate to feel that people thought they were ripped off at my place. As for working out complicated capital costs equations and formula for a "fair" system.....lifes to short and my brain not that big.A far worse practice in restaurants than high mark up on wine ( at least thats in black and white on a wine list) is re-sitting tables and rushing people to get the next ones in. When you book a table at a restaurant.it should be yours for the night.(it is a my place) Anyway.thanks for the response, sorry it was on the wrong board (i,m a new boy)  and let the games commence............ :raz:

PS..service charges.thats another bloody rip off!

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Basildog - you would be more than welcome to mention the name of your restaurant, unless you want to retain your anonymity. The eGullet User Agreement states that "Commercial posts are not encouraged, but they are acceptable so long as they are relevant to the discussion and all affiliations are fully disclosed."

My view would be that simply mentioning the name of you restaurant does not really constitue commercial posting, and that restaurants are obviously very relevant to eGullet, plus you have alreay disclosed that it's your place.  

No problem about the siting of this thread. Had I been more on the case I would have moved it in it's infancy, but as it took on a life of it's own anyway, no harm done. I think it's been an interesting and illuminating debate.

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