Wine in Restaurants

[MMerrill]

Okay, I have a question. Why does wine have to be so expensive in most DC restaurants? We love to eat out and enjoy having wine with our meal but the prices seem astronomical to me. When we travel to Europe (usually Italy and Portugal) there are always reasonably priced, good wines available in restaurants, as well as super star expensive ones. I wish DC restaurants would offer some less expensive alternatives. Why not even a house wine by carafe? Seems to me there are quite a number of 1.5 liter bottle wines that could be acceptable. The restaurant could still make a tidy profit and sell a carafe wine for $10 or $12. We would eat out more often if we didn't have to spend so much for wine!

[FunJohnny]

Ladies and Gentlemen...Start your Engines!

[Carolyn Tillie]

Ladies and Gentlemen...Start your Engines!

tempting, tempting....

[KatieLoeb]

The 1.5L bottle you deem "acceptable" obviously doesn't have the same effect on Beverage Managers throughout your city.

[DLang]

I don't think there is anything unique about D.C. in this phenomenon. Although some places are worse than others.

One common answer from the industry folk is that with food costs, labor, rent, insurance, etc. their is no profit to be made in the average restaurant, except for alcohol. Of course there are BYO's which seem to survive, (although not in my state ) so that debate rages on.

Then you could get into the whole culture of wine in Europe vs. U.S. . . . which is a big topic, and part of the problem, IMO. We still have a long way to go until wine is ingrained in our culture the way it is in Italy and Portugal (and Spain, and France, and Germany, and Greece, and....and.....)

We would eat out more often if we didn't have to spend so much for wine!

I couldn't agree more with this statement. And it has fueled my desire to cook well, and therefore eat (and drink) at home more. My dining out is usually on half-price wine nights and the like.

[Mark Sommelier]

In a restaurant, wine and food are the two main profit centers. There are certain fixed costs associated with purchasing, storing and serving wine. Without an acceptable profit, the restaurant goes out of business.

Edited August 20, 2004 by Mark Sommelier (log)

[derricks]

There are certain fixed costs associated with purchasing, storing and serving wine

If the cost is fixed, why is the markup usually based on multiplication?

Some industry types point out that in general markups have gone down over the years, presumably as we come closer to the European mindset about wine.

[marcus]

And yet there is massive variation in what similar type restaurants charge for the same wine, even in the same cities. Zagat once did a comparision in NYC and posted it on its website, I don't know if its still there. Restaurants do apply different pricing strategies for successfully selling and profiting from wine, and its not clear that pricing at the max yields the best results. I know that I actually am willing to spend more when I believe that the wine list is well priced. I believe that as diners become more knowledgeable about wine, restaurants will need to price their wines to provide value, in order to sell them.

[FunJohnny]

Maybe my perception on this is incorrect, but isn't the mark-up on beer (by the glass/bottle) less than on a glass of wine. In other words aren't we wine drinkers subsidizing the beer drinkers?

[mnebergall]

Indeed, what does Mr. Sommerlier mean when he says certain costs are "fixed." Are they fixed in terms of number of $ per bottle, or fixed in terms of number of dollars it takes to buy, store and serve the wine. The cost of the wine itself is certainly fixed. I would guess that it takes a fixed amount of labor to serve a bottle of wine. However, the cost of storing wine is an investment in storage space and the $/bottle will change based in the number of bottles sold and is therefore a variable cost (as the cost accountants will tell you). Are there other costs as well?

See what happens when you involve the accountants.

[nwyles]

Wow , you have no idea !

In Canada , what you ( in the DC area ) would see on the shelves in Safeway for $6.00 , sells in our liquor stores for $17.00 or $18.00.

I need to double that $34.00 to put on my list.

Imagine the sticker shock some tourists get when they see that !

I think our liquor has at least seven layers of tax on it before it hits the table. Sometimes, it is even tax on tax.

Stop crying about the price of the wine and just enjoy !

[Mark Sommelier]

And yet there is massive variation in what similar type restaurants charge for the same wine, even in the same cities. Zagat once did a comparision in NYC and posted it on its website, I don't know if its still there. Restaurants do apply different pricing strategies for successfully selling and profiting from wine, and its not clear that pricing at the max yields the best results. I know that I actually am willing to spend more when I believe that the wine list is well priced. I believe that as diners become more knowledgeable about wine, restaurants will need to price their wines to provide value, in order to sell them.

There has been discussion of this topic on the Wine Forum. I noted that the same bottle of Cristal that I sell $220, ADNY sells for $500. The same bottle of Corton-Charlemagne Domaine Coche-Dury that I sell for $400, Veritas sells for $1300. Go figure.

[mnebergall]

Wow , you have no idea !

In Canada , what you ( in the DC area ) would see on the shelves in Safeway for $6.00 , sells in our liquor stores for $17.00 or $18.00.

I need to double that $34.00 to put on my list.

Imagine the sticker shock some tourists get when they see that !

I think our liquor has at least seven layers of tax on it before it hits the table. Sometimes, it is even tax on tax.

Stop crying about the price of the wine and just enjoy !

You don't answer the question why you need to double the retail price in order to put it on your list. You buy for the same price the retailer pays. How much of a markup does the retailer enjoy?

Edited August 20, 2004 by mnebergall (log)

[nwyles]

We don't buy for the same price the retailer buys for , we buy at retail prices !

The restaurant pays $18.00 ( See above example ) for the wine. The retailer ( in our case , the Government ) keeps what they pay to themselves. As they are the ONLY game in town , we have to all buy from them.

So , why do I have to markup ..............

The table and chairs you are sitting at cost $1000. I would like a return on my investment.

The flatware and glassware you are eating with at that table cost $400. Again, I desire a return on my investment.

The staff need to be paid, the rent, insurance, the cost of the product etc. Do I need to go on as to why there needs to be a markup on wine.......

At the end of the day, restaurant owners make their money in nickels and dimes off of each guest. The only way to make dollars is to serve enough guests.....

[marcus]

Are there other costs as well?

I would guess that there are some other variable costs. Most significantly, there is the cost of money which will be related to turnover. I would guess that overall turnover in a restaurant is slower than a retailer. Restaurants may also stock many more high end expensive choices, that may move more slowly. Also a restaurant will experience many more rejected bottles, for which it must absorb the cost. However, I don't dispute the fundamental point, that restaurants generally do charge too much for wines, primarily because there is a restaurant culture that lets them get away with it. In a country like Spain in particular, you have a culture that just won't spend big bucks for wine, and even in the most expensive restaurants, the wines there are generally well priced.

[nwyles]

I will say this, even though we have a government agency for liquor distribution in British Columbia , if ever you had a bad bottle of wine, they would just take it back - no questions asked and replace it. It has openned the door to a couple of scammers but all in all, everybody is fairly honest about it.

[morela]

Plus, you have to factor in the cost (pain and suffering) of dealing with a bunch of raunchy purveyors.

PS: I'm kidding

[derricks]

We don't buy for the same price the retailer buys for , we buy at retail prices !

The restaurant pays $18.00 ( See above example ) for the wine. The retailer ( in our case , the Government ) keeps what they pay to themselves. As they are the ONLY game in town , we have to all buy from them.

But markups can be striking even in places where the government isn't the retail source.

Most restaurateurs I've talked to about this are blunt about the fact that food doesn't make much profit, and if you want to make money, you have to sell wine. Of course, restaurant critics I've talked to about the subject argue that the food should stand on its own. They aren't usually experienced at running restaurants.

Most people don't realize how high food is marked up, because $2 * 4 isn't as noticeable as $25 * 2.75. Or maybe they do realize, but recognize the labor involved in prepping and cooking the food. The restaurant's costs for the wine are harder to see. Again, though, I'd think that the costs above the wine price would be fairly fixed. It costs the same to store a really nice bottle and a really mediocre one, and storage space is probably fixed (i.e, if you store a wine for two years, you're not adding space to do that, so the per-year cost is the same). So why can't restaurants just figure out annual wine cost, divide by n where n is bottles of wine sold per year, and add that to the bill?

[marcus]

I will say this, even though we have a government agency for liquor distribution in British Columbia , if ever you had a bad bottle of wine, they would just take it back - no questions asked and replace it. It has openned the door to a couple of scammers but all in all, everybody is fairly honest about it.

I'm not saying that wine stores will not take back bad bottles, but it is a lot easier to reject a bottle on the spot in a restaurant, than go to the effort of bringing a bottle back to the store. Also what do you do when you've held the bottle for a few months before opening it, you might not even remember where you got it. Also, in a high end restaurant, the sommelier will probably inspect the wine, and may reject a bottle that the customer might not have. So I'm sure that the reject rate in a restaurant in practice turns out to be very much higher. How much impact that has on the overall expense of othe wine program, I don't know.

I also don't believe that US restaurants pay retail for their wines, I'm confident that they buy primarily from wholesalers or at public auction.

[nwyles]

Lots of different restaurants , lots of different systems.

You are right in pointing out it takes lots of cooks to produce dinner etc.

One bartender can pour for the whole restaurant where it take 5 to 6 cooks. The labor component is the big difference in the profitabily of food vs beverage.

The basic cost of the product is roughly the same , the big difference is the number of people it takes to get it to the table.

Edited August 20, 2004 by nwyles (log)

[bilrus]

I will say this, even though we have a government agency for liquor distribution in British Columbia , if ever you had a bad bottle of wine, they would just take it back - no questions asked and replace it. It has openned the door to a couple of scammers but all in all, everybody is fairly honest about it.

But do they refund the money for the original bottle and give you the replacement for free?

[nwyles]

I'm not saying that wine stores will not take back bad bottles, but it is a lot easier to reject a bottle on the spot in a restaurant, than go to the effort of bringing a bottle back to the store. Also what do you do when you've held the bottle for a few months before opening it, you might not even remember where you got it. Also, in a high end restaurant, the sommelier will probably inspect the wine, and may reject a bottle that the customer might not have. So I'm sure that the reject rate in a restaurant in practice turns out to be very much higher. How much impact that has on the overall expense of othe wine program, I don't know.

In B.C. , when I said no questions asked, I meant it.

Customer rejects , wine steward rejects, busboy rejects , no problem.

Private Auctions are a different story but not very common in our market as the Government always wants to have it's hand in it !

[nwyles]

But do they refund the money for the original bottle and give you the replacement for free? 

What sort of fantastic world would that be !

[winesonoma]

You can either afford to eat out or not. The cost is the cost. Cook and clean at home or relax and enjoy the nite out. Geez!!!

[nwyles]

Amen to that !

End of story.