Wine Markups in NYC

[Felonius]

I know I ranted about this in another thread a few years back, but an experience the other night compels me to go at it again.

As I sat down for my first visit to Mas and scanned the wine list, I soon realized that the average markup was about 300%-350% from retail (which makes it what, 500-600% from their wholesale cost?) While I can't remember exactly, I think the cheapest bottle of red on the list was a Fleurie at $45. Then I looked at the wine prices by the glass, which were in the $12-18 range for fairly average wines. I began to feel the old rage welling up inside of me....

I know it's hard for restaurateurs to pay the bills in NYC, but this is just too much. It's one thing to charge these markups at a place like Daniel, where customers are paying a premium for a list of rare and sought after wines from top producers in good vintages, carefully selected by a master sommelier. I don't like paying it, but I can stomach it. However, now every Tom Dick and Harry restaurateur in NYC thinks they deserve the same markup for even mediocre wines one could find at the local supermarket.

I can't remember much of the list from Mas, but here are a few selections:

Frog's Leap Sauvignon Blanc $50 - a nice bottle of this varietal, but c'mon I can buy it at the supermarket for $13.99!

Fleurie (I forget the producer) $45 - This price for what's basically an upscale bottle of Beaujolais? I love Fleurie, and buy a lot of it.... At $8-15 retail.

Turley Petite Syrah Estate 2002 $120 - I love the Turley Zins and nearly ordered this bottle of Petite Syrah out of curiousity. It retails for about $35, but is admittedly a hard to find item of low production volume. This markup might be justified due to the rarity factor, until one reads the reviews. Here's what Wine Spectator had to say "Lean and a bit green, with hard cedar, herb and pepper flavors that aren't quite ripe, making the dusty berry and sage flavors a tough act to swallow. Score 83" (note: I'm not suggesting that Wine Spectator is always right, but it's a reasonable reference point) A 350% markup for an unsuccessful bottle of wine is highway robbery, even if it comes from a top producer like Turley. It's also assault and battery if the sommelier knows it's a loser bottle or poor vintage (and probably got it at a discount from the distributor) that will sell to unsuspecting customers due to the famous name on the label. I'm not saying that's the case at Mas, but I am relieved I didn't blow $120 on that bottle.

Another factor that irked me at Mas (and to be fair, is common in NYC restaurants), is the lack of older vintages or the more successful recent ones. Many of the wines on the list at Mas were from vintages between 2000-2003 and barely ready to drink. I can see paying a high markup for top vintages or older ones that have been properly matured in a cellar. But paying these premiums for 2003 Oregon Pinot Noirs that probably came off the truck a few months ago and have barely had time to settle down in the bottle isn't very appealing.

After a lengthy search, I did find a reasonable bottle on the list at Mas, a 1996 Volnay Caillerets from Bouchard for $85. A great vintage, from an average producer of Burgundy, and an enjoyable if not particularly exciting wine. This bottle probably retailed in the $40-50 range upon release. As I heard the couple next to me order that $50 bottle of Beaujolais, I felt a mixture of pity and relief, as though I had narrowly escaped being mugged.

The unfortunate reality at places like Mas, is that one will likely have to spend $150 per bottle to get something even remotely comparable to the food. This means that dinner and a bottle of wine for two with tax and tip is over $350. I suppose that as long as customers in NYC are willing to pay exorbitant prices without blinking, the fleecing will flourish. I, however, will not be sipping wine at Mas any time again soon.

[jackal10]

I've started taking my own. Better wine and even at $10 corkage a lot cheaper...

[slkinsey]

This is one of the great things about Landmarc. Their wines are priced so low that they occasionally beat retail prices. I wish more restaurants would do this. Of course, part of what that means is charging 18 dollars for that plate of pasta instead of 15 dollars. Because the restaurants still need to make their money. I don't believe any of these places are pulling in obscene profits due to their wine markups.

[Juanito]

You're preaching to the choir. It really bothers me to pay obscene markups on mediocre bottlings.

Until the dining public slams shut their collective wallet, and orders iced tea with their meals, or better yet, enthusiastically support those operators that have a sane approach to wine pricing, the fleecing will continue.

I recently read a book by restaurant critic Alan Richman, and my favorite line in it was this:

Any restaurant can list wine. I'm interested in restaurants that want to sell wine.

[Felonius]

I've started taking my own. Better wine and even at $10 corkage a lot cheaper...

←

Where? I've found very few upscale restaurants in Manhattan that have a corkage policy, let alone at $10. If I remember correctly, the corkage fee at Jean-Georges is $70, and the one time I tried to bring a bottle they made it clear that even with that corkage fee, they did NOT appreciate me bringing a bottle (it was a 1985 Haut Brion, which was not available on their list).

Any leads to NYC restaurants with reasonable corkage policies would be appreciated.

Edited March 6, 2005 by Felonius (log)

[Moopheus]

But isn't the markup similar on other beverages as well? A bottle of San Pelligrino water at any restuarant that has it is likely to be at least two or three times the cost at the supermarket, and they don't even need a separate license to sell that. A cup of coffee costs 4 or 5 times what it costs me to make it myself, and usually isn't as good.

How much of the cost at the restaurant is to cover the cost of the liquor license?

Whay do people pay inflated prices for alcohol at bars when they could drink for less at home? Aren't you paying for more than just what's in your glass? How much is that worth to you?

The restaurant probably figures that people aren't buying expensive wines unless they can afford it, so why not make the money where they can?

[Felonius]

But isn't the markup similar on other beverages as well? A bottle of San Pelligrino water at any restuarant that has it is likely to be at least two or three times the cost at the supermarket, and they don't even need a separate license to sell that. A cup of coffee costs 4 or 5 times what it costs me to make it myself, and usually isn't as good.

Agreed, but there's a difference when you're talking about more expensive bottles of wine. When one has to pay 350% markup on a bottle of wine that retails for $50, which is a general price point where truly fine wines come into play, that's $125 of profit for the restaurant (or more like $150 considering wholesale cost). It's also $175 out of my pocket. That's a much more painful financial hit than a $10 martini or a $5 latte. I don't mind spending $100 a person for world-class food, but I do have a problem having to add $150-$300 for a halfway decent bottle of wine to go with it. Even at this price point, one isn't likely to get a truly exceptional bottle of wine or something from an older vintage. That will usually set you back $500 or more a bottle in a NYC restaurant. That's a lot of money unless your last name happens to be Trump.

I don't buy bottled water at restaurants for the same reason. I'd much rather drink NYC tap than pay $10 for San Pellegrino.

[docsconz]

I agree that obscene markups on wine is a major turn-off to a restaurant for me. I expect the restaurant to make money and thererfore to charge a premium, but anything beyond twice retail for a readily available wine is IMO gouging. Rare, aged or otherwise hard to find wines present another story, however, as there is significantly greater investment in time, effort and other costs on the part of the restaurant as well as supply and demand issues.

I also rarely order bottled water in NY restaurants, since I believe the quality of tap water in NY is generally quite good. If it is not at a particular restaurant, that is yet another turn-off. I don't typically order coffee at restaurants either, although that is not due to any cost issue.

The bottom line is that I would rather pay a fair price for food and wine. The restaurant should make a profit on my meal, but it should be a reasonable profit. Ultimately the quality of the meal and the overall experience will lead me to judge whether the price I pay is reasonable. Whether or not that is at a profit point for the restaurant will depend on their skills both in the kitchen and behind the calculator.

[slkinsey]

I don't mind spending $100 a person for world-class food, but I do have a problem having to add $150-$300 for a halfway decent bottle of wine to go with it.

Let's take your model of $100 for food and $150 for wine. Would it make you feel better about the experience if they charged $175 for the same food and $75 for the same wine? Or are you saying that you'd like to have the same experience for only $175 (same $100 price for the food and only $75 for the wine)?

[docsconz]

While the question is directed at Felonius, I will throw in my $.02 to say the latter unless it is food that truly is worth the greater price point.

[cuisinier1]

Greetings,

Do any of you own a restaurant? If you do you would understand that the profit in a up scale restaurant is only 4%-12% and this is if you are doing really well. The up scale restaurants are really high end wine Bars. This is most of the time the only profit the restaurant may even see. The salary of staff, NY taxes, rent, the list goes on and on. 300% is large in the increase of the sales. Please keep this in mind the cost of just opening a restaurant is very costly.

In Good Cooking,

Matthew Secich

[Juanito]

Greetings,

Do any of you own a restaurant? If you do you would understand that the profit in a up scale restaurant is only 4%-12% and this is if you are doing really well. The up scale restaurants are really high end wine Bars. This is most of the time the only profit the restaurant may even see. The salary of staff, NY taxes, rent, the list goes on and on. 300% is large in the increase of the sales. Please keep this in mind the cost of just opening a restaurant is very costly.

In Good Cooking,

Matthew Secich

←

Matthew, no, I don't own a restaurant. I do work in the periphery of the business, however, and I understand the economics. Your 4 to 12% figure is right on the money. It still doesn't justify the need for the kinds of markups we're talking about here. If I did own a restaurant, I'd rather sell more bottles of wine at a lesser markup, than fewer bottles at a higher markup. You bank dollars, not percentages. My wife and I dine out often, and we generally like to have a white or sparkler with our apps and salad, and a red with our entrees. More often than not, the markups make me think twice about that approach, and I'll forego the first bottle to keep the check within my budget. So the operator that could have sold me two bottles winds up selling me one. In the process, they'll likely clear less gross profit dollars on my meal than they otherwise could have.

The lower markup approach is working in practice. Ask the folks at Plumpjack's in San Francisco.

At the Biltmore here in Santa Barbara, they have one night a week where every wine on their list is half price. Can you guess which night they move the most wine?

Great markups do nothing for an operator's profit margin if it dissuades clients from ordering wine.

[docsconz]

Greetings,

Do any of you own a restaurant? If you do you would understand that the profit in a up scale restaurant is only 4%-12% and this is if you are doing really well. The up scale restaurants are really high end wine Bars. This is most of the time the only profit the restaurant may even see. The salary of staff, NY taxes, rent, the list goes on and on. 300% is large in the increase of the sales. Please keep this in mind the cost of just opening a restaurant is very costly.

In Good Cooking,

Matthew Secich

←

No doubt the cost is extremely high, especially when using the finest ingredients in a fine environment such as you do. Those costs need to be covered. The food prices should reflect that as should the wine prices in a fair manner. There is always a balance between price and sales. The more the markup in most situations the less likely the sale. For people who are familiar with wine prices, an extreme markup is egregious unless there is a valid reason for it such as particularly rare or aged bottles.

It is easier to justify a markup for exceptional food since so much depends on the skill of the chef and the restaurant. The wine is created by someone else (usually) and already has a retail price attached to it. For me twice retail or less is generally an acceptable markup for most wines. as I stated above exceptional wines in terms of quality, rarity and long-term investment by the restaurant are justifications for greater mark-ups.

edited to add that I missed Juanito's post, composing my own. He made my main point more eloquently than I did.

Edited March 6, 2005 by docsconz (log)

[cuisinier1]

Greetings,

If I charged you the quest the true cost of the cuisine, the main course alone would be around $45- and the tasting menu would be $120-$130 per quest. This would put my cuisine out of range for most of my guest. The education on cuisine in the US is not stronge to support the true cost. One must remember I am in upstate NY the education is not as well rounded as the city. Never the less wine prices that are 300% are out of control. The only true profit is wine and bar sales.....

MJS

[DutchMuse]

Nice thread and very good point (and counterpoint) regarding wine markups. I'm a wine collector. I regularly BYOB all over Manhattan, at regular and top end restaurants. Many restaurants now allow BYOB--such as Gramercy Tavern, Per Se (they have a hefty $75 corkage)--its almost the exception that doesn't allow it. When they discover I enjoy wine and am not bringing in Mondavi Woodbridge or some such thing, its usually not a problem. But of course I always call first and check as to policy, etc. When I first moved to NY from CA in 1996, it was the exception re BYOB and I got the attitude some posters above mentioned. But in 2005, its the exception when the restaurant does NOT allow BYOB for a corkage fee. And try Montrachet on a Monday night where BYOB has no corkage; its great.

Minor point re the initial post--Turley Petit Syrah is a highly sought after wine that retails for approximately $80 to $100 (check out www.winesearcher.com for prices in the USA, the 2002 ranges from $75.00 to $149 in wine stores) so $120 isn't really out of line for that one. But I agree with your basic point.

Edited March 7, 2005 by DutchMuse (log)

[docsconz]

Matt, this is how I am understanding this for a fine dining restaurant's economics. Please correct me if I am wrong. Basically in order to succeed the restaurant needs to make a certain profit, albeit slim from a given meal. The food is essentially sold at a loss, but most of the profit comes from the wine and bar.

If there is a consistent markup on all wine across all price points it helps the restaurant's bottom line to sell more expensive wine since there will be a greater absolute profit per bottle. But if most of the guests cannot afford the true cost of the meal then what will allow them to afford the cost of the more profitable more expensive wines? Anyone working within a budget will most likely stick to that budget more or less as far as the wine is concerned. One might argue that if that budget is going to be the determining factor anyway it might be worth getting the bigger profit from the higher markup, especially since anyone who will likely be drinking wine at a fine dining restaurant probably still will despite the price. That is fine, except that guests may be less likely to buy more wine than they otherwise would therefore negating some potential incremental profit and potential guest satisfaction. To me a restaurant seems more expensive if the wine list is disproportionately expensive and unless I am really blown away by the food I am less likely to return. That was one of the most disappointing aspects of Alain Ducasse at the Essex House to me. While the food was very expensive it was for the most part very good and worth the tariff (with a few exceptions noted in that topic). The wines were IMO particularly overpriced for what I received. They were good, but the one "expensive" wine in the flight was poured with an exceedingly skimpy portion. I chose the flight because it was chosen for the tasting menu and the list prices were no more reasonable. For most of the people dining there that is probably not a huge issue, but I prefer to get more value for my money. As such I don't have a burning desire to return there (at least not on my dime).

Restaurant economics are very difficult, which I know you know. I also know that you strive hard to provide the best possible product at a reasonable cost. Wine is an important component for me and for many others, although ultimately I think most people go to restaurants for the food. Much in the same way that the ultimate quality of a dish depends on the balance of the ingredients in that dish the best and most successful restaurants find a balance in their charges for food and wine that reflect the quality of both.

It is a difficult battle in upstate New York to do what you do so well and I very much admire you for it.

[Mark Sommelier]

Turley Hayne Vineyard Petite Syrah wholesales for $60 a bottle. $120 is a good price. I sell it for more.

Edited March 7, 2005 by Mark Sommelier (log)

[Felonius]

Turley Hayne Vineyard Petite Syrah wholesales for $60 a bottle. $120 is a good price. I sell it for more. 

←

I think we're talking about two different bottlings. Turley makes both a "Hayne Vineyard" Petite Syrah and an estate bottling which retails for about half the price. The wine in question was the estate bottling.

I'm a big fan of Turley Zins and have bought a lot of them at retail and at auction. Never had the Petite Syrahs, so can only go by the reviews I've read, which admittedly doesn't count for much. However, I'd be hesitant to pay $120 for a wine that got such a horrible review in the Wine Spectator (incidentally, the "Hayne Vineyard" bottlings got much higher accolades).

Edited March 7, 2005 by Felonius (log)

[Felonius]

I don't mind spending $100 a person for world-class food, but I do have a problem having to add $150-$300 for a halfway decent bottle of wine to go with it.

Let's take your model of $100 for food and $150 for wine. Would it make you feel better about the experience if they charged $175 for the same food and $75 for the same wine? Or are you saying that you'd like to have the same experience for only $175 (same $100 price for the food and only $75 for the wine)?

←

Damn Sam, I'm not sure I have a good answer for your question! I guess I'm willing to pay up for something unique and special that I can't get elsewhere, be it food or wine. I could never hope to cook a meal like those I've had regularly at the top restaurants in NYC. I have no problem forking out $100+ at a place like Cafe Boulud or Jean Georges, because they're offering something I can't make myself and seldom find outside of cities such as NYC or Paris. The thought, labor and vision that goes into a meal at these places is easily worth the price asked, in my humble opinion. However, when someone in NYC wants to charge me $50 per bottle for a mediocre 2003 Sauvignon Blanc that I can buy at Kroger Foods in Charlottesville, VA for $13.99, I begin to question what I'm paying for.

Rare wines, things I can't buy anywhere at retail, or wines from exceptional producers/vintages are another matter. I can stomach forking over 3x retail at one of Daniel's restaurants when I'm getting a great wine (and a good vintage) from the likes of Peter Michael, Arnaud Ente, Helen Turley, Paul Hobbs, La Mission Haut Brion, etc. - wines I struggle to find at auction let alone retail. I'm also willing to pay up for recommendations from a truly knowledgeable sommelier that will teach me something about wine pairings or wines I haven't tried (Daniel's restaurants, ADNY, Danube, Veritas all provide such expertise). This is not the case for many restaurants in NYC charging these huge markups. At MAS I was handed a wine list, never saw a sommelier, and was expected to pay 2-4x retail for mediocre wines from recent vintages that are either readily available at any wine store are from small but lackluster vineyards.

The bottom line is thaf if you want to charge that kind of money for food or wine, you'd better be prepared to deliver something out of the ordinary. Otherwise you're wasting my time and my money.

Edited March 7, 2005 by Felonius (log)

[Felonius]

Nice thread and very good point (and counterpoint) regarding wine markups. I'm a wine collector. I regularly BYOB all over Manhattan, at regular and top end restaurants. Many restaurants now allow BYOB--such as Gramercy Tavern, Per Se (they have a hefty $75 corkage)--its almost the exception that doesn't allow it. When they discover I enjoy wine and am not bringing in Mondavi Woodbridge or some such thing, its usually not a problem. But of course I always call first and check as to policy, etc.  When I first moved to NY from CA in 1996, it was the exception re BYOB and I got the attitude some posters above mentioned. But in 2005, its the exception when the restaurant does NOT allow BYOB for a corkage fee. And try Montrachet on a Monday night where BYOB has no corkage; its great.

Interesting... I too used to live in CA and loved the fact that nearly every restaurant allowed me to bring bottles so long as they weren't on the house list. My experience in NYC has been quite the opposite. I've found few restaurants that allowed me to bring wines, irrespective of corkage fees. And then, even the places with corkage fees treated me like crap when I arrived with wine in hand. In general, this has not been ameliorated by the fact I always call ahead, always bring something exceptional that is not on their list, always buy an additional bottle of something good off their list in addition to the bottle I bring, and always offer a taste of my wine to the waitstaff and/or chef. In my experience, the top NYC restaurants have a big issue with any sort of BYOB, no matter how hard I try to be reasonable about it.

It bums me out, because I love wine and food, have a fairly decent wine collection, and don't cook much at home. All I want is to be able to bring a special bottle from my cellar out to dinner once in a while. I also can't begin to afford to pay $1000 for a bottle of wine, which is about what it would cost in NYC to drink a lot of the wines in my cellar.

I gave up on bringing wines out in NYC years ago. I hope that you are right that things are changing in this regard. In my mind, there's no good reason why NYC restaurants shouldn't allow regular customers to bring their own bottles once in a while. Even if they charge $100 for corkage, they'd be ahead of the game. I'd get to bring my wine, they'd make the same profit that they would have had I ordered off their list, and I could finally drink a wine worthy of the food they provide.

[RobinsonCuisine]

My experience as a wine director has been that only one in five customers will call in advance to ask if BYOB is allowed and if there is a corkage. The other four will almost always complain when corkage (ours is only $20) is added to the bill. One in eight will offer a taste to the staff and only one in nine will offer a taste to the sommelier or purchase another bottle from the list.

I understand BYOB (especially if its a rare bottle or one of special significance), but many hours have gone into the planning, purchase and organization of the list. It is a very complicated process dealing with the law, suppliers, minimum order requirements, storage, training, owners etc etc. BYOB is a bit of an insult in that regard (imagine the chef's response if you brought your own food--and I've seen it tried, kosher being the exception).

I'm always dumbfounded by the customer who brings in a mediocre bottle, never extends a hand or greeting to myself or the steward on duty and then stiffs the wait staff who have been pouring, polishing and tending to their wine needs for the evening..........the norm.

Sommeliers love good wine. Thats why we hold the jobs we do (God knows its not for the money or an easy life). If a customer brings in something wonderful, I consider it a point of pride that he feels my restaurant is worthy of his treasure and in fairness, these customers almost always ask to meet me and offer a taste because they love wine as much as I do and want to chat about our common interest.

They are just too few and far between.

[slkinsey]

The point I was trying to make upthread, perhaps not very well and expanded upon by others more informed than I, is that a restaurant has to make a certain profit on average per diner to stay in business. So for example, it may be the case that the target price point is around $200 per person. Let's suppose that the food usually costs around $100 per person and the wine usually costs $100 per person. As we know, most of the profit from that $200 meal comes from the wine. The $100 of food, after various expenses (labor, linens, flatware, etc.) are added in, may cost close to $100. The wine may cost $25 at wholesale, with the real cost (including labor, storage, stemware, etc.) being closer to $45. So, the restaurant is theoretically making $55 bucks on the meal.

People look at that and think, "they're making an obscene profit on the wine." The restaurant has to make its 55 bucks (a completely hypothetical number, of course -- it's probably lower). So, what to do? Well, one thing they can do is lower the price of the wine to 50 bucks (200% over wholesale) and increase the price of the food to 150 bucks. But this has its problems. One problem is that they might lose customers if they charge $150 for the food, because even though the cost of the meal would, on average, be the same, $150 "feels" like a lot more than $100. The second problem is that they lose flexibility in terms of the kinds of customers they can have. Most restaurants are fundamentally about the food, and they may be willing to serve some people who choose a 45 dollar bottle of wine with their $100 food at a loss, because they know they can make up the difference on the high rollers at the next table who are paying $300 for their wine.

[docsconz]

That is, as usual, very well said, Sam, but let me rephrase the question. I want my favorite restaurants to be profitable enough to stay in business so I can enjoy them, but I also want them to be reasonable enough for the overall meal cost that I can enjoy them often. How does a restaurant balance the costs and charges such that they can accomplish that? At some point "the law of diminishing returns" must kick in with regards to prices whether they be wine or food such that incremental increases in per unit profit lead to decreased overall profit because of decreasing sale volume.

[Nathan]

leaving aside the more arcane economic issues for the moment...I was in Miami this past weekend and was amused to see a restaurant price a bottle of "Marques de Caceres Rioja" at $45.99 (retail under $10 outside of Manhattan)...the rest of the list was similar....I stuck with beer.

[Bux]

One problem with the current formula is that those who don't drink wine aren't paying for their share of the food. Another problem is that those who do drink wine pay with each bottle they drink thus discouraging the selection of a second bottle. Wines by the glass, by the way, are generally one fourth the price of the bottle and perhaps one sixth of the volume. Pairing wines to tasting menus often runs at a lesser "value." Of course there's the added value of interest to the meal, but most of us have budgets somewhere.

Another issue has been well defined by Felonious when he said "a wine worthy of the food they provide" as well as in his comments about knowledge, services of a sommelier, optimal storage conditions, selection, etc. (I don't know that he mentioned all those as such, but he established what one restaurant offers to justify a mark up that another doesn't.)

I expect a much higher entry level at a four star restaurant than I do at a new neighborhood restaurant and I expect a bit higher percentage mark up on a bottle. I think this is the gist of the complaint that started this topic. Fifty dollar bottles at the bottom of a new restaurant that's not pretending to aim at four stars seems presumtuous when I can find a selection at sixty at Per Se and Daniel. One mistake people make when selecting a restaurant by price, other than relying on Zagat's estimates for comparitive analysis, is to neglect the cost of wines.