Why the expense of wine in restaurants and wine bars?

Let me start by saying I’m very much a free market guy, an ardent believer in capitalism.

Here’s my question. Why in hades is wine so expensive in restaurants and wine bars? The stock answer is of course, because enough people will pay that amount. If so, fine. I’m not for putting a stop to it by any means other than my voting not to pay for the bottle. But can anyone offer a reasonable alternative to that answer, one that makes us mere consumers look less stupid?

Nope. It’s because we pay for it.

Every time I see one of the periodic restaurant wine pricing or corkage fee threads, I again feel thankful that I live in such a BYOB friendly region of the country. My solution is simple – I don’t buy off lists, I always BYOB (except for one local restaurant where I’m good friends with the Somm – buy off her list as a personal courtesy). Ensures that, even if I get a bad meal, I know I’ll be drinking wine that I like (usuallly with way more age on it than I’d be able to find on Seattle lists) – and at a cost that doesn’t make me feel like I’m being bent over.

If I lived in a place where BYOB was prohibited, I guess about all you can do is make sure your $$$ go to restaurants that have interesting lists and reasonable prices (and make sure they know that’s why you’re giving them your $$$$).

Michael

The wine is free. You are paying for the rent, the insurance, the staff, the spoilage, the linen, the clean-up crew, the refrigeration and air conditioning (HUGE expense in many locales), the advertising, the liquor license and much more. Restaurants fail more than almost any other business for a reason.

The $4 beer only costs you $8 for a six pack on the outside. The $8 cocktail is made from $1-$1.50 worth of booze. The $10 hamburger you could make at home for less than $2. Wine’s obvious since there is no prep required but it’s just the expense of walking into a restaurant.

I think some restaurants treat wine pricing like some states see taxes. We’re not making enough money, so let’s raises prices, ignoring the fact that consumers can go somewhere else. Every once in a while, there is a successful restaurant that realizes that reasonable wine pricing will generate both increased business and net income. It is very frustrating, however.

Restaurants really have the option of pricing only two categories of items: food and drink. Given that service, location, ambience, talent in the kitchen, etc., are all priced into food and beverages, I’m often surprised at how little restaurants mark up the wine.

Of course, some restaurants have ridiculously steep prices (definition: too rich for my blood ). And, on any given wine list, some wines are usually much better values than others. For the most part though, at restaurants I like, I can almost always find a wine I’d like to drink for what I think is very reasonable price (given everything else I am getting).

Cheers!

• Frank

Jim - I don’t know how much you pay, but if a restaurant buys some fish, they cook it in a few days. They don’t keep it in inventory. That’s one reason for a markup.

Then, if you want to go to one of those restaurants with a huge wine list, the problem is compounded. If they only have 12 bottles, people say they don’t have a good list. If they have 2000, people say it’s a “good” list but typically don’t order 100 bottles at a time. So the bottles stay there for a long time.

Then those bottles start to be “older” wines that have been kept in temp-controlled storage for years. They were paid for a long time ago and the cash has been tied up until one day someone orders one of those bottles. The point of a business is to move inventory, not to build collections.

And if there’s a by the glass program, who knows how many bottles are going to be partly finished? If the place is good, they’re not going to keep a bottle around for a week.

A completely different model is the one at Landmarc here in NYC. They price roughly at normal (not discount) retail levels and don’t offer anything by the glass. You buy a 1/2 bottle if you want less than a full bottle. It’s not a huge list, but it’s reasonable. You don’t get anything old, because they’re not storing wine, but you don’t ever feel screwed.

Plus all the other things that have been and will be posted. And don’t forget, the health inspectors will want their monthly fees, the local cops will want to be comped, and you’ll have breakage and theft.

A.
Costs of good sold:

1. purchase price for product;
2. Insurance costs (liability issues which are no insignificant);
3. costs of training of staff - ABC mandated procedures plus customer service elements;
4. other capital investment - costs for storage, wine glasses, decanters, breakage plus interest carry plus maintenace costs for the storage space plus costs of inventory control;

Plus:
B
Profit margin for a fair return on investment.

But in the end . . .
Because they can.
Supply and Demand.

Don’t like the cost?

Learn to cook.

While my reply was somewhat flippant the point is that everything is marked up relatively steeply. I think the question truly revolves around egregious mark-ups relative to other place or for WBTG that are pricey for severely inexpensive and common bottles. The answer is simple and has been given over and over. People pay it so its the way it is. Ballparks would charge less than $10 for beers if no one bought them but…I would just say it’s nice to find the reasonably priced places, places with fun wines that aren’t marked out of sight, places that allow BYOB, places that care about wine, wine pricing and wine service. Don’t sweat the gougers.

All alcoholic beverages see huge mark ups in restaurants. Wine seem so much more egregious because it starts off at much larger prices than beer and often cocktails. It also tops out far higher than any other beverage. The percentage mark ups are not that much bigger but we notice them because we are wine geeks and know the cost of those bottles from our favorite shop in Wine Searcher. I’m sure there is some good reason for the stiff mark ups on these beverages but it’s probably not any better than ‘because they can’.

Same reason popcorn costs $8 in a movie theater.

Recently saw a 2006 Dujac Bonnes Mares for $325 in Silicon Valley. Didn’t seem outrageous.
As already mentioned beer and drinks are generally even more over priced. Even worse, when I go to EU I really do get sticker shock when I look at prices for wines in restaurants.
All in all, I feel lucky that I live in a place where I can always bring my own wines and only pay $0-25 in corkage.

This is the model I like akin to dining in Spain. Common wines are good and reasonable for common, reasonable people. I will let the wealthy spend their money as they see fit. I do not want to pay $50 for a $15 wine.

Frank wrote:

“I’m often surprised at how little restaurants mark up the wine”.

Why, that’s strange. I am often scandalized by the mark-ups!

Sure, I can see the point about fixed costs, but when the restaurateur sells the wine 4 or 5 times his purchase price (common here), I think he deserves the firing squad.

What is the result of this exploitation? People like me increasingly drink BEER.
I hate being taken for a sucker.

And you’ll never, ever find me tipping on wine sold at an outrageous price in a restaurant.

Best regards,
Alex R.

Dennis,

I might reconsider my BYOB policy if I lived in Spain. Last year, when I was in Haro, I’ll never forget sitting outside at the tapas bars in the main square, gorging on great ham, cheese and other treats, while drinking the RLdH Granvonia on glass pour @ 2.5 euros per. A real eye opener…

Of course, then there was the DJ playing “Achy, brakey, heart” and the local folks getting up and line dancing to it at about 1 in the morning (seriously, it was surreal…), but that’s another story…

Michael

So a few points I get from this:

1. I don’t mind absorbing a reasonable amount of the cost for the experience and understand the risk involved in operating a restaurant. Not trying to cheat a restauranteur out of any money.

2. BYOB. Now we get into ridiculous corkage fees. I know there are the expenses of licensing, stemware perhaps, and labor. I can’t help but believe the main justification there is, I the restaurant owner didn’t get my chance to screw you, the consumer, over with my enormous wine list markups so I will get a huge hit on your own bottle.

3. Storage. Got the inventory point, but in most cases – at least here in Dallas – I’m certainly not paying for temperature controlled storage. Case in point, and I hate to call a restaurant out by name, but the owner did not respond to a very reasonable email on this subject. I got an enormously enjoyable meal three weeks ago from the very nice Oak restaurant here. Food was unbelievable, service was near perfect. But my very nice bottle of Oregon Pinot was served at about 75 degrees. No excuse for that – and I need to charge the establishment back some cash if I have to ask to have the wine served at an even reasonably appropriate temp. You’ve gone to enormous lengths to procure food ingredients, hired the finest chefs to imaginatively prepare and present the food, yet you schlop out the wine like that? It’s insulting.

Bottom line is we consumers are morons and are treated accordingly. Which is why, though I love fine dining, I only dine out maybe once a year.

Typically, here, I don’t think wine is marked up any more (on a percentage basis) than beer. A bottle of inexpensive beer (say $1+…that is, I could find a six-pack for $6.99) is often $3.50-4.50 at a restaurant or wine bar. Better beers, often on draft, are more expensive, but I’m not sure how to calculate the per-glass cost outside of the restaurant, as I haven’t bought a keg of beer since college.

And I do agree with you about 4-5 x markup giving stocker shock (fortunately. that is not the case at most restaurants here). At restaurants I like, the list price for a bottle is normally closer to 2x retail (often a little less, sometimes up to 50% more). Certainly, I don’t begrudge a restaurant charging me $40-50 for a bottle that I could buy down the street for $25 (which seems an average markup in these parts). As you suggest, though, I generally wouldn’t be a buyer of a $25 bottle at $100-125.

Interestingly, I can often buy wine for less than the restaurant’s cost, as they may be locked into a distributor or distributors, while I can find the best price in the country (or the world if the savings justifies the shipping costs) and have it shipped to my house. But that is another matter.

Cheers!

• Frank

In some cases the wholesaler pressures the restaurant to raise prices on markups that ar too low. I know it happens here in Maryland.