This was my experience as a distributor. Hard to say just how often but it was easily a large majority (90%?) of the time that closeout deals didn’t trickle down to the end consumer.
And this little nugget. When I began the strategy was to work low with the thought that buyers would recognize the value. As time went on, I realized that raising prices often resulted in increased sales and I attribute a lot of that to the perception that if it costs more it must be better.
I think that’s right. Price is often used as a surrogate for knowledge. My concerns are less about retailers than irrational, greedy restaurants. Trade news suggests the strategy only has limitedd appeal. The extravagant expense account dinners are really from another era.
I share your anxiety. I can only hope that the West Coast wineries take the opportunity to better balance their inventories rather than be greedy and raise their prices.
In my experience, nothing about wine in American restaurants has changed since I got into wine around 2001 - its mostly boring wine lists full of common wines at 2-5x the price I can easily buy them for. Since nothing has changed in 2 decades, I’m wondering why anything would change in the future? Has the average American decided not to pay 2-5x markup anymore so restaurants must change? Why were they ok paying that markup in the past?
There are actually some decently-priced bottles at the restaurant mentioned in the original article if you look really hard, but the vast majority of their extensive wine list is rip-off pricing.
Re the “irrational, greedy restaurants.” I guess it’s fair to say they exist but most people figure it out. If a place is truly irrational with their pricing, they might be able to survive or even do very well via marketing or whatnot but usually silly overpricing will be punished by the market. When I began selling I would often feel some places were being greedy. “Hey, I priced it so customers could get it at x and you’re charging x+” Same with fellow distributors. I thought some were unreasonable with their markups. But later I learned these are often what it takes to survive. The businesses that charged a little more often tended to be the ones who paid their bills on time, who stayed in business and kept their employees, who kept doing business with their suppliers for years and years.
We will agree to disagree.
Super interesting topic…I share a lot of the sentiments here about not wanting to pay much more than a 2x retail markup. That said, it’s worth noting that wine is probably the least marked up product at a restaurant. As Chris mentioned, beer, cocktails and other drinks are marked up even more (e.g. a craft beer you can buy for $1.50 in a 12 pack will be $7-10 at a restaurant). And while it varies of course deending on restaurant type / cuisine etc, a general rule of thumb is food costs should be around 30%, so food is marked up 3.3x (of course the labor element is much more than with wine).
My issue then with paying big markups on wine is the experience is actually inferior to my home drinking wine experience. The main issues are 1) wine lists that are full of just mass ditributed stuff and nothing interesting to try (e.g. Meiomi etc) 2) quality wines that are way too young (really don’t get why folks order super young Barolo, Bordeaux etc that I see all the time now on wine lists), and 3) not always, but often find restaurants serve red wine too warm - I prefer cellar temp to room temp. As with a previous poster, I like getting cocktails when eating out because I don’t make anything complicated at home or have all the ingredients, thus I’m getting a superior experience. And beer is basically the same experience.
I still do order some wine and generally do it when there are interesting wines I can try by the glass - then it’s a real benefit to me to try something without committing to a bottle
Another hurdle / gripe to add — the process of ordering off a list is too cumbersome.
All that time you’d like to have a nice glass of wine
Actually, a food cost of 30% means the food is marked up 2 and 1/3 times. A $10 menu item would have a food cost of $3, which is marked up one time to $6, a second time to $9, and another 1/3 to a total of $10.
Surprisingly, there are sources supporting that approach but I think it’s wrong. Markup is the multiplier, not (multiplier -1).
In my training, we learned that there are basically 2 ways to determine prices; both of which have implications (which I will save for another note). A business (aka restaurant) can use a ‘cost-plus’ approach whereby they figure out all of the costs associated with what they are selling and then add a mark-up to it which will result in a price that covers costs and provides profits. The other approach is called ‘demand-based.’ In this framework, the customers/market sets the price by showing what they are willing to pay for what is offered. This approach is independent of the costs involved. In reality customers want a ‘fair price,’ and don’t really care about the underlying cost structure. Please keep in mind that it is total dollars that matter at the end of the day, not margins. This usually leads to happier customers and more sales. Oh, well…
as Barry pointed out, in the way we (and most people in my experience) are using the terminology, 2x means your cost is say $50 and you’re charging $100. When people say a restaurant marked its wine 3x, they almost always mean they are charging $150 for a $50 wine for example. Not arguing you’re technincally incorrect, just how the term is used (as opposed to say “marked up 100% / 200% etc” which is correctly understood as you indicated in my experience).
No more Spatburgunder? 
I truly don’t understand why restaurants don’t routinely have more aged wines on the list. It’s never been easier to source aged wines from Europe or from auctions. You don’t need to store them yourself, the secondary market is full of them. There’s nothing like going to a really high end restaurant and seeing a fifty page wine list with 95% of the wines from 2019-2022 vintages. How can this happen?
Plenty of reasons. Many states limit to purchasing through a distributor. The large distributors just crank through current vintages. For those states that do allow other methods of acquisition, it does take time and effort to procure a rounded portfolio. Most restaurants don’t dedicate the time to it or want to pay someone to manage it. But you are right, restaurants that want to do it certainly can. Right now, many are content with the easy way out. I guess they don’t care if they feel it’s generates enough revenue
And there is capital! Most restaurants don’t have the capital to invest in building a cellar. A few of my favorites lists in NYC are all based on consigned cellars.
You bring up good points, but I would add economics to it. If a good bottle of wine at a restaurant can be purchased elsewhere for $50 and the restaurant is marking it up to $150, you know you are paying an extra $100 to drink it at the restaurant and you can easily replicate that experience at home and save $100. To me, that’s a lot of money to just throw away for no added value.
The food has added value so may be worth the markup. Beer may have the same or more markup as wine, but its significantly less expensive overall. And cocktails are kind of in-between beer and food, some added value, maybe not as expensive.
If they’re just going to get criticized for selling for 3x retail why bother?
I don’t care if beer or cocktails are marked up at a greater percentage than wine. For me, as the customer who’s making the decision whether to purchase, it’s the price that counts.
I can afford $20 for a cocktail. I don’t care if it’s been marked up 5 or 10 times the cost to the restaurant. I don’t begrudge them the $16 or $18 to pay their overhead and make a profit.
I can also afford a $500 bottle of wine, though not as often as a $20 cocktail. But I do care if it’s marked up more than 2 times the cost to the restaurant. If I can buy it for $200 at retail, you bet I object to the profit the restaurant is taking. Glassware, storage costs, staff… I’m not buying it when the vast majority of the bottles on the list are less than 2-3 years from release, with maybe a few selections out to a whopping 10 years post release, still too young for my palate. No Master Sommelier. And while the glassware is fine, it isn’t $30+ a stem. That’s the reality at most of the restaurants I patronize in the DC/Baltimore area. Not talking about destination/splurge dinners but places with good enough food to be worth the visit.
As a result, I have almost completely stopped buying wine by the bottle off of restaurant lists. I see no benefit in grossly overpaying for an immature bottle. Guess I’m not the only one. I’ll BYO or buy a glass of something, or if the table wants wine I pretty much stick to the $50-100 range.
I think people would be much less critical of markups on aged wine, in part because it’s harder to figure out the retail, in part because they would appreciate the effort of sourcing and storage.