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Wine "mark ups" in restaurants

r
RedTop May 26, 2012 05:55 AM

Forgive me, I couldn't find a similar discussion so am starting this thread.

Yesterday I took my two daughters out to lunch at a restaurant featuring a Mediterranean menu.

DD#1 asked if she and her sister could share a bottle of wine "because we'll both probably want more than one glass each."

"Sure", I said. They settled on a Ste Chapelle Riesling priced at $24. They liked the wine. Our meals were tasty and we enjoyed a nice leisurely visit.

Later yesterday, I guess I started experiencing buyers remorse, because I googled the wine brand to see if it was worthy of the price I paid. Info back is that, at retail, this wine would be priced $9.99 to $10.99 per bottle. I was a bit taken aback that I had paid well more than 100% markup on the wine and began to wonder what is the typical restaurant mark up on a wine. Or, what is a fair mark up on a wine to assure profitability for a restaurant.

  1. westsidegal Jun 7, 2012 05:38 PM

    look at it this way:
    the cost to the restaurant of paying the rent and making a table available for a <<nice leisurely lunch>> is normally in excess of the actual price that the restaurant pays for a low- cost bottle of wine.
    you are not just paying for the wine.
    you are paying for the rent, the insurance, the business license, the capital cost of building out the restaurant, the labor cost, the utilities, the OPPORTUNITY cost associated with the cccupancy of your table, and the cost of properly ordering and storing the wine, etc.
    all of these other costs do not go down because you ordered a lower-priced bottle of wine rather than a higher-priced bottle.
    unless the restaurant is located in a very low-rent district and came to the owners already permitted and built out with all the equipment already in it, imho they really are completely justified in charging the markup you described.

    10 Replies
    1. re: westsidegal
      g
      goldangl95 Jun 7, 2012 05:46 PM

      I'm not sure I get your point, but maybe I do? Are you saying that running a restaurant is highly competitive and a low margin business and so if they choose to have low markups on food but high markups on wine, who are we to say otherwise?

      My one real problem with this argument is. Why CAN a restaurant charge only say a 30% markup on food but a 300% markup on wine? I would argue its because the market for wine is not transparent - knowledge is not symmetrical. It's because the average customer knows how much a chicken breast costs, or how much an avocado costs, but it's rare to have a customer who has such a breadth and depth of wine knowledge to know the retail cost of the majority of the wines on the list.

      1. re: goldangl95
        Bill Hunt Jun 7, 2012 06:26 PM

        The wine "markup issue" has been addressed from almost all sides, over the years. We have had restauranteurs, distributors, patrons, wine makers, et al, weigh in.

        What has often been missed, as most use their own "frame of reference," was a study done by one of the major restaurant publications in the very late 80's, or maybe the early 90's. I have tried to find that, for reference, and have begged folk in the business to search for it too.

        To distill that study, it was found that when a restaurant dropped the markup on the wines down, they sold more wines, and enough to actually make a larger profit, though obviously not "per unit." That study took a number of restaurants, from mom-n-pops, through upper-end chains, to chef-driven, stand-alone operations. In it, they found many "wine-centric" restaurants, that wanted badly to feature wines with their meals. When they lowered the markups (running between 200 and 600% over wholesale), they sold much more wine, and enough, that they actually had higher profits, though on more product. Margins were less, sales/volumes were up, and in the end, so were profits.

        I only wish that I had made a copy of that study, or could cite the source, as I still think that much of it could be useful.

        Some restaurants will markup their wines by a set $ amount, regardless of the cost of that wine, say + US $10/bottle, and seem to be doing well.

        Now, I will admit that there are many considerations, in good wine service:

        Cost of wine
        Overhead to store it properly
        Overhead to serve it properly
        Overhead to produce the wine list, and update it, plus maybe the Web sites' PDF
        Overhead to use wines to teach the servers the pairings
        Glassware
        Glassware cleaning and breakage
        Returned wines, that, while replaced by the distributor, or producer, takes time, and costs $
        Part of the overall overhead of keeping the doors open

        One cannot deny any of those, though some might factor in with some restaurants, than with others.

        I find the "sliding scale" of markups to be especially painful, in that the lower-end wines usually have a very hefty markup, then at the middle of the list, the markup goes down, but near the top, it escalates to "what the market will bear."

        Many years ago, a Ch. St. Jean was awarded "Wine of the Year," by a major wine mag. The wine was initially released at about US $ 27 retail. The producer re-released the remainder, at about US $35 per bottle retail. I dined at a local restaurant, that had it listed for US $55, and I purchased many bottles, up to their last two, at that rate. The wine went well with their beef, as they were a steakhouse. In another city, a steakhouse had the same wine. It was initially listed at US $125, but then went to US $250, and finished at US $450 per bottle. When I asked the sommelier, who I knew, why those prices for a US $27 - 35 (retail) wine, and his answer was, "Because I can get it." I would guess that his costs were in the US $12 - 20 range, so at the end of the run, the markup was almost 2400%. Well, so long as "they can get it... "

        Hunt

        1. re: Bill Hunt
          k
          kagemusha49 Jun 7, 2012 06:59 PM

          I think at 2400% markup I'd cook my own steak (not exactly difficult to do a great job yourself) and buy my own wine. I've been to steakhouses like that but never more than once on my own nickel.

          1. re: kagemusha49
            Bill Hunt Jun 7, 2012 07:10 PM

            Yes, I do agree, plus I have tons of great wines, that really need drinking, and can do some great things with beef on my grill. I am less a "steakhouse fan," than many, and even with an "expense account," seldom feel 100% right about them - just not my thing.

            OTOH, during the run of that wine, we seemed to host many folk at that steakhouse, and did enjoy their fair pricing, even up to the last two bottles.

            Hunt

          2. re: Bill Hunt
            Midlife Jun 7, 2012 07:46 PM

            Then there's Screaming Eagle. I'm pretty sure this wine sold at the winery for <$100 no more than 15-20 years ago and has now reached $750............... with a wine list price running into the multi-thousands, depending on vintage. Just saw two recent vintage bottles go for $1400 each at retail. There's wine people buy because they like it, wine people buy because they CAN, and wine people buy because they want other people to KNOW they can. ;o]

            1. re: Midlife
              Bill Hunt Jun 7, 2012 09:20 PM

              As I was typing, I was also thinking of SE. Though going back a bit, I passed on a case of the 1997, or maybe the 1998? at US $ 125 per bottle.

              Not too many years later, I saw that wine on a high-end wine list at US $ 5K per bottle. At the time, many were flying their private jets into Napa/Sonoma, and treating their Sr. Management staff to several bottles, just for lunch.

              Then the "bubble" burst, and those jets did not fly, or did not fly so often. Still, he prices remained, and many doubled to US $ 10K per bottle.

              I have talked to a few sommeliers, and most indicate that when the right clientele arrives, they will spend US $ 30,000 on wines for lunch, and want SE most often - sort of like the Barkleys folk, who spent £450K to celebrate a merger, while having lunch at Restaurant Petrus in Mayfair.

              Having a few US$ 10K bottles might be a good thing, when the G-500's start landing! When one is spending US $0.5M on lunch, what's a few thousand per bottle, for the wines? Some folk just do not relate to those prices, as you and I do, but that is life.

              Though we host board meetings around the globe, I am charged with set budgets, and must work with those, and the various wines lists. It would be great to do a 20 year vertical of La Tâche Burgs, for the dinner, but then we have major constraints. Maybe in my next life?

              Hunt

          3. re: goldangl95
            Robin Joy Jun 7, 2012 09:57 PM

            Markups on food are nothing like as low as 30%, westsidegal. Typically here in the UK the ingredients for a £20 steak, fries and salad meal would cost maybe £5-£7 from a supermarket.

            I personally don't begrudge food and wine markups too much, as restauranteurs need to turn a profit to survive, and many fail even charging such marked up prices (they have no divine right to succeed of course, like any business the poorly run ones don't last long).

            1. re: Robin Joy
              g
              goldangl95 Jun 7, 2012 11:16 PM

              Ah, that was me with the 30% number. I'm curious if this is true (e.g. 400% markup on food at most restaurants). Because if so, then the wine markups are the same as the food markup and there's nothing really to be upset about.

              That isn't my impression most places. At many places it really does feel like 30% and at others more like 50-70%. But I've never continued to eat at a place where it felt like they charged me $20 for $4 worth of food.

              1. re: goldangl95
                Robin Joy Jun 8, 2012 12:03 AM

                Sorry...Cited wrong Hound!

                Maybe it's less in the US, or at take-away chains, but I think I'm about right for anywhere with table service in the UK.

            2. re: goldangl95
              westsidegal Jun 9, 2012 11:36 AM

              goldangle95:
              my point is:
              there are a LOT of fixed costs associated with providing a seat in a restaurant in a high-rent metropolitan area.
              the restaurant, if it is to survive, must recover these costs as well as its variable costs.
              to make it even harder, typically, they must recover all their costs at mealtimes.
              with limited square footage with which to work, every restaurant owner has to try to figure out the best way to maximize the return they get on ALL their costs.
              just because a cost is fixed, doesn't mean it is insubstantial.
              also, if the restaurant is not part of a chain, the owner is often stuck with a 10 year lease with a PERSONAL guarantee that is TRIPLE NET.
              after you personally sign a lease like that, get back to me about what you think is a reasonable margin for creating a space for patrons to have a <<leisurely lunch.>>>

              keep in mind, that if your restaurant fails financially, the landlord can legally come after your personal assets for what the rent payments would have been for the entire ten year period.

              the fixed cost to the restaurant for providing a spot for me to sit during a mealtime doesn't go down because i order a cheaper wine rather than a more expensive wine.

          4. f
            FrankJBN Jun 4, 2012 10:15 AM

            The 'old school' rule of thumb:

            The bottom third of the wine list has, for most of us, the highest mark-up, 300-500% not unusual or outlandish.

            The middle third contains the 'best buys'. As noted above, your $50 wine customer will pay $75-$100\ for his bottle, but may balk at more.

            The top third can contain bargains or as noted above wines at over $10K. A $500 First Growth selling for $600 is only marked up 20%, (a bargain) but is still costs you an extra $100. Folks in the DRC or Harlan market are not especially worried about paying a premium.

            I have a local restaurant which sells 'boutique' wines, small, generally unknown producers both for on-premises and off. The on-premises mark-up on every bottle is $5. Yeah baby.

            1. k
              kagemusha49 Jun 1, 2012 10:58 AM

              If you want low markups you need to dine at a cooking school. Last night we dined at Platt college in Tulsa. $20 for a 4 course dinner including a foie gras appetizer. Wines were similarly low priced and good. Paid $24 for a Malbec from Cahors (that's in France not Argentina) and $4 for a glass of armagnac.

              4 Replies
              1. re: kagemusha49
                g
                goldangl95 Jun 1, 2012 11:24 AM

                Not to devalue what you are saying, but many Cahors wines are in the $10-15 range, which would make the markup in line with other reasonable restaurants, but not necessarily a steal in my book.

                1. re: goldangl95
                  k
                  kagemusha49 Jun 1, 2012 12:09 PM

                  My impression was that the markup was 50% or less. I do not remember the exact wines to do a price check but I seriously doubt that any were marked up more than 50% and many less.

                  1. re: kagemusha49
                    Robin Joy Jun 3, 2012 09:10 AM

                    Well, I guess they need to cover costs at cookery school restaurants, but pay staff? Make a profit? Probably different math to a commercial joint.

                    1. re: Robin Joy
                      twyst Jun 3, 2012 09:40 AM

                      The math is EXTREMELY different. Both culinary school restaurants and most country club restaurants do NOT want to make a profit.

              2. JB BANNISTER May 29, 2012 07:14 AM

                If you knew that $165 dress shirt was made and sold for around $4.50 then this wine thing would be a very small issue.

                4 Replies
                1. re: JB BANNISTER
                  Midlife May 29, 2012 05:38 PM

                  After 40 years in the apparel industry I think I know a little about that shirt. I'd love to see the documentation on that. $4.50? ......... REALLY?

                  1. re: Midlife
                    JB BANNISTER May 29, 2012 05:48 PM

                    OK you got me, maybe $5 bucks

                    1. re: JB BANNISTER
                      Midlife Jun 1, 2012 09:15 AM

                      RIGHT!!!!!!!!!!!!! ;o[

                  2. re: JB BANNISTER
                    trolley Jun 10, 2012 11:23 AM

                    i'm with midlife, after working in apparel for over 10 yrs producing both domestic/international i have never met a dress shirt that cost $4.50 to make that cost $165 retail. i've produced stuff for walMart and $4.50 per shirt is still a tough one.

                  3. Eugene Park May 26, 2012 09:45 PM

                    It's amusing that the same folks who think a 300% markup on wine is egregious, but hardly bat an eyelash at ordering a beer that's been marked up 500% or more.

                    I do admit I enjoy the challenge of plowing through a wine list to figure out which wines have the lowest markup, would be tempting to my palate AND a reasonable match to pair with what's being ordered. I even get a perverse thrill when the server returns to say the wine I ordered is out of stock. Call me a glutton for punishment.

                    12 Replies
                    1. re: Eugene Park
                      twyst May 26, 2012 10:10 PM

                      Even beer mark up pales in comparison to liquor. My last bartending job before I graduated college we sold $14 grey goose martinis all night long (this was late 90's). Liquor cost of said martinis? well under a dollar.

                      Its not like most restaurants make money hand over fist though, without the INSANE markups on dessert and alcohol they would either be out of business or be forced to double the prices on the food menu.

                      Dessert markup is hilarious sometimes. That $15 souffle has a food cost of about 50 cents. As they say in bakeshop "Just sellin some air!"

                      1. re: Eugene Park
                        Bill Hunt May 27, 2012 06:27 PM

                        Eugene,

                        You make a great point. In many instances, the same could be said for many waters in restaurants. Not sure why the focus on wine, but it IS common.

                        Hunt

                        1. re: Bill Hunt
                          Robin Joy Jun 3, 2012 09:05 AM

                          The focus is on wine must be because the exact same product is easily identifiable at retail? Harder to do with a chicken breast, onions, mushrooms, cream, brandy, herbs, vegetables etc. to cost a meal.

                          Actually with wages, premises, equipment and utility costs, insurance and so on it would probably cost a restaurant $20 to serve you an empty plate and an empty wine bottle (OK, not McDonalds, but you know what I mean).

                          1. re: Robin Joy
                            Bill Hunt Jun 3, 2012 09:54 PM

                            Huh?

                            Hunt

                            1. re: Bill Hunt
                              Robin Joy Jun 3, 2012 11:53 PM

                              Maybe what I'm trying to say is that if a restaurant's ingredients' costs were zero they'd still have to charge to serve you a meal, as their fixed costs remain unchanged.

                              Same goes for wine. A $20 bottle is often marked up to $60, but if the bottle cost the restaurant $0 they still have to charge $40 for it to make the same net income, an infinite mark up.

                              1. re: Robin Joy
                                k
                                kagemusha49 Jun 4, 2012 02:42 PM

                                Some restaurants will charge you a "corkage" fee for serving bottles of wine that you bring to them. That corkage can be anywhere from $5 to $20/bottle. I'm sure that they do no lose money on whatever amount they charge for corkage.

                                1. re: kagemusha49
                                  Midlife Jun 4, 2012 03:07 PM

                                  "I'm sure that they do no lose money on whatever amount they charge for corkage."

                                  That depends on how much they charge and whether you accept that there is a real $ cost to their wine service.

                                  1. re: Midlife
                                    k
                                    kagemusha49 Jun 4, 2012 08:24 PM

                                    No it just depends on their being rational. If they lost money on corkage they wouldn't offer the service.

                                    1. re: Midlife
                                      Bill Hunt Jun 4, 2012 08:48 PM

                                      One would hope that they did not "lose money," as that would be a very bad business plan, and they could not survive for very long, unless they made up the losses elsewhere.

                                      Hunt

                                      1. re: Bill Hunt
                                        Robin Joy Jun 4, 2012 09:33 PM

                                        +1 on that Hunty. Most restauranteurs that I know personally struggle to make ends meet.

                                        The few that drive Ferraris do so via books/TV/endorsements rather than by marking up a bottle of paint stripper by a few bucks.

                                    2. re: kagemusha49
                                      JB BANNISTER Jun 4, 2012 04:46 PM

                                      I have seen it as high as $125. Forces you to drink their wine.

                                      1. re: JB BANNISTER
                                        Bill Hunt Jun 4, 2012 08:50 PM

                                        Now, I seldom do BYOW, so am not current on "corkage fees," but when I have brought my own wines, it was for special purposes, and also at restaurants, where we dine often, AND, I call ahead of time. Usually, there is NO corkage charge.

                                        Hunt

                          2. j
                            JeremyEG May 26, 2012 02:24 PM

                            My wife and I just bought a pair up really nice Riedels to serve special wine in at home. After seeing how expensive high-stemware can be, I was reminded of how much cost goes into serving wine properly at nicer restaurants. I hate the high markups as much as the next guy but there are certainly additional costs that go into storing and serving wine properly in a good restaurant.

                            How was the Riesling after all that?

                            JeremyEG
                            HomeCookLocavore.com

                            2 Replies
                            1. re: JeremyEG
                              r
                              RedTop May 26, 2012 02:58 PM

                              Both of my daughters liked the wine. DD#1 said it was nicely balanced--not super sweet.

                              I sipped on a Merlot. Not yet met one I did not like.

                              1. re: RedTop
                                Bill Hunt May 26, 2012 07:26 PM

                                You know, and at the end of the day, it is all about the enjoyment factor, that should take center-stage.

                                As others have mentioned, wine markups are more than "a can of worms." There can be much to consider - much more that should be considered with a $ 24 bottle of wine.

                                Some restaurants will go with about 600% over retail (they seldom buy at retail), for cheaper wines. Think about it, 600% for a $4.00 (wholesale) bottle of wine is still not that expensive, but then there IS the markup. As one goes up the price scale, the % will often fall.

                                Now, some restaurants take a different track, and will use a set $ markup, rather than a %, in hopes of selling more wines. They might also start higher up the price list, and say add $10 to what they paid, or maybe $10 on "retail." Their idea is that if they sell enough bottles, that $10 will be heavily multiplied, and off-set their overhead for serving the wines. Yes, it does cost them something to serve wine, as has been mentioned.

                                Exactly how the prices are structured, might depend on how much an owner feels that wine should be part of one's dining experience. Some will make wine a "loss leader," if they feel strongly enough, that it MUST be included with one's meal.

                                Basically, the wine lists that I have the greatest problem with are the ones that skip from "entry-level wines" at about $60, to fine wines at $600, with nothing in between. Now, after breakfast (most times), I cannot imagine a meal without wine, but when I encounter such a list (and they are almost everywhere nowadays), I gag.

                                Hunt

                            2. ellaystingray May 26, 2012 02:05 PM

                              The discussion of wine mark-ups is a quagmire of epic proportion with a ridiculous set of variables, misinformation campaigns, self-rightous indignation, highway robbery and general lack of critical thinking, from most sides of the issue. I am not even going to try and explain in detail why this is (I could easier explain String Theory), but in my opinion, you paid a fair price for your wine.

                              1. w
                                wattacetti May 26, 2012 11:30 AM

                                Unless it's a BYO with no corkage, you're going to be spending something extra than the retail costs of wines. The markup you're willing to put up with depends on the wine, the locale and so forth, again with cheaper wines getting higher markup than pricier bottles.

                                In Montreal many places are averaging 100% markup which to me is reasonable. The 700% markup that I saw at Nobu San Diego however, wasn't.

                                If you know the wines or have access to retail pricing for national brands via your smartphone, you can quickly see what a markup is.

                                Markup on wines by the glass are worse.

                                1. b
                                  Brad Ballinger May 26, 2012 08:04 AM

                                  If we knew the markups on everything we purchased, we'd be outraged. But it always has been and always will be whatever the market will bear with respect to price. Marea, in NYC, has a bottle of wine listed at $18,500. Someone will order it.

                                  1. ipsedixit May 26, 2012 07:26 AM

                                    This is a well sussed topic.

                                    But bear in mind, when you buy wine at a restaurant, you are not just paying for just that bottle of wine's price -- be it retail, wholesale, or something else.

                                    You have to factor in things like storage, maintenance, stemware, service, sommelier, etc.

                                    In fact, when you really think about, the markup on non-alcoholic beverages like sodas, iced teas, coffee, etc. are even more outrageous.

                                    1. twyst May 26, 2012 06:56 AM

                                      Thats actually at the lower end of markup. 300% is not uncommon.

                                      3 Replies
                                      1. re: twyst
                                        r
                                        RedTop May 26, 2012 07:16 AM

                                        Gad!

                                        1. re: twyst
                                          JB BANNISTER May 26, 2012 07:52 AM

                                          That is true. That $36 of Sutter Home cost between 3-6 bucks. I do like my bar code scanner on my smart phone.

                                          1. re: JB BANNISTER
                                            h
                                            happybaker Jun 4, 2012 04:53 PM

                                            Oh! Naughty!

                                            I love it.

                                        2. JB BANNISTER May 26, 2012 06:20 AM

                                          Cheaper wine is always marked 100% or more. For better deals shoot for $150 bottles as very few will pay a 100% on those so often they are marked up $50-$75.

                                          1 Reply
                                          1. re: JB BANNISTER
                                            r
                                            RedTop May 26, 2012 06:29 AM

                                            Thank you for your reply, JB.

                                            Unfortunately, a $150 bottle would be wasted on our palates.

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