Why do you have to pay so much for a bottle of wine in a restaurant?
Are all restaurant owners greedy?
This week, Uncorked exposes the reasons for markups between 300 and 400 percent in restaurants, explains the rationale and talks about a world with reasonably-priced wine lists.
How often have you walked into a restaurant, opened the wine list and stared wide-eyed at the seemingly ridiculous prices?
You scan down the list, looking for one or two of your most recent favorites, find them and can't believe that the restaurant wants $125 for the bottle you paid $35 for last week.
What is the meaning of this ridiculous markup?
Well, before we go and lambast all the restaurants in Milwaukee -- and for that matter around the world -- let's take a look at why those prices are so high.
The reason higher markups were invented was simple. Restaurateurs wanted to put together a quality list of wines that may or may not be available elsewhere. They wanted to have depth of selection, which included range of price, varietal, origin, etc., and they wanted it to represent the quality and high standards of the restaurant.
In order to build such wine lists, the owners had to invest quite a bit of money in a product that wouldn't move very fast. Imagine an initial investment of $200,000, or even more. The vast majority of that money is tied up in inventory and the owner sees very little return on that investment. Not only that, but with such a huge amount of wine, owners have to pay at least one full-time employee just to manage it. Consequently, the revenue earned from the total sales of wine each month has to be enough to justify the expense. Hence, a markup of 250 to 400 percent, depending on the size of the establishment and the volume of sales, became largely standard in the fine dining arena.
This markup made possible wine lists that brought you, the consumer, a wide range of choices, rare selections, older vintages and choices that you would otherwise not be able to consider, much less enjoy.
Unlike retail outlets which seldom have older vintage products, let alone a wide range of them, restaurants prided themselves in the depth and range of vintage and selection of their lists, all the while keeping the markup somewhere in that 2.5-4 times range.
Typically, however, the lower-priced bottles see the highest markup, which makes it difficult for the average spender to find a decent bottle within his or her price range. But, with some of the best restaurants in the world carrying million-dollar wine inventories, don't you think it's only fair to sell accordingly?
That's one side of the story. One can understand the rationale behind it, and at least there are specific reasons, none of which help your pocketbook at all. If you spend good money for a great bottle at a retail store, how fair is it that in order to drink the same bottle in restaurant, you are required to pay so much more for it?
The only trouble I really have with high markups is the fact that the lower-end restaurants followed the high-end business model and began marking all their product up, as well. The practice of selling a glass of wine for the same price that the bottle cost at that level is ridiculous, but unfortunately common. I will be kind and not name the multitude of restaurants around town that pawn off mediocre glass pours at markups of close to 400 percent. Come on, a $7 retail bottle = $28 or more in a restaurant? Absurd. If a restaurant is going to mark wines up that high, they should be items that are difficult to get, and for which the restaurant paid a premium.
Pricey food = pricey wine
The argument here is that people who can afford to visit fine dining restaurants more often than not can afford the higher-ticket wines. I believe this is quite limiting and shortsighted, especially in a town like Milwaukee, where the majority of patrons dine out for special occasions.
So what if I pay $40 for an exotic lamb dish, does that mean I should be forced to pay more than $100 to get a decent bottle of wine? What if my grandmother is paying the bill and wants to drink Beringer White Zinfandel with ice? Should she have to pay $24-$30 for a bottle that (as of last year when I had to buy for a restaurant) costs only $4.51? I think you can agree that math doesn't work so well.
Bring your own
I will make some enemies with this one, but last time I checked, bringing your own wine to a restaurant was still illegal in Wisconsin. Restaurants aren't technically supposed to offer a corkage fee option, but like many laws on the books, this one is often overlooked. Call ahead to see if a restaurant will allow you to bring your own, and ask what they charge for a corkage fee. Any good restaurant will welcome you to bring something in, they stand to make peripheral beverage sales from carry-in patrons. Please do some research of the wine list before you show up. Bringing in a low-end bottle that they already have on the list is borderline insulting. If it's a gem from your cellar or a product that they have marked way up, then I say it's fair game.
Make some noise
I think we need to start a campaign to get casual eateries to start pouring better wine and stop overcharging for it. Come to think of it, let's extend that to all restaurants. Why shouldn't all restaurants charge a better price for wine? Wouldn't they sell more?
Ironically enough, yes.
The other side of the markup game is a unique practice that very few restaurants around the country are employing, one of them right here in Milwaukee. Dream Dance (now Dream Dance Steak -- I haven't been there since the change in concept) is one of the restaurants that offers all its wines at very minimal markup. The logic is this: get more people to drink better bottles of wine and more of them. It can work really, really well if done right. Think about it, you have a budget of $50 to spend on a bottle for the evening. Normally, you would be stuck with some very average stuff like 2005 Sterling or 2006 Markham Cabernet or some other OK, but overly priced, high production wine you see absolutely everywhere.
Then, you look at a wine list that only marks their wine up by about 1.5 times and you see a bottle of 2002 B.R. Cohn Olive Hill for $52 or 2000 Phelan Cab for $65 or 2003 Jordan Cab for $62. The natural thought the consumer makes is the one you and I just made while typing / reading this -- Duh, pop the extra $10 for the considerably better bottle that would normally be WAY out of your range. The other side of it is that groups are far more likely to purchase a second or third bottle when normally they would not have. Even better, now that Wisconsin has a carry-out law, you can take the rest of a second bottle home with you.
This low markup model can be very successful, especially with higher volume establishments, but it is a risk that few restaurateurs have been willing to take. Besides, if you could be just like every other restaurant and guarantee higher revenue with three or four times the markup of average wines, wouldn't you?
I say we make a little bit of a ruckus and get some great eateries to pay a little more attention to the price and quality of their products.
What restaurants do you think have fair wine programs?
Which establishments would you like to see offer better products at better prices? Use the Talkback feature to let us know.
