Restaurants have millions of dollars in reasons not to price their wine fairly
Restaurant wine pricing has bewildered all of us for years, and never more so in the past 18 months. Why, given that restaurant wine sales are so sluggish and prices are so high, haven’t restaurants cut prices to boost sales? Instead, just the opposite has happened.
I’ve written about this on the blog. We’ve discussed it in the comments. I’ve even interviewed experts, and they were just as baffled as the rest of us. And if you talk to restaurant types, as I have, you’ll get a hem and a haw, but nothing to really justify the high prices.
Until now. I’ve spent the past couple of days perusing mixed beverage tax receipts compiled by the state of Texas, and the answer has become abundantly clear. Many restaurants don’t sell enough wine to make it worth their while to price it more fairly, and those that sell enough don’t have any reason to do so.
Or, rather, have millions of reasons not to do so.
In September 2016, nine restaurants in the state sold more booze than the highest-ranking strip club, and strip clubs exist to sell overpriced alcohol. That’s nine individual restaurants, not chains, and one of them did $800,000 in alcohol sales. The best the strip club could do was $551,000, which was just $4,000 more than the 10th best restaurant in the state.
That’s more than $6 million a year for the top 10 restaurants. And every time I looked at the list, I found something else that stunned me. A restaurant where I have had many wine lunches and where the wine list is quite ordinary: $1 million a year. Another, where the food is quite reasonable but with an even less distinguished wine list: $400,000 a year. A chain Chinese restaurant in the north suburbs: $500,000.
Those are mind-boggling numbers, and explain all. How much more could you sell if you priced the wine fairly? Probably not enough to make a difference. I’d even think about marking wine up four times wholesale for results like that. And I’m one of the good guys.
The caveats: The totals here include beer, wine, and spirits, and the restaurant business in Texas may not be representative of other states. Still, I’m trying to compare apples to apples. Hence, I didn’t include Mexican restaurants in my analysis, where margaritas will boost the numbers, or bars, which don’t sell much wine. The restaurants I’ve cited here are medium- to high-end, many steak houses. One, in fact, even boasted about its wine list helping it sell one-half million dollars in alcohol last month.
Not very good restaurant wine price news to start the new year, is it?
Image courtesy of Wine Folly, using a Creative Commons license