Some restaurants are moving away from traditional wine pricing, and selling wine at prices we can afford to pay
There’s actually some good news surrounding restaurant wine prices 2018 – which is especially welcome after 2017’s higher prices and, not surprisingly, flat consumption.
I’ve talked to a number of restaurant officials in different parts of the country over the past two or three months who are being more aggressive with pricing. That includes extended half-price wine nights, half-price wine happy hour promotions, and even – as difficult as it is to believe – lower markups than the traditional 3 ½ to 4 times wholesale.
Yes, this is a small sample size, and there remain too many restaurants that consider charging $30 for an $8 retail bottle of wine their inalienable right, just like freedom of speech and assembly. But good news is good news.
Perhaps even more important: The restaurants that are cutting wine prices are seeing impressive results. An Italian restaurant owner in New Jersey told me his second biggest wine night of the week is half-price Monday, second only to Saturday night. Ordinarily, Monday is one of his worst days for wine sales.
In New Orleans, meanwhile, the general manager at a popular French Quarter restaurant said half-price wine happy hour has done the impossible – keep his restaurant busy between lunch and dinner, usually a dead spot. In this, he said, given the choice between a packed dining room and traditional wine pricing, he’ll take the packed dining room every time.
A few other notes from my reporting and research on restaurant wine prices 2018. Unfortunately, in these cases, the more things change, the more they stay the same:
• A Dallas seafood restaurant that caters to the city’s social and political elite has about one-third more red wines on its list than whites. And the markups remain mostly 4-1.
• The restaurant business’ leading trade magazine recently ran a very basic story about how to put together a restaurant wine list, the kind of thing I might write for the blog. One would like to think that anyone reading that magazine would already know how to do that. That the story still ran speaks to the need for basic wine list information – which, actually, shouldn’t be surprising. Also not surprising: the story didn’t mention pricing at all.
• Where are the young people? No matter where I eat (and not just in Dallas, where wine is still seen as exotic by many diners), I don’t see enough Millennials and Gen Xers drinking wine. I’ve been coast to coast this spring, and most of the wine was being consumed by older white couples – even in restaurants where where there were lots of younger people. One more reason why I fear for the future of the wine business.
More about restaurant wine prices:
• The John Cleese Fawlty Towers guide to restaurant wine service
• Restaurant wine prices explained: Follow the money
• Winecast 28: Bret Thorn, Nation’s Restaurant News
This week’s wine news: U.S. organic wine may have suffered a serious setback when Frey Vineyards burned, plus customers want top-notch service and more bad news for restaurants
• Organic wine: Frey Vineyards, destroyed in last week’s wine country wildfires, was one of the leading organic producers in the country, one of only two or three with national distribution. Its destruction deals another setback to organic wine, which has never been as popular as other organic food products. It accounts for less than five percent of U.S. wine sales; that compares to the 13 percent market share for organic fruits and vegetables. I’ve written a lot about why organic wine does so badly in the marketplace, but the best explanation is so simple I’m embarrassed I didn’t think of it. Says Tyler Rodrigue, an organic viticulture consultant in northern California. “Consumers assume that wine, by its very nature, is pure and natural to begin with. Ask most consumers, and they don’t equate a vineyard with a factory farm the same way they do for other products. Vineyards are beautiful, and don’t look like a picture of a factory farm.”
• It’s all about customer service: The Wine Curmudgeon is the son and grandson of retailers, so this study from a company that tracks on-line reviews called Trustpilot isn’t surprising. We want better service when we shop on-line, even more than cheap prices. Which is what I heard when the subject came up at the dinner table, which was more often than not. Says the report: “ ‘Price’ only shows up around in 4-5% of 1-star reviews and in 10% of 5-star reviews, significantly behind the top five most common words.” Why does this matter to wine retailers? What’s more confusing than buying wine? What other category requires service to find something to buy that is enjoyable? In other words, fake discounts and shelf talkers blaring 92 points aren’t enough. We want a person to answer our questions knowledgeably and intelligently.
• Restaurant sales continue to slump: How bad has the restaurant sales slump become? So bad that the people who parse the numbers are desperatley looking for silver linings. Throw out the hurricane states from this summer’s sales figures, and the decline in sales from month to month are less than two percent. Not much of a silver lining, is it? Or, as the chart with the story shows, same store sales have declined for 11 of the past 12 months. We’ve written about this on the blog many times, since poor restaurant sales numbers usually mean higher restaurant wine prices, as operators increase wine prices to make up for losing money elsewhere. No doubt this will continue to happen.
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
British restaurant wine prices are ridiculously high, just like those in the U.S.
British journalist Matthew Bell is even more angry about restaurant wine prices than the Wine Curmudgeon is.
As he writes in London’s Daily Mail newspaper: “But if you think you’re paying a reasonable price for a decent bottle, think again. … restaurants are relying on the fact most of us don’t know much about wine to squeeze the biggest profits out of frugal diners.”
Which, as regular visitors here know, is something we’ve been warning consumers about for the past couple of years. As restaurant traffic and profits slump, they’re using wine to make up the difference – and gouging those of us who want a quality bottle at a fair price.
As Bell writes: “Take The Connaught hotel restaurant in London, which has two Michelin stars, and where a meal for two can set you back £300 (about US$381). A small glass of house white (125ml) costs £10 (about US$13). But go on-line and you could buy a whole bottle of the very same wine for just £9.70. That represents a mark-up of a staggering 500 per cent.”
There’s a terrific chart with the story showing the markups at four London restaurants – 300 percent for a couple of simple Italian white wines, 312 percent for a French red posing as a house wine, and 233 percent for another French red.
In other words, British restaurants are doing the same thing to their customers that U.S. restaurants are doing to us, and a London food critic calls it a big problem. Would that food critics in this country noticed the same thing.
And the results? Writes Bell: Those of us who don’t know much about wine are left “with an unenviable choice — either we pick the cheapest, and get ripped off; or go upmarket and spend more money, when all we ever wanted was a simple glass of wine.”
Restaurant wine prices are so high because restaurant costs keep going up. But that doesn’t necessarily mean they need to be so expensive, says one of the country’s top restaurant experts.
Bret Thorn, the senior food and beverage editor at Nation’s Restaurant News, knows more about the restaurant business than almost anyone in the country. So who better to ask why restaurant wine prices keep going up despite woeful sales?
We talked about that, as well as changes in the restaurant business that may alter the way we eat out — if we eat out at all in the coming decades — and are changes that the restaurant business still doesn’t completely understand.
To high wine prices, says Thorn, some restaurant operators see wine as a way to recoup increased costs, which include a higher minimum wage in some states and rising food prices. Those of us who buy wine in a restaurant may be shouldering more than our fair share of those rising costs.
But Thorn is an optimist, and says there are a lot of smart people in the restaurant business who might recognize an opportunity to sell more wine — especially if we let them know we think a four to one markup for a glass of $10 wine is too much. His suggestion? Politely and reasonably let the restaurant know you’d buy more wine if prices were more reasonable. And no, he said, a Twitter rant probably isn’t the best way to complain.
Click here to download or stream the podcast, which is about 16 1/2 minutes long and takes up 11.6 megabytes. The sound quality is mostly good, though I wasn’t able to get it to play on my Linux box. Windows is OK, though.
Last month’s restaurant wine prices post was so well received and got so many comments, both here and in emails, that it’s worth a follow-up.
Restaurant operators may well have their reasons for marking wine up four times their cost, as one comment explained. Or as this restaurant management website advises: “You can therefore reasonably price a bottle that retails around $20 at $60 and $80” (giving new meaning to the word reasonably).
But the numbers say otherwise. Restaurant wine sales measured by volume have declined for three consecutive years, failing to even meet the flat growth of overall wine sales. And they have not made up the difference with higher revenue, according to any number of national surveys for 2014, 2015, and 2016.
And we know the reason. Restaurant wine prices are too high:
• Emailed one regular visitor: “I don’t buy wine at restaurants because it’s too expensive.”
• Emailed a long-time Dallas restaurant operator, now retired: “I made money selling wine at 2.14 times the cost. The .14 was to cover the state fee. And I sold lots of wine by the glass and the bottle. And most important – staff training!”
• Said a distributor friend of mine: “If the only way for a restaurant to stay in business is to charge four times cost, then how did everyone stay in business when they didn’t do that? Or if they didn’t sell wine at all?”
• Perhaps the best comment in the original post? From a wine producer: “I only wish restaurants marked prices up 3 times. I am finding restaurants marking wine up 4 times. Trust me, the waiter makes more on his tips vs. the money I make producing the wine.”
In this, the restaurant business is alienating its best customers – the Baby Boomers who drink wine and who like to eat out. Because younger consumers are less interested in both, and their preference for delivery and eating restaurant food at home may eventually deserve the term disruptive — something, I think, GrubHub already knows.
Says this year’s annual Silicon Valley Bank wine business study, perhaps the best source of reliable wine industry data: “We believe the reasons for this change are explained by more at-home consumption and a behavior change of our frugal millennial consumers who are more likely to satisfy their restaurant consumption needs by starting with a beer or cocktail, then having a glass of wine rather than a bottle of wine with dinner.”
So, restaurants, keep charging $50 for a $15 bottle of wine. It’s not our problem; it’s yours.