Trip to Cote d'Or, Burgundy (long, boring)

Two relevant previous threads on this topic:

Wine list markups - less in Europe, elsewhere?
One more nit on wine prices at restaurants (especially the post by MikeH)

Thanks for the links. I remembered the "nit" thread, but must not have read to the point of Mike's post. He makes good points. If 50% of people order wine at the higher markup, 20% are beer or cocktail drinkers, and 20% of people are teetotalers, then dropping wine prices to get the other 10%
might not make sense.

The big factor is that is restaurant actually selling wine to 50%? I go in restaurants with high markups, and don't see that many bottles on table. I go into Landmarc (either Tribeca or Time Warner), with 2X markup, see bottles on about 80% of tables.

Plus there are other factors at play:

If one uses a straight 3X retail markup, IF I order wine I'll be looking at low end, I might order a $30 Cotes du Rhone. Restaurant might pay 7.50, have direct marginal costs to make $10, so $20 for restaurant.
If 4X, I don't order wine. And won't be back (absent the most incredible food experience yet). $0 for restaurant
But if one uses attractive 2X retail markup, I might order a $80 Volnay or CdP. Restaurant paid $30, marginal costs are similar, so $47.50 for restaurant.
The better the pricing, the better wine I tend to buy. And I am far more likely to return. Maybe empty seats are not an issue for some restaurants, but even in touted places I tend to see lots of empty seats on non-weekend nights.

I realize I'm not typical. Maybe it makes no sense for restaurants to cater to price-sensitive wine geeks. But those that do* tend to get my business.

* wine friendliness takes many forms, not just attractive markups. Corkage-friendly policies, interesting lists, and one of my favorites, well priced quartinos.

Max, ... Let's not forget that retail shops also have payroll, breakage, ...

The tired argument that the restaurant HAS to make its money on alcoholic beverages because there is no money in food is the one that tends to get me riled.

I strongly agree. I see people post offhand about restaurants making most of their money on wines. That is demonstrably not the case with independent high-end fine-dining restaurants I know well (some of you know some of them too). At least one of them has described its wine department as indispensable but lossy, subsidized by food sales.

Point about costs in wine retailing too is good, though it doesn't change my upshot. The quantitative details are different; retailers tend to move wine faster and especially move more bottles per unit payroll than restaurants -- not all of whose customers buy wine, and when they do, it's served and consumed there, using restaurant utensils (the breakage I mentioned).

Some of the costs (public relations) are not directly tied to wine.

Surprisingly maybe, on occasion they're tied to nothing else. A recent case might amuse some people here. I spoke to manager of a large restaurant with a publication's coveted award for its large wine list. Scuttelbutt in past years had alleged a tie between those awards and a specific minimum advertising buy. I'd heard that this was not true lately, and mentioned that to the manager. "Welllll...," he mused, and told me that a year before, the same list didn't get the award though it got a mention. The next year, the award. He showed me the two lists. Virtually the same beyond minor replacements. "What changed," I asked. "We spent $24,000 in advertising the second year." (Very near the number I'd heard thrown around in the past, BTW) "Of course, it could be coincidence," I suggested. "Of course," he replied.

Hmm, so high end wine departments lose money, but owners are willing to spend $24K advertising said department. ooookkkkkkaaaayyyy.

This reminds me of a recent thread on another forum where some retailers (the two most prominent of whom I buy from, and one of whom I like -he's posted here once or twice, nice guy) were bemoaning the horrors of Bordeaux futures. Very low margins, headaches, adds nothing to business. So the question of course is why do it? "Because we have to!" Obviously on some level they perceive benefits from selling futures. They are not idiots.

Similarly, a restaurant has choices. They can choose to not allow wine, not sell wine but allow BYO, sell wine at a very low markup, at market markup, and at above market markup. Each choice is (or at least should) be made with an eye towards what wine sales bring, what wine sales can bring to the restaurant as a whole, and what costs selling wine brings upon the restaurant. I'm pretty ok with any choice. The last choice will tend to make me unlikley to visit the restaurant. The second and third choices will make me likely to visit more. Assuming management has reasonable intelligence, they will choose the option they feel maximizes their profit.

As I noted, I don't think I've ever accused a restaurant of immoral behavior based on their wine pricing. But I do factor that pricing in my decisions as to where to dine, and into my decisions as to what to order while there. And share my opinions.

One last thought- when a wine list is well-priced, it tends to make me generous towards restaurant overall. I'm not looking for retail pricing, just not feeling fleeced. If Blue Hills at Stone Barns and X20 offer some good wines (Nigl Privat and Baudry Picasses) at 2 or 2.5 times retail, I'm more likely to order a cheese course, encourage Betsy to order dessert, have an afterdinner Port, etc. If I paid 3+X for wine, I'm not feeling like extras. Maybe I'm the #$Shole client that restaurants don't want, but that is how I feel.

I don't tend to whine about restaurant wine pricing, but it does influence whether I revisit a place. As far as I'm concerned, price as you wish, just don't whine back at me.

Max, one small question- I do realize that restaurants have some costs that aren't matched by retail stores. But I'm always a bit bemused by restauranteurs talk of breakage. I've eaten in a 100+ moderate-high to high end restaurants, and can't recall seeing a stem being broken at a table. I'm sure some are broken in bussing, washing, etc. But how many? Say a restaurant does 100 covers a night. Some don't drink or have beer/cocktails, some have multiple wines. 2-4 stems per bottle. We're talking 200 stems on outside? I don't know any restaurants that use Riedel Sommeliers as their norm. Even in high end, most are Spiegelau, Riedel, or for the smarter ones the SZ titanium glasses. So we're talking $5-10 a stem. So if clumsy dishwashers break 2% a night (doubtful if they use the SZ Tritans), we're talking maybe $30. On wine sales that have to gross of thousands (even if every bottle is shared 4 ways, that's 50 bottles). Please show me figures that would change that.

I don't buy the glassware breakage excuse. I, too, have never witnessed stemware broken in a restaurant. I have a hard time believing it's much of an issue.

My problem with wine markups comes down to the added value that the restaurant is providing. With the food there is no issue concerning the mark-up over the cost of the raw ingredients. The restaurant staff invest much labor and expertise in converting the raw ingredients into the finished meal. There is a lot of added value there. Often a unique added value that can't be had anywhere else, at any price. But concerning the wine, all they do is buy it, store it, bring it to the table, uncork it, and pour it. THAT justifies a 3X markup over the RETAIL cost (which isn't what the restaurateur pays--they buy much cheaper at wholesale)? Sorry--I have a problem with that.

-Paul W.

Hmm, so high end wine departments lose money, but owners are willing to spend $24K advertising said department. ooookkkkkkaaaayyyy.

Uh, Dale, those were unrelated points summarized from different types of restaurants, each in a separate context. I'm sorry if that was unclear. The $24k was at a high-end chain restaurant and there were other differences you haven't asked about. (I thought we were talking about substance here, and could handle a little complexity. Reality of course affords us many ironic juxtapositions.)

I do realize that restaurants have some costs that aren't matched by retail stores. But I'm always a bit bemused by restauranteurs talk of breakage...

My point there Dale was precisely that it's not something people see. Obviously if you haven't seen breakage in restaurants you haven't dined with me much, because I'm notoriously clumsy . One episode with a wine organization with 40 tightly packed tasters resembled one of those domino fiascos in TV commercials ... Anyway if you want, I could get some authoritative numbers, it will take some time but it can be done. More accurate than anything I could give you standing on one foot, or second-guessing.

Breakage was one, not necessarily large, of the constellation of factors I cited adding overhead to restaurant wine departments, different quantitatively both from retail shops and home use. As with so many things, you can prove this in depth if you'll do the work. To dwell on breakage is to miss the larger point: comparing retail bottle prices offhand to restaurant bottle prices is superficial. If anyone doesn't get this, or thinks I'm making it up, I urge them to avoid wine in restaurants. Better yet, get off the armchair and invest in a real-world business to prove your theory!

Max,
sorry if my responses were too shallow and flippant for you. The chance one takes on a public board, you know.
I was just amused by the juxtaposition of the advertising and loss leader comments.

As to the breakage, as I said it was a "small question", and I was more bemused than concerned. I'd guess conservatively I have ordered wine a minimum of 500 times in restaurants, and don't recall ever breaking a glass. Your mention of tightly packed tasters reminds me I have seen couple stems broken at offline events (lots of people with lots of stems), but they were not the restaurants' stems (many NYC places ask us to bring own stems at big events). But trade events and offlines where most wine isn't coming from list aren't really what we were talking about. Neither Paul Winalski nor I recall seeing stemware broken in "normal" dining, though I guess its certainly possible we are just lucky, like those people who say "TCA is not an issue, I've drunk 3,000 bottles and only 2 were corked." To be fair, as I noted, stems can be broken behind scenes as well.

My main point remains that restaurant wine pricing affect my decisions about a restaurant- whether to order wine, and whether to return. As I noted, I don't like paying 3+X retail for wine. There are fine high end restaurants that seem to offer plenty of wines at 2.5X that I like. There are others that start at 3x and go up. I like wine, which do I choose? Several of the places I like with good pricing have been in business many years, so it doesn't seem to be impossible to make money at those markups. Generally I am talking about places that are "fine dining" (Danny Meyers places like 11 Mad, Gramercy, or Tabla, Blue Hill at Stone Barns, Peter Kelly's Xaviers or X20, Batali/Bastianich, etc). There are also places a bit more casual (Trestle on 10th, Cendrillon) with good food but interesting lists at 2X that I would return specifically because of their wine lists. I actually can't afford to eat more than once every couple of years at someplace at the absolute pinnacle of dining (the Keller, Boulud, Robuchon, Kinch, Ripert etc type places). Maybe the economics make it impossible for them to offer 2.5X on anything. But in those cases I either don't drink, nurse a glass, or possibly split the wine pairings if offered. Last doesn't make it cheaper, but is less mentally painful for me than staring at a $20 Brocard 1er knowing that I just paid $80 for it.

Better yet, get off the armchair and invest in a real-world business to prove your theory!

Again, as I stated in earlier answer, I have no fine restaurant experience except as a consumer. I didn't see that as a criteria when you asked opinions on restaurant markups. I'm just offering a consumer's viewpoint (one would think those in the business might be interested).

cheers

Still don't think I've seen a reply on this restaurant-pricing subtopic from Oswaldo, by the way (original poster).

Another factor in restaurant pricing is market penalization of pricings inconsistent with customers' willingness to pay. If a business prices wines too low, it loses potential or real money. Too high, and customers pass. Therefore the customers, i.e., the market, have implicit input on prices (assuming they're set rationally).

That's a basic economic reality that for better or worse is objective. In contrast to characterizations (like this markup is "way too high"). Which by the way are few and good-humored, compared to what I read online in opinions about "fair" corkage policies (some of which comments might themselves be more fairly labeled rationalizations). Those in turn are less remarkable than some general restaurant gripes. Like on one food Web site carrying two long threads complaining bitterly of restaurant reactions to problems that (the complaints freely admit!) the complainants themselves created. Each thread garnered lots of sympathetic responses too (as well as some amazed ones).

Hi, Max, I was watching and learning with great interest, but from the sidelines, as you guys had it out (happily, without breakage).

I thought of a reply, but it seemed overly simplistic; since you were kind enough to draw me out of my shell, here it is:

There are numerous bookstores with cafés. What I would like to see, by analogy, is a wine store with a café. Anyone eating at the café could buy a bottle from the store and have it with their meal. The café wouldn't have to be managed by the wine store, since the skill set is probably very different. It could be an alliance between a store and a restaurant owner. For example, on Chambers Street, in Tribeca, there is Kitchenette, a very successful BYOB, and Chambers Street Wines, an excellent wine store. Combining two independently successful businesses could generate a third that would be even more successful. That’s what I would like to see. But since such apparently obvious (to me) combinations don’t exist, I suspect that I am being simplistic.

What I would like to see, by analogy, is a wine store with a café. Anyone eating at the café could buy a bottle from the store and have it with their meal. The café wouldn't have to be managed by the wine store, since the skill set is probably very different. It could be an alliance between a store and a restaurant owner.

I don't know about the issue of being managed by different people, but from my experience there are quite a few wine shops/food outlets in Paris, where you pay minimal fees on top of the retail price to drink the bottle in the shop with your meal. Some of this may have emerged as a way to sell other stuff in wine shops (i.e. charcuterie), but some are quite good with full-on menus.

To a certain extent, I think this is what Terroir in SF is trying to do.

For example, on Chambers Street, in Tribeca, there is Kitchenette, a very successful BYOB, and Chambers Street Wines, an excellent wine store. .

The only problem is planning ahead, as I recall Kitchenette doesn't even have Libby glasses.

I regard corkage as a privilege (one I enjoy!). A place with free or low corkage is like a restaurant with a very well-priced wine list- a factor that encourages me to patronize the place. No or extremely high corkage isn't usually a deal breaker, as long as it's not combined with a very high markup on list. At that point one has to decide is the food worth it. But again, I don't tend to whine about, just choose not to go there. The only times I remember complaining about corkage policies were 2 times the rules were changed in midgame:
a now defunct restaurant took a reservation for an offline group, with confirmed $10 per person corkage. Then announced "no, we've decided $15 per bottle" (even with written evidence of same manager's original offer) 3 days before event (this is a modest place, we were bringing own stems).

Oswaldo will remember this one. We had a reservation with no corkage at Turkish restaurant with no liquor license. Confirmed twice. 2 days before owner "realized" it was Ramadan. He was afraid we might offend other patrons (though I was confused, if they were observant, wouldn't they be fasting?). His solution- we ate there, but had to hide the bottles under the table. Seriously. I almost kicked over Boillot Meursault and an older DDC when I went to restroom.

I am often amazed at sense of entitlement some folks have about dining out (and corkage). The customer is not always right.