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Robin Garr

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WTN /Wine Advisor: Down with the markup?

by Robin Garr » Fri Sep 28, 2007 12:38 pm

Down with the markup?

For many wine lovers, one of the most frustrating things about enjoying wine from a restaurant wine list is the significant markup that management tacks on to the price.

While the practice varies from state to state and around the world, in most states of the U.S. restaurants routinely set the wine list price at three to four times the wholesale price they pay for a bottle. As a result, diners selecting from the list can expect to pay at least twice as much for the wine of their choice as they would for the same wine in a retail store.

A bottle of Louis Jadot 2006 Beaujolais-Villages, for example, might command $10 at full retail, although it's often discounted for less. At a restaurant, look for it to cost $20 or even $25. In either case, the vendor likely paid $5 to $7 for it at wholesale, offering the restaurant a tidy profit indeed.

Restaurants justify this practice on the basis of cost: Wine inventory, storage, glassware and service all add legitimate costs, and it's fair to recover that. Indeed, in a free-market system, there's no use arguing about the restaurateur's right to take a fair profit.

Still, a $25 price tag on a $5 bottle seems to be pushing it ... yet it's not uncommon. It's no wonder that wine lovers enthusiastically embrace BYO where the law allows; and that many more elect to pass on wine in favor of beer or a non-alcoholic beverage when dining out.

Accordingly, I'm watching with considerable interest as a local restaurant rolls out a cheeky challenge to wine-list practice. Louisville's Bristol Bar & Grille, celebrating its 30th anniversary, announced that effective immediately it will offer its entire wine list at twice each wine's wholesale price, effectively matching full-retail wine shop prices.

As a practical matter, this means that the Bristol's bottle price for Heidsieck Champagne will drop from $57 a bottle to about $33. Trevor Jones "Virgin" Australian Chardonnay, $31 on the old list, now sells for $19. The sought-after Cakebread Chardonnay, which sells around $70 at many Louisville eateries, now goes on the Bristol's list at $38.

"This program allows wine lovers to broaden their horizons and will allow people to experiment with the wine they order at dinner without doubling their bill," the Bristol said in a news release.

At a news conference, restaurant owner and founder Doug Gossman put it a bit more pungently: "There's a reason why wines in restaurants are higher than in liquor stores," he said. "But I resent just getting shafted when I buy wine. Some very popular restaurants mark up four times their cost.

"I hope this will draw attention to the egregious amounts that some restaurants mark up wine," Gossman said. "If this draws attention to that and pulls prices down, <i>good</i>."

Bristol wine and beverage director Scott Harper, a wine educator and candidate for Master Sommelier, said the wine list changes will affect 100 wines by the bottle and 40 by the glass. Wine prices on the new list will be almost entirely in the teens and $20s range, and the lower markup will make it possible for him to add wines that wouldn't have been feasible before under the Bristol's practice of focusing on interesting, relatively affordable wines.

Gossman said he'll commit only to one year, but if the new approach pays off in additional wine and food sales, he would love to extend it. "I'm giving away a significant part of our bottom line," he said. "My hope is, this will drive more traffic, particularly at dinner when more people are having wine. If our margins don't suffer, I could see going on with it. We'll wait and see."

In any event, he hopes the move will send a message to the restaurant industry and inspire competition. "I hope this will draw attention to the egregious amounts that some restaurants mark up wine," he said. "If this draws attention to that and pulls prices down, good."

<B>TELL US WHAT YOU THINK</B>

Would you be more likely to purchase wine by the bottle in a restaurant if the price were the same as retail? Would you go out of your way to patronize that restaurant? I'd love to hear your opinions about this unusual wine-list approach, and would also like to hear more about other restaurants around the world (like the late, lamented Uva near Boston) that have experimented with innovative wine pricing. Please feel free to post your thoughts and comments here!

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Bob Ross

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Re: WTN /Wine Advisor: Down with the markup?

by Bob Ross » Fri Sep 28, 2007 1:35 pm

Robin, do you happen to know if the Grille is increasing its food prices?

I've talked about this pricing issue with lots of restaurant owners, many of them with good wine lists, and they indicate that beverage margins need to be high because of food price resistance.

It seems to be true in this area, where we have many BYO restaurants. Meal prices are invariably higher than they are for similar restaurants with liquor licenses.
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Re: WTN /Wine Advisor: Down with the markup?

by Brian Gilp » Fri Sep 28, 2007 1:55 pm

There is a place close to where I live that has had wine pricing like that for years. We actually use it as our local wine store stopping to buy bottles even if we are not dining there. I have posted the link to their wine list before but will do so again. Some of the prices are actually below local retail.

http://www.thecrossingatcaseyjones.com/files/file/TheCrossing_WineList.pdf
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Re: WTN /Wine Advisor: Down with the markup?

by Ian Sutton » Fri Sep 28, 2007 2:00 pm

Best of luck to them. I guess both the restauranters and their clientele have developed this blinkered thinking, with perhaps only wine enthusiasts (who probably know the retail price of 20-30% of the wines on the list) who see the ludicrous nature of the arrangement.

If fact I reckon it's the people who are most likely to spend big on a good wine, who quite often will make do with a single glass, or stick to water, as they can't stomach the equation.

I do vote with my feet and currently that mean far more meals in, where I can cook a decent if not special meal, but enjoy a really good wine, stored sensibly, aged appropriately and that won't cost me way over the odds.

I'd love to see them do well, because that might just make a dent in the current blinkered thinking.

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Robin Garr

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Re: WTN /Wine Advisor: Down with the markup?

by Robin Garr » Fri Sep 28, 2007 2:30 pm

Bob Ross wrote:Robin, do you happen to know if the Grille is increasing its food prices?

I've talked about this pricing issue with lots of restaurant owners, many of them with good wine lists, and they indicate that beverage margins need to be high because of food price resistance.

It seems to be true in this area, where we have many BYO restaurants. Meal prices are invariably higher than they are for similar restaurants with liquor licenses.


Bob, the menu appears unchanged, and I think there are enough savvy consumers (and food writers) in this town that a restaurateur would be pretty wary of doing anything that blatant. I haven't heard this discussion around here; of course we don't have BYO, but wine-and-beer licenses (unlike full liquor) are relatively easily acquired in the city, so just about any restaurant but a hole-inna-wall will have at least a modest wine list, so it's hard to draw a similar comparison.
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Re: WTN /Wine Advisor: Down with the markup?

by James Roscoe » Fri Sep 28, 2007 4:59 pm

One practice is to have a wine store and a restaurant together and to charge a $5- $10 corkage fee on wines bought off the shelf. This seems like a good idea too. We frequent a place in Columbia, Maryland called Iron Bridge that does this.
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Re: WTN /Wine Advisor: Down with the markup?

by John Tortoriello » Fri Sep 28, 2007 6:16 pm

We are lucky enough to live in a state that allows BYOB. We usually base our casual-type dining choices on that criteria. As a matter of fact, every Wendsday night about 5-15 of us get together to enjoy food and a choice of wine brought by everyone, some of it good, some of it bad, but always the right price and interesting.

Our "up-scale" dining is infrequent, mostly due to the extreme mark-up on the wine prices.

However, if we could find a fine restaurant that had reasonable wine prices, I know we would eat out at that "fine" restaurant more often.
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Re: WTN /Wine Advisor: Down with the markup?

by Robin Garr » Fri Sep 28, 2007 6:37 pm

John Tortoriello wrote:However, if we could find a fine restaurant that had reasonable wine prices, I know we would eat out at that "fine" restaurant more often.


John, thanks for the testimony. BYO is not an option here due to state law, but I'm interested to hear your thoughts on this. Assuming that wine list prices were the same as retail (and of course, assuming the list had a good selection), that should make buying from the list as good as bringing your own.

Welcome to the forum! Now that you've broken the ice, I hope you won't be a stranger.
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Re: WTN /Wine Advisor: Down with the markup?

by Mark Lipton » Fri Sep 28, 2007 6:38 pm

It's a nice move, and I hope it works out for them, but it's worth mentioning that marking wine up a set percentage isn't the only way to do things. One system used by a few innovative restaurants in Europe is to charge a set value markup to wines, thereby making the more expensive wines relatively more attractive and encouraging patrons to spend a bit more to get a very appealing wine. Such a system doesn't actually cost the restaurant much if anything since they can tune the markup to return the same amount, but it does encourage exploration and is particularly friendly to wine enthusiasts.

Mark Lipton

p.s. One interesting fallout from the Bristol's pricing adjustment is that astute patrons will be able to work out the wholesale prices of every item on the list, which could be quite instructive.
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Re: WTN /Wine Advisor: Down with the markup?

by Robin Garr » Fri Sep 28, 2007 7:03 pm

Mark Lipton wrote:One interesting fallout from the Bristol's pricing adjustment is that astute patrons will be able to work out the wholesale prices of every item on the list, which could be quite instructive.


This is true, but astute patrons are pretty good at that already at retailers, since about 1.5 x wholesale seems to be a fairly standard retail markup here.

And of course, each state's Beverage Journal, which lists wholesale prices, isn't a confidential document, although it helps to have a friend in the business if you want to get your hands on one.
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Re: WTN /Wine Advisor: Down with the markup?

by Bill Hooper » Fri Sep 28, 2007 11:39 pm

Insanity! Good luck.
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Re: WTN /Wine Advisor: Down with the markup?

by KarlLung » Fri Sep 28, 2007 11:44 pm

Unlike food, restaurant can't provide much "value-added" to wine, other than better service. This is why people don't want to pay huge premium, especially they have good idea on the cost. I am from Hong Kong and it is common here that restaurants like to carry wines that are exclusive for restaurant sale (i.e. not offered in retail shops) so the customers don't know the cost. Don't know if this is common in the states.

I think the best markup policy is based on the class of the restaurant. If the customer spend less than $20 on food, how can you expect them to pay the same money for a bottle of wine that retails at less than $10? On the other hand, if the typical price of meal (food only) is already $100 and most are there for business (i.e. pay by the company), they won't mind spend $50 or even more on a bottle even it only retails at only $20.
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Re: WTN /Wine Advisor: Down with the markup?

by Jo Ann Henderson » Sat Sep 29, 2007 10:22 am

WOW! Great discussion, people. I never think much about the price of the bottle when I am at a restaurant. But then, I seldom eat out. I already know that the bill will be roughly $40-50 per person (I am often hosting), so I just factor a $40-50 bottle of wine into the equation. I do notice that, depending on the scale of the restaurant, a $10-12 bottle of wine might sell for $25 and one place and $38 at another. We have a BYOB state, but somehow it just doesn't seem to be worth the bother to me. And, yes, I am on a budget. Perhaps I need some help figuring this one out! :?
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Re: WTN /Wine Advisor: Down with the markup?

by Hoke » Sat Sep 29, 2007 1:38 pm

Bob:

I'll chime in with my take..

Many years ago... practically prehistoric times (early 80s) a restaurateur was struggling because his food sales were okay but his wine sales sucked. He had the traditional paradigm of standard usual suspects, French heavy, and the standard (over)pricing of the day.

Trouble was, he had a (then) novel sorta cuisine minceur/hearth healthy approach with his food styles. He begged for some kind of help.

I totally redesigned his list, putting many lighter-framed, higher acid wines on, and dabbled in trendy, off-the-beaten-parth wines that would stimulate people----then talked him into charging a standard price for anything on the list (my charge was to buy around a fixed price point so it would pretty much average out). So in this upscale area your choices were either the house wine for a minimal price or a selection of eighty wines from all over the place, at $20.00 a bottle.

His wine sales immediately quadrupled. Plus he got the rep in the area, which eventually spread around town, that this was a good food place, but even better was a 'destination' wine place.

And, no he didn't raise his menu prices at all. He just took lots more money to the bank.
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Re: WTN /Wine Advisor: Down with the markup?

by bengigli » Sun Sep 30, 2007 1:53 am

Robin , this frustration has afflicted millions . Mr. Gossmsn is to be applauded and I feel like visiting Louisville ( from Newfoundland Canada )
to support his restaurant . Gosh , a good GSM from Languedoc or South Rhone for $ 20 !!!

Lucky are those who live in Louisville !

Butch[/b]
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Re: WTN /Wine Advisor: Down with the markup?

by Judi Kaye » Sun Sep 30, 2007 9:26 pm

You have to ask? I'd be 1st in line (followed by my Sweetie) to dine in this restaurant. But of course the cost of airfare for us to get there would be prohibitive. :wink: This scheme seems like a no-brainer to me. And we would take the opportunity to try a wine we've not had before (as in one that we had felt was a bit beyond our reach on another establishment's wine list).
I'm also intrigued by Hoke's idea; :idea: if it would work for the restaurant, it would certainly work for me!
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Re: WTN /Wine Advisor: Down with the markup?

by Dick M » Mon Oct 01, 2007 1:02 am

I often do not order wine with a restaurant meal, knowing that I can go home and have an "after dinner" glass for one fourth the cost. If the ratio was only one half, I very likely would order a glass with my meal.

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Re: WTN /Wine Advisor: Down with the markup?

by Dave C » Mon Oct 01, 2007 9:23 am

[quote="Robin Garr"]

<B>TELL US WHAT YOU THINK</B>

Would you be more likely to purchase wine by the bottle in a restaurant if the price were the same as retail? Would you go out of your way to patronize that restaurant? I'd love to hear your opinions about this unusual wine-list approach, and would also like to hear more about other restaurants around the world (like the late, lamented Uva near Boston) that have experimented with innovative wine pricing. Please feel free to post your thoughts and comments here!

Well a couple of weeks ago I went on a family outing to a lovely country pub with good dinning (this is in the UK) called 'The Swan With Two Nicks' in Little Bollington Cheshire.

For UK readers here's a review page - including a small picture of the place:-

http://www.sugarvine.com/Cheshire/feature_stories/feature_stories.asp?story=510

They had a lovely Australian Shiraz for about 14 UKps - 28dollars - that was their own label ie. the wine was called 'The Swan with Two Nicks'

I was a lovely full-bodied fruity Shiraz that I enjoyed with a Fillet steak - enjoyed all the more as I had no idea as to it's 'normal' selling price.

So that's certainly one way around this customer relations problem.

Cheers, Dave C
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Re: WTN /Wine Advisor: Down with the markup?

by Dick Day » Mon Oct 01, 2007 9:27 am

I like the effort to build traffic and increase margins....just imagine if more establishments would support BYOB...a $20/bottle corkage policy would result in better wines on the table, no inventory, no returns, no complaints...the cost of goods sold for a corkage fee is the cost of glass and the washing! A number of restrauants in the Chicago area are having 1/2 off wine nights to build traffic and are popular.
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Re: WTN /Wine Advisor: Down with the markup?

by Paula Sindberg » Mon Oct 01, 2007 9:29 am

I've just recently returned from Piemonte where I have a house. I love to order wine at restaurants there (this is less the case elsewhere in Italy). The restaurants rarely charge much more than you would pay at the cellar door for the same bottle. Older vintages, virtually unavailable at retail, are sold in restaurants for just a few Euros more than the current vintage sells at the cellar door. If they can do it, surely other restaurants elsewhere in the world can do it too.
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Re: WTN /Wine Advisor: Down with the markup?

by MikeH » Mon Oct 01, 2007 9:37 am

James Roscoe wrote:One practice is to have a wine store and a restaurant together and to charge a $5- $10 corkage fee on wines bought off the shelf. This seems like a good idea too. We frequent a place in Columbia, Maryland called Iron Bridge that does this.


There was a place like this near us run by a husband and wife. Went out of business. Not sure why because it 1. had good food 2. reasonable wine prices in the store and 3. had been operating several years.

Maybe they got divorced?
Cheers!
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Re: WTN /Wine Advisor: Down with the markup?

by James Roscoe » Mon Oct 01, 2007 1:56 pm

MikeH wrote:
James Roscoe wrote:One practice is to have a wine store and a restaurant together and to charge a $5- $10 corkage fee on wines bought off the shelf. This seems like a good idea too. We frequent a place in Columbia, Maryland called Iron Bridge that does this.


There was a place like this near us run by a husband and wife. Went out of business. Not sure why because it 1. had good food 2. reasonable wine prices in the store and 3. had been operating several years.

Maybe they got divorced?


Iron Bridge opened a second "store-restaraunt" in Virginia.
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Re: WTN /Wine Advisor: Down with the markup?

by OW Holmes » Mon Oct 01, 2007 2:42 pm

Robin Garr wrote:
<B>TELL US WHAT YOU THINK</B>

Would you be more likely to purchase wine by the bottle in a restaurant if the price were the same as retail? Would you go out of your way to patronize that restaurant?


I can answer with a definite maybe.
We have such a restaurant here in town, and one my wife loves. They sell every bottle of wine in their restaurant at the same price the retail shop up the road charges.
The problem is, it is an Indian restaurant. Beth loves Indian food - me not so much. And I'd really rather drink beer with Indian food. Maybe a semi-dry or semi-sweet Riesling, but mostly beer. And the wine list, while quite nice, has only one Riesling.
But I do have to admire them for this effort, and I have spread the word about it in hopes that it pays off for them.
-OW
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Re: WTN /Wine Advisor: Down with the markup?

by leenelsen » Tue Oct 02, 2007 1:46 pm

Often times I not only avoid buying a bottle, I cross the restaurant off my list completely. If they think methe fool, why spend my money there.

There should be a national wine walkout day where we all tell the owner we just saw how high he has marked up his wine, we are offended and we are leaving.

That might create a new pricing policy.
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