Wine Mark-Ups in Restaurants

[cjsadler]

I'd be curious to hear some sommeliers or restaurateurs address how Range can keep its markups so low.   Are they fools?  A strange anomaly?  Someone in that thread mentions them buying in bulk, but that doesn't seem right, as their wine list is quite extensive yet the markups are low across the board. 

[DonRocks]

I'm probably missing some point here, but no one expects a widget to cost 3 times more at Store X (the restaurant or Walmart) that it is at Store Y (a wine shop or a Mom and Pop store). There might be a difference in price between Walmart, Amazon and the local mom and pop store for the widget but it's not several orders of magnitude like you see with wines, and especially wines by the glass.

Right, and you know that without having any special knowledge of wine. What I'm trying to say is, everyone here - wine expert or not - should be able to fully comprehend this situation without having a "good palate" or knowing the difference between Cabernet Sauvignon and Cabernet Franc. In other words, Bart, you know as much about this situation as any wine expert in the world. You have a consumer good, being sold for 2-3 times retail for the privilege of drinking it in a restaurant instead of buying it in a wine store, perhaps 3-4 times wholesale - perhaps 5 times wholesale when it's sold by the glass. And that pretty much sums up the issue. Yes, there's stemware breakage, labor in washing glasses, etc., but other than that, the costs are the same to a restaurant as they are to a wine store (and that includes costs of holding inventory, paying salespeople, labor when it comes to purchasing wines from distributors, etc.). This is how restaurants can offer Half-Priced Wine Nights: they're *still* making money.

[RWBooneJr]

If you want to get really pissed off, calculate the markup on beer. There are 124 pints in a keg.

[DonRocks]

If you want to get really pissed off, calculate the markup on beer. There are 124 pints in a keg.

Yes, and the high cost of wine by the glass has "paved the way" for the (even higher) cost of cocktails and (relatively higher) cost of beer. Customers look at all three of these as "one drink," and feel they should all cost about the same even though they're nothing like each other.

People say "cocktails are so labor intensive." Well how about the labor involved in growing grapes?! Don't even get me started on beer.

[Keithstg]

And that pretty much sums up the issue. Yes, there's stemware breakage, labor in washing glasses, etc., but other than that, the costs are the same to a restaurant as they are to a wine store (and that includes costs of holding inventory, paying salespeople, labor when it comes to purchasing wines from distributors, etc.). This is how restaurants can offer Half-Priced Wine Nights: they're *still* making money.

Don, how do you figure this? I'm not in the wine biz, just a collector, but I'm having a hard time believing that a wine store like Schneiders, can't get significantly better pricing on wine from a distributor/ importer (due to volume) than your average corner bistro.

[JPW]

If you get the WineSearcher app, you can just plug in the name of the wine.

FIFY

[dinwiddie]

Don, how do you figure this? I'm not in the wine biz, just a collector, but I'm having a hard time believing that a wine store like Schneiders, can't get significantly better pricing on wine from a distributor/ importer (due to volume) than your average corner bistro.

Keithstg,  I'm not Mark or even a sommelier, but most wine shops don't get better prices than restaurants.  Wine shops have a great range of wines, but don't normally buy any more of any one specific wine than a good restaurant does unless you are talking about the plonk that we normally think of as "jug" wines, the Woodbridges, Concha y Toros, Vina Santa Rita, Fetzer, etc. that they buy by the pallet load.  But wine shops don't handle the wines as carefully, don't have to worry about stemware, long time storage, etc. They generally have much more storage space, at much less cost too.  For a restaurant to have a very good wine list, the costs involved are nor normally seen by the customer, but can be substantial.

[Keithstg]

So you don't think that Calvert-Woodley, MacArthur, or Schneider's buy significantly more say Bordeaux (pick a chateau/ importer), or say, pick an importer - than, say, Central? Ok...

I agree with you re: stemware, but probably not on storage costs being significantly less, esp in a major metropolitan area. It's not like these shops are storing their wine in Glen Burnie or Waldorf or wherever - Schneider's storage is within a mile or two of their shop.

[deangold]

Some of major stores do have off site storage.  Macarthurs and Schneiger both do.

Discounts are sometimes structured to favor restaurants and some to favor retail.  There are what I think of as restaurant oriented wines that have 5 case discounts which is a lot for a small restaurant to buy.  With 25 or so wines by the glass, we only sell multi cases a week on a few items.  I would bet that Central would buy a lot more of their least expensive glass chardonnay than we do of anything we pour.

[Nick Freshman]

It's not like these shops are storing their wine in Glen Burnie or Waldorf or wherever - Schneider's storage is within a mile or two of their shop.

I don't think that is entirely accurate as far as the costs of storage and the purchasing power of having space to store wine. Schneider's maintains at least 30,000sf of storage in far NE DC where the rent for it is probably nothing. I know, because I have seen it. It's way up off Rhode Island Avenue. They bought the entire lot from Eventide. 130 cases, our entire inventory, disappeared instantly in that warehouse. It was amazing. They have the ability to not only buy at a volume from distributors that most restaurants could not, but they also actively buy large inventories from collectors and restaurants. They run a truck constantly from the NE warehouse to the store to keep the inventory rotating. It is a very impressive operation.

Some of major stores do have off site storage.  Macarthurs and Schneiger both do.  

[Keithstg]

Thanks Nick - exactly my point re: volume etc.

I've been to Schneider's warehouse as well - it's very impressive. Not sure if they own the building, but I assume so. Of course, a newer store looking to run the same type of operation would have to pay an arm and a leg in storage costs in DC - to say nothing of the other startup costs.

[deangold]

I know when I have done wine dinners with major retailers, on occasion they were getting wines for far less than I could ever hope to pay.  I know this because the vendor gave me the retailer's price for the event.  And that price was maybe 1000 to 1500 basis points lower than my best price.

Other vendors give their absolute best deals to restaurateurs on very small quantities.

[Bart]

Wine is both too expensive and too cheap.....

"Are Wine Prices Too High? Or Too Low?" by Mike Veseth in wineeconomist.com

(Probably not the best place for this since it's not about restaurants)

[DonRocks]

Wine is both too expensive and too cheap.....

"Are Wine Prices Too High? Or Too Low?" by Mike Veseth in wineeconomist.com

(Probably not the best place for this since it's not about restaurants)

Wine is no different than most collectibles (its shelf-life makes it a commodity, and sometimes a collectible, rather than merely a consumable). Take art as a parallel example - there's art in seemingly every office building and hotel room in the world: a heck of a lot better than I could ever produce, and yet the frames are often worth more than the art itself. But at the high end, a single painting is worth more than many entire *companies* on the NASDAQ. The discrepancy is just crazy, but that's the free market at work. The ultra-wealthy (who don't have the time or the inclination to educate themselves about wine) are prepared to pay top dollar for famous names, but the ultra-educated know how to find wines just as good (or almost as good, or sometimes better) at a fraction of the price.

If the parallel of art doesn't appeal to you, take coins, which are nothing more than money - but look at this. They were made to be spent on packs of bubble gum (which sometimes contained baseball cards that are now worth thousands of dollars). Go figure ...

... he says, enjoying a Vatan Sancerre.