Wine or wine not? Knowing how restaurants price their wine may impact your decision.

I love wine, but I’m no sommelier. When a friend and I ordered a bottle of prosecco at a “happy hour” rate of $30 (normally $40), I thought we were getting pretty good value. It didn’t occur to me until I took a sip and thought, “well, this doesn’t taste very good”, that perhaps we were better off ordering cocktails by the glass for $8-12 instead. A quick search of the prosecco brand, Primaterra, on the Internet showed me that the entire bottle retailed for $10. Given that the wholesale price is even lower, that’s more than a 200% markup! I was shocked and ever since, I’ve wondered how do restaurants price their wines? And does it make sense to order wine at restaurants? If so, when?

According to an article by Gretchen Roberts, “The Lowdown on Restaurant Markups” from the Wine Enthusiast, “industry-wide markups average two and a half to three times wholesale cost” 1. While the article is a little dated (2010), it’s similar/consistent with a more recent article from Crain’s in 2015, which reports markups of up to 300% per glass (4 times the wholesale price) 2. Why is this the case? Here’s how restaurants would justify their pricing strategies:

  • Value-add to the drinking experience. Restaurants spend time selecting wines that pair well with menu items and can provide that knowledge when you ask for recommendations 3.
  • It’s market-driven. People who order wine often feel strongly about it and if they’re willing to pay the premium, why not?
  • Taxes. Each state collects excise taxes on wine that is consumed, varying by alcohol content and ranging from $0.20 (California & Texas) to $2.50 (Alaska) per gallon 4, 5.
  • Costs. The need to cover stemware, wages, rent, inventory, may warrant restaurants to charge a markup on wine 6. One-off restaurants (unlike chain restaurants) do not benefit from volume discounts and therefore, may need to mark up wine prices more to cover costs. And it just so happens that wine is one of those few menu items for which there is a market even if you charge a premium.

That being said, I’m not convinced by the reasons above because there’s no indication that restaurants will be worse off by reducing prices and in doing so, make up for the difference by encouraging more people to consume wine.

So should you order wine or not? It depends. Most restaurants are not BYOB (bring your own beverage), so if it’s a romantic dinner or if you’re catching up with friends after a long day at work, it might make sense to pay a premium for wine to savor the moment. If you do decide to wine (and dine), here are some quick guidelines for you:

  • Markups are higher on the cheapest wines than on the more expensive ones, so you’ll get more bang for your buck by ordering a few levels above 1, 4.
  • Don’t order wine by the glass, especially if you have enough people to share a bottle 7.
  • It’s OK to try lesser-known brands. Restaurants are more likely to place a full markup on popular brands they know they’ll sell 1, 4. According to Juliet Chung from the WSJ, “wines from regions like Argentina and Spain are likely to be marked up less than ones from Napa or Bordeaux” 7.
  • Use an app like CellarTracker, to help you find good-value wines.
  • If you’re in New York, I’ve compiled a short list of wine markups for restaurants and wine bars that were voted to be the best in 2018 by The Infatuation and Eater NY. I was initially trying to gain insights on whether restaurants and wine bars price their wines very differently, but it seems like the markups are all over the place! These numbers are markups on average retail prices I found on sites like Wine-Searcher and Vivino for wine of the same type/vintage and from the same winery. I only took a sample of each restaurant’s wine list, so that’s where the accuracy may be off. Overall, it looks like the markups at wine bars and high-end restaurants, such as Momofuku and Balthazar, are lower than the rest, but their price points are also higher ($36-$100+). Whereas places like “Her Name is Han” had a really high 290% markup on their wines, but they were priced all at $37/bottle and retailed for only $5-14.
Name Neighborhood Type Yelp Rating Average Markup Over Retail
Vanguard Wine Bar* Upper West Side Wine Bar 4 125%
Momofuku Ssam Bar East Village Restaurant, American (New) 4 144%
Jadis Lower East Side Wine Bar 4 145%
Amelie Greenwich Village Wine Bar & Restaurant, French/Belgian 4.5 153%
Terroir Tribeca Tribeca Wine Bar 4 163%
Balthazar SoHo Restaurant, French 4 164%
Le Cou Cou SoHo Restaurant, French 4 205%
Gottino Enoteca Salumeria West Village Wine Bar, Italian 4 214%
Aldea Flatiron Restaurant, Portuguese 4 251%
Her Name Is Han Midtown East Restaurant, Korean 4 290%
Victor’s Café* Midtown West Restaurant, Cuban 4 341%

* For restaurants/wine bars that only offered pricing by the glass, I made the assumption that had they offered bottle pricing, it would be 3.7 times the amount charged by glass.

Lastly, don’t forget that “price” is only one factor to consider in your selection of wine! I’m always drinking $10 wines from Trader Joe’s, many of which I’d prefer over the really expensive ones anyway. So don’t forget to keep that in mind too!

Sources:

1 https://www.winemag.com/2010/05/07/the-lowdown-on-restaurant-markups/

2 http://www.chicagobusiness.com/article/20150319/BLOGS09/150319719/why-your-glass-of-wine-costs-so-much-or-does-it

3 http://www.newsweek.com/2014/07/11/why-wine-can-cost-four-times-much-restaurants-257169.html

4 https://www.reluctantgourmet.com/restaurant-w-wine-markups/

5 https://www.statista.com/statistics/324624/us-wine-excise-tax-rates-by-state/

6 http://www.businessinsider.com/how-wine-markups-work-2017-3

7 https://www.wsj.com/articles/SB121875695594642607

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