About The Author:

"Roger, The Wine Guy" is Roger Yazell, CWS. He is a member of the International Wine Guild and has had a long time admiration of wine. After careers in broadcasting, advertising and marketing account management, he explored his love of wine in hospitality, wholesale and retail sales. The intent of Roger's Grapevine is to share stories, history and information that will add to the reader's love, enjoyment and appreciation of wine and sake'.

Questions, requests for topics and comments are always welcome via email: rogerthewineguy@gmail.com.

(Note: The Wine Guy is currently undergoing chemotherapy and this blog will be on hiatus for the duration and into a recovery period. The Wine Guy is planning to celebrate his recovery with a trip to the two wine producing regions in Argentina and that should provide for some interesting new blogs. Meanwhile please enjoy the archives and feel free to email in the interim.)

Thursday, September 10, 2009

Restaurant Wine Pricing Part 1

Since I joined the wine business I’ve been asked about or commented to about the price of wine in restaurants constantly. Today, the Wine Guy offers some short background on the cost of wine on-premise (at your favorite wine-bar or restaurant) and some tips on how to know if those higher prices are somewhat fair or just simply “too” high.

Let’s begin by qualifying the subject of this blog to restaurants whose lists are largely confined to wines normally available to the consumer at retail (including both everyday and fine wines). Restaurants who offer very rare and uncommon wines are unique and have endured exceptional effort and expense in developing those special offerings to their diners. At least part of the reason you’re there should be the opportunity to taste rare and eclectic wines. DO recognize that the cost for having those wines available will be borne by ALL the wines on their list. If you choose to have wine at one of these establishments, forget the cost and go for the good stuff…it’s why you’re there!

Back to conventional dining with wines you would normally buy for yourself. Yes, you ARE paying more for your selection than you would at your favorite wine emporium. Here’s a short summary of the most significant reasons why:
1. The restaurant’s wholesale and inventory costs are significantly higher:
Because of volume and turnover, retailers often qualify for volume, quantity and promotional discounts that restaurants cannot often advantage. In many instances, a single case may represent an inventory investment of six months or longer for the restaurateur but only a month or less for the retailer. This also translates to higher expense in terms of inventory cash investment and higher product maintenance cost due to longer storage.
2. Licensing costs & liability are higher:
While licensing does vary by state, most states are similar to Arizona (The Wine Guy’s home) with higher fees for on-premise than off-premise licensing. The retailer has select employees who have wine knowledge and have met state alcohol awareness training while the restaurant may have endured that expense for all who are involved in handling your wine. Additionally, the cost of liability insurance is ALWAYS significantly higher for an establishment where alcohol is poured and consumed on site than for one where the consumer purchases for later consumption.
3. There is a higher cost of sales in a restaurant:
In terms of glassware, utensils and even labor, the restaurant has significantly higher cost in delivering the product to you than does the retailer. Virtually none of the retailer’s transactions involve serving accessories that have to be cleaned and maintained. Up to 80% or more of his transactions involve no significant customer-staff interaction beyond paying of the tab. The restaurant, however, endures these kind of extra expenses in virtually everyone of his transactions involving wine.
O.K., we’ve established that a higher cost can be expected. When is that higher price too much? Below are some general guidelines The Wine Guy uses in evaluating restaurant wine pricing. Note that when I mention average retail bottle prices, I DON’T refer to the cost of discounted wine, cost after volume discounts nor sales promotion items. This would the average normal retail price at your typical wine merchant. This retail can vary up to thirty percent in the typical marketplace so we’re looking for an overall market representation of what the typical consumer pays everyday to take his bottle home.

Wines by the glass:
Well-run restaurants that serve wines by the glass will average just a little over three glasses served per bottle. Yes, a bottle contains more, but, operationally, some allowance needs to made for shrinkage due to operations and loss of freshness. A good restaurateur needs to recover his wholesale bottle cost in the first glass poured if he hopes to realize a reasonable profit. Your cost for the wine-by-the-glass you order should fall somewhere between 70% and 90% of the average retail cost per bottle in the market where the restaurant is located. Any more should make you start to feel a pinch in your pocketbook. The by-the-glass cost would be considered extremely high if it exceeds the average retail bottle price.
When buying wine-by-the-glass, The Wine Guy usually only orders the most frequently sold varietals. This means Chardonnay, Cabernet Sauvignon, Merlot and, with caution, Pinot Noir in general restaurants. I’ll consider another varietal if it ties into the restaurant’s specialty, A Chianti or Sangiovese in an Italian or a Naoussa in a Greek restaurant would be classic examples. This rule offers some assurance of volume turnover and freshness. Remember: you pay a premium for wine by the glass…if two or more in your party drink the same wine or if one of you intends to have a minimum of two glasses, your best buy is by the bottle!

Wines by the bottle:
1.5x to 2.5 x Average Retail:
Affordable values come from restaurants that offer wine by the bottle at one and a half to two and a half times the average retail market price. These are good values and offer you a fair opportunity to pair your favorite wine with your favorite meal. The Wine Guy cautions that you should avoid unknown labels, particularly house wines, in most value restaurants. Stick with labels and varietals that you are familiar with or ones that have been recommended by a source you have confidence in.
2.5x to 3x Average Retail:
This is pricier but still can be a reasonable range for restaurant wine. However, at this point, The Wine Guy is beginning to look for something beyond just average restaurant wine service. I want to see some variety and opportunity in the wine selection, some knowledge of the wines from my wait staff and some very good fundamentals in presenting and serving of the wine.
3x to 3.5x Average Retail:
Your wine selection has begun to overshadow your entrée selection so there should definitely be “something extra” going on if you are to consider these wines as reasonably priced. Wine selection and wine service should be much more formal at this point. The Wine Guy will also look for a wine list that offers descriptions, pairing suggestions as well as a selection of better quality wines. During prime dining hours, I would expect a knowledgeable wine steward or sommelier to be available if my waiter was not thoroughly versed in the wine list.
3.5x Average Retail and above:
At this point and higher, there really needs to be something very exceptional in terms of offering and service that simply isn’t available at other restaurants. If not, The Wine Guy opts for iced tea or water with dinner, followed by a promise to Mrs. Wine Guy to uncork one of our favorite cellar selections to enjoy on the patio when we get home. Hopefully, the food was awesome, or there’s an opportunity to BYOB the next time with a reasonable corkage, otherwise a return trip is highly unlikely.

Good wine and good wine service in restaurants comes at a higher cost but doesn’t always have to be overly expensive. With a little effort, you’ll find great restaurants offering great wine with great food at fair prices. Remember to vote “with your pocketbook” for those that do and don’t hestitate to vote against those that don’t by denying your business. I hope you found The Wine Guy’s restaurant pricing guidelines helpful in that quest.

On my next blog, Restaurant Wine Part 2 covers BYOB (Bring Your Own Bottle) and some do’s & don’ts to enjoying this particular and highly fun form of dining out with wine.

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