I was eating out at a restaurant a couple years ago; I had the wine menu; I flipped through the pages and suddenly, stop. The bottle I recognized from the local store was listed for almost four times the cost. I double checked because I did not know if I imagined it. This memory stayed with me. I wondered why wine was so expensive in restaurants. Was it just clever pricing? Or was there some other reason involved?
So I paid closer attention; I asked questions; I watched how the restaurants were managing their wine. What I discovered is that there is no single “they’re ripping you off” answer to the question. They are making a number of business decisions and investments along with costs and experiences associated with each price.
The most fundamental explanation: restaurant price increases
You may want to begin with the basic. Typically, restaurants increase the price of wine by somewhere from two to four times its original retail price. Sounds extreme, and yes it is, but it’s an intended action.
From my own research, most restaurants depend upon wine and liquor sales to generate profit. The margin on food is generally much thinner than you’d imagine. Ingredients, preparation time, and waste all decrease profitability. Liquor, however, provides restaurants with increased flexibility and profit margins.
Not a scam in and of itself. More of a fundamental aspect of the business plan. When I understood this concept, the prices no longer seemed completely arbitrary (although still enough to keep me thinking twice).
Wine prices are high because you are buying more than liquid in a bottle
I think this is perhaps the part which has caused me to think about it in a new light. You are not simply purchasing a bottle, you are purchasing the total experience surrounding the wine.
To be honest, once I took a minute to truly reflect upon it, I realized I wasn’t buying a liquid in a bottle, I was paying for the atmosphere: the lighting; the music; the comfort of being seated at a beautifully arranged table. Even the glasses themselves matter more than I ever gave them credit for.
Another benefit of this purchase is the ease of use: I do not need to go out to select the wine; chill it; pour it; or dispose of it afterwards. Another person handles these responsibilities, and although this seems minor, it does add up when looking at the complete picture.
Costs associated with storing and maintaining wine
Something I have learned firsthand is that wine cannot simply be placed on a shelf and left alone. Restaurants must provide adequate storage for their wine, which results in additional costs.
For example, temperature controlled storage units; wine coolers; or even full cellar systems are costly. If the wine is not stored properly, it will spoil, resulting in financial losses. Therefore, one of the things you are paying for is the guarantee that the wine is being maintained appropriately.
Most consumers do not give any consideration to the fact that someone needs to maintain a proper environment for the wine, it is one of those behind-the-scenes aspects of purchasing wine that few consumers think about, yet it plays a larger role than most consumers would believe.
Employee education and customer service
Until recently, I rarely considered the employee assisting me in selecting a wine. Many employees are educated regarding wine, often extensively educated.
Employees can assist in recommending a suitable type of wine based upon your personal preferences; describe differences among types of wine; and suggest pairing wine with your food. All of these tasks require education, as well as time.
Additionally, customer service is a component of the experience of purchasing wine in a restaurant. Properly opening bottles; allowing wine to breathe if necessary; and serving the correct amount of wine are all elements of providing excellent customer service. For myself, these components of the experience can easily be overlooked, yet they contribute to why wine is so expensive in restaurants.
Inventory risks and unsold cases
This point surprised me somewhat. As mentioned earlier, restaurants carry multiple varieties of wines for their clientele. However, not all cases sell immediately.
Cases can remain unsold for weeks, sometimes months. These products represent an investment for the business, tied-up capital in inventory. Furthermore, if cases do not sell, or become damaged, businesses incur a loss.
As such, prices are raised to offset risks associated with inventory management. Therefore, while you pay for the product you are consuming, you are also compensating for the risk associated with not selling another case.
Variety of locations and types of restaurants can cause differing prices
Similar wines can vary dramatically in price depending on location and type of restaurant. Generally speaking, upscale establishments, or highly trafficked urban centers, charge more for their wines and it is understandable.
Higher rents; higher labor costs; and greater operational expenses all impact prices charged by these types of restaurants. Thus, a bottle you see offered at a neighborhood restaurant may be significantly more expensive at an upscale downtown restaurant.
While this may seem like nothing more than price gouging, in reality, it relates directly to where you are consuming the product.
Do we get our money’s worth?
Honestly, it depends. There are certainly occasions when I believe the total experience warrants the cost. Good food; good friends; recommended wine, it all combines for an enjoyable evening that appears worthy of cost.
However, there are times, particularly when considering a casual meal, when I find myself questioning whether we get our money’s worth.
Based on my own experimentation and testing, I am confident that you should never automatically buy the first bottle you recognize from your past purchases. In general, this represents where the mark-up appears most evident.
Presently, when viewing wine lists, I view them slightly differently than previously. While I still take note of price, I also contemplate what is contained within that price.
Basic tips to help consumers avoid over-paying for wine
Over time, I have developed several strategies that enable me to navigate wine lists without feeling overwhelmed.
One tip is to consider purchasing house wine. House wines are generally less expensive and of similar quality compared to regular bottled wines.
Generally speaking, I tend to avoid both extremely inexpensive wines, as well as wines at the extreme upper end of price ranges. Wines priced in the mid-range area offer superior value for consumers.
Trust me on this point, you want to avoid assuming that the lowest-priced bottle is the best bargain, it usually contains the largest mark-up available.
If you are unsure about a particular bottle, ask. Employee recommendations can direct you towards superior alternatives that are not excessively priced.
Ultimately, why wine is so expensive in restaurants relates to more than merely a mark-up. It relates to numerous business-related factors including service; maintenance; inventory control, and overall consumer dining experience.
I continue to hesitate when reviewing those prices, but now I at least comprehend what drives those costs, and therefore, my choices relating thereto seem far more rational.
