money.jpgPeople often ask me why the wine prices at restaurants are so high. It seems like everyone is angry about the large markups nowadays, which just seem to be getting larger and larger by the day. Restaurant owners do have some responses to these complaints, but I have not really bought into their validity.

What Are The Markups?

In case you havent noticed, the markups on wine in restaurants in the United States have reached record levels. It is not uncommon to see bottles going for up to 3 times the retail price. When you consider what those prices are, also consider that the restaurant is virtually always paying less than retail. So a 30 dollar bottle of wine at retail most likely wholesales somewhere around 20 dollars. You may end up paying 60-70 dollars for that very same bottle when your sitting at the table.

Worse By The Glass

If you think that restaurants do a number to you on the bottled wines, have you seen what the glasses are going for? Unfortunately my wife doesn’t drink wine very often when we are out, so if it’s just us, then i’m usually looking at what they offer by the glass. I chose a nice Kendall Jackson last week that was 12 dollars a glass. However, that particular vintage was available across the street at a supermarket retailing for 20 dollars! My 2 glasses ended up costing me more than a full bottle, and if that restaurant was getting some nice wholesale pricing on the wine, they probably paid for the whole bottle with just my first glass!

Mismatched Quality

One particular issue that this type of pricing creates is that the wine quality that people end up selecting nowadays does not properly match up with the food that they are eating. For instance a nice New York Kobe steak that sells for 48 dollars really would pair nicely with a 30-40 dollar bottle of wine. However, that same bottle could end up costing 90 or more dollars at the restaurant, and many people just won’t justify that. I don’t blame them. So in the end they are stuck drinking a cheap low end wine with their nice meal.

Is The Tide Turning?

With all the backlash around restaurant wine pricing, and the subsequent tendency for people to stay away from the quality wines when dining out, there have been a bit of a movement for some newer restaurants to try to sell wines right at retail price. They use this “retail priced wine list” as a way to attract more business. I think it remains to be seen however if this will allow them to bring in more revenue in the long run, or if they will just backslide back with everyone else and just find it more lucrative to double and triple their wine prices.