Sunday, February 06, 2005

What's Reasonable in Wine Pricing- Addendum (NW)

Wine pricing? Well, here's my take...

On the shelves, wine is priced based on a mark-up over what the store pays the distributor or supplier. These margins vary, but one thing remains relatively constant: you will pay in the ballpark of the "MSRP". In other words, many wine makers post a suggested retail price and you hopefully find their wine for plus or minus 20% of this price. In other words, for a $20 wine, prices will likely range from $16-24 depending on where you live and what store you're in. One thing is for certain, though- you shouldn't be paying $40. That's a restaurant price.

Restaurant pricing is different. The reason the $20 wine costs $40 is because of the cost of storage, service, glassware, printing wine lists, and so on. Many restaurants justify this mark-up with a robust wine list, carefully selected and hard-to-find bottles, high-end glassware, well-organized printed wine lists, ice buckets, decanters, and maybe even a staff wine professional or a sommelier. The problem is, many restaurants don't offer any of these things and still charge $40 for a wine you know costs $20 on the shelves. Even worse, many restaurants offer that wine at $48 or $55. I see more and more extreme variation in pricing wines.

Let's look at an example of price variation and how I use this information. Recently, I paid $105 at a bistro for a bottle of 1999 Silver Oak Alexander Valley Cabernet Sauvignon. This was a business dinner and the client was fond of this wine. I didn't hesitate, especially since this wine is generally $60-65 in the store. A week later, in a local, family-friendly upstart restaurant, I saw the same wine offered as their best "premium" red and priced at $85- such a "bargain" that I almost went for it on my own dime. Shortly thereafter, I spotted the wine priced at $130 on several wine lists that offered many even more expensive wines. I wouldn't touch it for $130 or more. Therefore, when I see wines at less than 100% mark-up over retail prices, I tend to think they are well-priced bargains. In this example, anything under $120 is well-priced.

The current problem, however, lies in the more affordable wines on the lists. They can be outrageously priced. Many restaurants will have a broad selection of bottles from $20-30. Take a close look, though, and you'll see these are wines that can be bought in a supermarket for $6-12. This outrageous mark-up is unjustified and is especially problematic at national chain restaurants. Not only is the wine too expensive, there is nothing in the experience to even remotely support the mark-up. I cringe at the questionable service and terrible glassware I am presented with, not to mention the high likelihood of wine being served at the wrong temperature.

Routinely, the least expensive offerings at a restaurant are the worst deals. PB, of this blog, is absolutely right- too many $8 wines are priced at $24. I find this time and again. I generally don't order a bottle of wine any longer unless I find something interesting or something that is well-priced (which is usually at the higher end). Relative "bargains" often abound at the higher end. If I pass on a bottle but still want some wine with my meal, I'll find something offered by the glass. In this case, I usually find a $10 glass of a wine the restaurant also offers by the bottle for $40. I probably pay about $20/bottle for the wine at the store. When I get home, I'll drink a glass of wine from my own collection (say a $20 bottle). Total wine bill for the night: about $17, including restaurant glass, tax, tip, and glass at home. If my wife and I are out together, total bill is $34. Had I ordered the bottle, total bill: $48-50, based on bottle, tax, and tip. My wine economics!

My benchmark for restaurant pricing is 100% mark-up from retail prices. I am okay with this, especially for interesting wines that I don't see often. But when it comes to chain restaurants charging $24 for an $8 bottle, I pass. Next time you are headed out for dinner when you are too tired to cook, order carry-out instead. When you get home, pair the food with a wine that you have at home- and make it a good wine. Hopefully you bought the bottle some time ago and have even forgetten what you paid for it. Total wine bill for evening: unknown. Now this is good wine economics! Raise a glass!



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