Restaurant Wine Sticker Shock

Best of 2011: Millennium Restaurant (San Francisco, CA)

Lee Atwater, the late Republican political consultant, once said, “Perception is reality.” Atwater was referring to how the public perceives a politician’s actions or a Washington scandal, but he could just as well have been casting a futuristic opinion on restaurant wine pricing. Are proprietors taking increasingly larger margins on the wines they sell, be it by the bottle or glass? Seems that way.

Whereas traditionally it was acceptable—and profitable—for a restaurant to charge double the retail price for a bottle of wine, or three times the wholesale price of the bottle, today, bottle prices are often jumping to nearly three times what that same wine would cost in your local wine shop, especially in major cities and at trendy restaurants with well-curated wine lists. A few pokes on the calculator show that in instances like this, the restaurant is pocketing 400% more than it paid for the wine.

As for by-the-glass pricing, that also looks like it’s on the elevator headed up. Within the business, it’s understood that a restaurant seeks to recoup the wholesale cost of a bottle with one pour, leaving another four or so glasses to generate pure profit. But with many restaurants striving to offer better BTG wines, following that lucrative formula means $15 has become the baseline cost for a nice glass of wine. (Notice I chose the word “nice” and not a superlative such as “awesome.”)

Given the fragile state of the economy, is it smart business for a restaurant to offset rising food costs, higher rents, increasing taxes and past losses by taking advantage of the wine lover, the customer who is most helping their bottom line by purchasing a product with a 300% mark up? Not according to Rajat Parr, a San Francisco-based master sommelier, who oversees the wine program for Michael Mina’s multistate restaurant group.

“I would never go above three times wholesale,” said Parr. “Anything beyond that could be seen as greed or gouging. To me it’s shortsighted and unnecessary. At our RN74 restaurants [in San Francisco and Seattle], 2.2 times wholesale is my guideline. I don’t think our customers would pay more than that, nor should they.”

Parr is among a trio of prominent sommeliers who I interviewed for this column; all three acknowledged that restaurant wine prices are trending up. Parr, however, suggested that exorbitant pricing is more of a Bright Lights, Big City phenomenon than coast to coast. The biggest offenders, he said, are popular spots in New York and Las Vegas, where disposable income is greater and it’s an accepted fact that you will pay handsomely for your pleasure, whatever pleasure that might be.

As a New Yorker, I accept that…to an extent. Things often cost more in the Big Apple than anywhere else in the country. But should a casual, no-reservations Asian joint in a scruffy neighborhood charge $95 for an excellent—but not rare—2010 Carneros Pinot Noir that retails for less than $35? Should a trés-cool steakhouse in a trendy neighborhood charge $88 for a new-release Vacqueyras with a suggested retail price of $32? Not, say my sommelier sources, if these wines cost these restaurants just over $20 a bottle to acquire.

“Restaurant mark-up practices are a black hole of mysterious calculations that I’ll never fully comprehend,” said an importer who requested anonymity so as not to offend his buyers. Given that summation, maybe we should just be happy that restaurants are offering better and more varied wines.

Published on March 27, 2013
Topics: Editors' Column