are restaurant wines too expensive?

Wednesday, April 07, 2010

In general, for as long as I’ve been studying restaurant wine lists, I would answer that question with a big YES! But things are changing, and more and more restaurants are responding to current economic realities by trimming their lists, selling down their cellars, and – hosannah! – lowering prices.

It has always seemed obvious that a savvy restaurant wine manager could more than compensate for lower bottle prices by selling more wine. And yet, few have been willing to try it. Perhaps it requires special skills, or the economics of scale, or simply a willingness to go out on a limb. But whatever it takes, Jake Kosseff has what it takes.

Kosseff is a well-credentialed sommelier and consultant who recently became the Wine Director for Ric Yoder’s Wild Ginger/Triple Door restaurant group. Kosseff was immediately put to the test with this challenge: reach more customers, more often, with more wines. “I blanched,” Kosseff confessed over a recent lunch at the downtown Seattle Wild Ginger. “We were following a traditional restaurant business model. It worked. We thought we already had great values.”

But as Kosseff dug into the books, he came to a couple of important conclusions. Despite having impressive wine sales in all three restaurants, a disproportionate amount of those sales were going to a small number of guests. “After thinking about lots of gimmicks and fancy window dressings,” he continued, “I came up with a simple plan. We should lower the prices.”

Further number crunching convinced him that the risks of price lowering were actually quite minimal. An increase of wine sales of just two or three percent would put hundreds of thousands of dollars into the profit column at year’s end. And make customers happy as well.

A couple of weeks ago, Kosseff finished re-pricing more than 4000 different wines in the Wild Ginger cellars. Not everything has come down equally. Some wines have not come down at all, and some actually went up in order to balance out pricing on comparables. But the overall trend is clearly down. The biggest reductions, not surprisingly, are on more expensive, older wines. Here are some representative examples (old price/new price): JJ Prüm 1997 Graacher Himmelreich Auslese $122/$75; Etienne Sauzet 2002 Puligny-Montrachet $138/$85; DRC 2006 $4900/$3246 (I’ll take two!); Domaine du Pegau 1999 Cuvée Réservée $143/$76; Andrew Will 2005 Annie Camarda Syrah $145/$84; Betz Family 2006 La Serenne $129/$88; Cayuse 2005 Armada $375/$113; Spottswoode 1997 $240/$119; Screaming Eagle 1996 $1390/$817.

A couple of things to know if you plan to check it out for yourself. The Bellevue Wild Ginger has a 500-bottle list; the bigger list resides at the Seattle location. Most customers will be given a much shorter list unless they request the tome. Granted, the examples I’ve chosen are not your every day “what’ll I have with my singing fish satay” type of wines. Plenty of less pricey and by the glass options are also available.

The point is that here is a program that looks to be win-win, for customer and restaurant. “People get excited about something that also helps the restaurant,” says Kosseff. “It’s hard not to be a hero.”

Wild Ginger


Richard Sentner said...

A couple of months ago, I went out for lunch at the "La Fiamma Wood Fire Pizza" restaurant in Bellingham and on the table was a card advertizing a "California Red" bottle for $5.00! It was no worse that a three buck chuck bottle!

Mike Kallay said...

That's a nice article. I see that trend down here in San Diego as well.

I always point out to people who say this that they aren't also complaining that their steak, chicken breast, or salad has been marked up by a factor the same or more than the wine. Wine gets picked on in this regard.

Anonymous said...

Another restaurant with a fantastic wine list with prices that are often comparable to what you would find for retail prices is Dulces Latin Bistro in Madrona. Better prices than Wild Ginger on the wine list and the food is right up there in quality.
- Charlie

Stewart Boedecker said...

I've always been a huge fan of Jake K. I'm glad to see him lead the way in the Northwest. All anyone has to do to see if this strategy will be successful is look at the nightly bookings at Bern's Steak House in Tampa. I've known people who have flown to FL just to order off their deep, well-priced wine list.

Art said...

To my mind, restaurants have been enamored by margins, not by net profit. So Kosseff’s realization that the “traditional business model” could be improved upon is a good one indeed – in other words, selling more wine at lower prices actually improves the bottom line. This applies to glass-pours, too, by the way. As for the argument that food gets marked up by the same factor, I don’t think many people would order two steaks if the price were lower; but they certainly might order two glasses of wine (or a second bottle for a group). Again, good for Jake for doing the math!

Tom O'Neil said...

I respectfully disagree with Mike Kallay that wine gets "picked on" with regard to its often obscene markup. There's value added to that raw steak or chicken breast before it gets to the table. A bottle of wine, however, is simply passed through, often with a several hundred percent markup. Kudos to rational thinkers like Jake!

1WineDude said...

Well, in PA, where restaurants mostly have to buy at the same prices as consumers, the only entity that wins in the entire scenario is the government-run state monopoly :-(. The restaurants are forced to sell at higher prices and pass the costs onto their customers.

RLL said...

Good inexpensive Washington wines are always available at $4-10 a bottle. Unlike food it is not a perishable item, none need to thrown away. A small stock of various wines can be replenished on a weekly (or daily) basis. Wine by the glass from $3.50-$5 should be a staple, maybe even a dollar cheaper. Note: this is for lower priced restaurants, but even higher priced ones should be doing something similar, maybe with $10-$20 bottles of wine.

Peter Rosback said...

Good move! (And Jake's a great guy.)

Was visiting a fancy restaurant in Milwaukie, WI where the somm. halved all the wine prices...profits went way up! Far more people ordered wine...

Sean P. Sullivan said...

Kudos to Kosseff for doing this. In an age when consumers can increasingly check wine prices immediately via hand held devices (and see just what the markup looks like), decreasing markups will be important to convincing consumers to spend the money. This is especially true in a bad economy.

I would break consumers into a couple big buckets. In the first there is the "I don't care what the markup/cost is. I have the money." This group will always be there but is a smaller slice of the pie. The second is the "I'd like to buy a nice bottle of wine with dinner but I don't want to radically overpay for it/I want to drink a wine of approximately equal value to the cost I am paying for plus a reasonable markup." For this group, a much larger piece of the pie, the size of the markup is important.

Last week I saw a bottle at a restaurant/wine bar that was a 300% markup on a reasonably inexpensive bottle of wine. When I see that, is that going to make me more likely or less likely to buy the wine? Conversely, when I see a wine at a 50-100% markup, is that going to make me more or less likely to buy the wine?

I believe the confluence of a bad economy and improving technology is going to lead to a pretty good sized realignment on restaurant wine lists. Getting out front is never a bad thing.

PaulG said...

Sean, that's an excellent point. When you can sit at the table and run a price check on the average retail you don't want to see a triple or quadruple mark-up. I know it rankles the heck out of me to see a $10 (retail - not wholesale!) wine priced at $10 a glass (standard procedure). Especially when you may be getting the last glass in the bottle, and it's less than optimally fresh.

Anonymous said...

Great article, we are seeing this trend elsewhere. Restaurants in the past put a standard mark up on all the wines on their list, whether it costs them $20 per bottle or $1000 per bottle. Now they ask, what is a reasonable amount of gross profit dollars they should make on a particular bottle of wine. An example might be should I make $690 (at the standard mark up)on that bottle of Sreaming Eagle that sits in the cellar or will I be happy with a $300 profit?

Dave McNeilly said...

Although an obvious point, the markup on wine also helps contribute to the nice $3-10 wine glass it's poured into, or the $20-50 decanter. As you know: glass breaks, frequently.

Unless you can afford a wine preservation system (and have room for it somewhere around your bar), you should be throwing out the remains of your wines-by-the-glass bottles after about three days, or less if they are delicate pinots. There's a cost to that.

So, while I agree that many lists are priced exorbitantly, wine doesn't quite just pass through from wholesale to the restaurant customer without added cost, especially once you throw in the labour needed to receive, store, rotate, inventory, and adjust and print lists to reflect outages, new stock and new vintages.

We use a $15 markup on all bottles, regardless of price, which has been well received by our customers (the cheapest wine available at retail here in the most expensive wine market on earth is about $8, and there aren't many of those). More expensive bottles that we've held for awhile might go to a $20 markup after a few years.

Dave McNeilly
Seymour Golf and Country Club
Vancouver BC

Art said...

Even though there is some "added cost" involved in serving wine, you also have to consider that retailers (at least here in WA) have to pay cash when the wine is delivered from the supplier/distributor. This means that the faster it moves, the lower their inventory costs are. That fact could compensate for some of the broken glasses.

Karl S Mann said...

it's very don't bank %' bank $'s

Donn Rutkoff said...

My kudos also to Kosseff. Most Americans eat, but only a small % know much about wine and are into spending more than $50-ish at a restaurant. So, more wines at lower prices, less exotica, equals more bottles sold. And more bottles sold is how you expand the %s of how many Americans drink wine and how often.

Anonymous said...

Someone should educate restaurants in Boca Raton, Fl. where the prices are ghastly. However, one particular place has 1/2 price on all wines Monday and limited 1/2 other days. You will see wine on most tables at that restaurant

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