The tension around wine pricing at restaurants?

What is the right price for a bottle of wine at a restaurant?

Wine pricing at restaurants is a hot topic of late but has many complexities. Let's dig into it and better understand the issues and some potential solutions. 

Let's remember the immense challenges the restaurant industry has faced in recent years, particularly the devastating impact of the pandemic. The industry is still grappling with the aftermath, including the closure of many beloved establishments, the departure of skilled professionals, ongoing supply chain issues, and the burden of inflation. Rising costs are a universal struggle, and simply raising prices is not enough. 

At CorkRules, we recently conducted a study to gain insights into the restaurant and wine landscape from patrons' perspectives. We discovered a significant tension between perceived value, service quality, and rising costs, with 72% of respondents expressing that the value they receive at restaurants is worse than pre-pandemic. Our research extends beyond the price of a bottle, but it's a crucial aspect to consider. 

Let's jump into better understanding the issues on both sides:

How alcohol sustains restaurants:

For most full–service restaurants, alcohol accounts for ~25% of revenues, and for higher-end restaurants, it could be as high as 50%. Think Las Vegas. The gross profit on alcohol can range from 70% to 80%. This helps restaurants fund other costs related to their overall product (food margins, overhead, labor, rent, utilities, etc.).

How are bottles of wine priced?

Restaurants typically price wine purchased from distributors between 2 and 4 times its cost. Other considerations include the winemaker's reputation, quality, scarcity (how hard it is to find), and vintage (older usually increases the price). 

Wines by the glass (BTG) usually have a higher markup (4-5x) as the restaurant is taking the risk of waste. Wine goes bad, and the restaurant may have to eat the cost of offering one customer a glass. With the invention of a Coravin (a wine preservation system), you are starting to see more expensive wine offered by the glass. The wine BTG programs have a great opportunity to make more wines accessible to patrons, but I digress. 

In our research, nowhere do we see patrons unwilling to pay a wine markup. Let's explore issues from the patron's point of view. 

Decisions about buying a bottle of wine:

Yes, price is a big part of the decision process, but most people don't appreciate the social aspect of picking a bottle for a boss, friend, or spouse. This is why wine scores are so popular; they take people off the hook for selecting. People are very nervous about picking the wrong wine, not to mention overpaying. 

Price is a top decision when choosing a bottle of wine:

Yes, our research says price is 5X likely to influence your decision compared to other factors. This is because we all have a number in mind when we walk into a place. Is it a special occasion? Is it date night? We tend to contextualize our expectations and the price we are willing to pay. We see from our usage data that people drink more expensive wines on Saturdays vs Mondays. Duh, logical. 

Inconsistency of wine prices:

Our data suggests that wine pricing is all over the place. We see the same wines priced differently from restaurant to restaurant. For instance, a bottle of Chardonnay that costs $20 at one establishment could be priced at $40 at another. This variation can range from 2-3% to 200-300%. Yes, it's wild. This leads consumers to distrust restaurants and feel they are being exploited. 

The dreaded markup of wine: 

There is inconsistency around the price of a bottle of wine relative to the fair markups and retail pricing. A 'markup' is the difference between the cost of a product and its selling price. All consumers expect to pay a premium for ordering wine at a restaurant, but they are seeing significant inconsistencies (2-9x markups) and are, as such, skeptical about trusting the wine list price. 

#1 wine app/technology:

 It hurts me to say this, but Google is the number one wine app people use to check the price or reviews of a wine. In talking to many somms/beverage directors, they hate that the consumers are doing this. I'm sure car sellers feel this way, too, or banks selling mortgages, but the reality is that we live in a digital world, and transparency is an expectation we all have. I hope our industry can embrace technology and create a win-win.

Ordering wine is complex: 

Wine lists are always different. Restaurants all have different formats for presenting their lists: how they write the wine names, how they organize the list by region, varietal, price, the number of bottles they have, and finally, all the diverse choices they have. Many restaurants look to differentiate themselves, often with wines most of us are not familiar with, but to most consumers, it's daunting and overwhelming. 

Wine knowledge is lacking:

If we are honest, learning about wine is a lifelong journey, and most of us aren't that invested, but it feels like we need to pick a wine at our favorite restaurant. Being handed a list and asked to make a selection in the first 10 minutes is intimidating. Trying to choose a wine that works for everyone is not easy. I eat meat, and my wife eats fish. How do I pick a wine that works for both of us? I know, ask the somm…

Talking to the somm/server about wine: 

Somms have a bad rap as being stuffy, arrogant, and can be intimidating. However, they play a crucial role in the wine pricing process. They are responsible for curating the wine list, ensuring a diverse selection, and providing recommendations based on the menu and guest preferences. Yet, consumers are afraid to ask questions and look bad in front of their guest(s), so they tend to order what they know – Chardonnay or Cabernet. Ugh. 

Becoming a certified sommelier requires significant passion, time, and personal expense. It can take 2-5 years to become a certified professional from the Court of Master Sommeliers (CMS). Numerous programs offer various certifications and diplomas. This program includes innumerable exams of both theory and service. It can cost thousands of dollars. This is a real commitment to their craft. 

Wine knowledge at restaurants:

Sadly, 38% of consumers suggest that wine knowledge is not where it was before COVID-19. This is easily explained by the loss of many talented professionals who left the business due to COVID-19. Professionals new to the industry are not getting the training to service their clients and sell more wine. 

So, where do we go from here? 

Cristie Norman, a highly acclaimed sommelier, said it best: " It starts with respect." We need to recognize that both sides have a point. 

First, we must support our restaurants, eat out more, and order wine! 42% of our respondents eat out more than 5+ times a month and 64% order wine regularly. Let's keep it up. 

Second, patrons want confidence in ordering, and this starts with transparency and open communications. Technology can help patrons connect the dots and help restaurants enhance the overall experience. 

Third, let's keep the dialogue going about this complex topic. We all agree that we want our restaurants to succeed and provide unforgettable memory-making experiences. 

We appreciate the continued dialogue on this critical topic.