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I almost never order alcohol in restaurants because I have to drive home afterward (and cabs are expensive). That is a good thing, because I recently learned that wine is marked up 300% in restaurants over the wholesale price or 200% over the retail price (see WSJ article on wine pricing formula). Cheaper wines tend to be marked up at a higher percentage (300% – 400% of wholesale) compared to more expensive wines (150%-200% of wholesale).
That means a $20 bottle wine you bought at a grocery store would cost you $50 at that bistro down the street. WOW! I was always under the impression that wines were marked up, but I had no idea how much.
Also, as can be imagined, more expensive restaurants may have a higher markup.
In most cases, the fancier the restaurant, the higher the markup. A top-tier chef, a team of sommeliers, a large wine cellar and expensive stemware are all built into the wine price. Because pricier restaurants typically have fewer tables and less turnover, they need to make profits on fewer bottles sold.
Buying wine by the glass is even more costly. Restaurants tend to charge the wholesale bottle price for a glass of wine – so that they make back their investment with the first glass (see this ChowHound thread about wine mark-ups) and protect against loss if any bottles have wasted wine.
WSJ recommends that diners avoid ordering by the glass if possible – for reasons of taste as well as value.
If the wine in an opened bottle doesn’t sell in a few days, for example, best practice is to pour out the spoiled wine — but whether that happens or not is a matter of conjecture. For diners looking to maximize the value per ounce, ordering a pricier bottle may be a better choice than ordering wine by the glass.
A few nights ago I went out to a cheap burger and fries place where the entrees top out at $10 or $11. A friend ordered a couple of glasses of red wine. The restaurant didn’t even say what type of red it was. She forgot to check the price but assumed that it was $5 or $6. Turns out it was $9! Two glasses added up to almost $20.
I’m trying to become more educated about wine … and I think I shall begin my education at home, where I can drink excellent pinot noirs and chardonnays purchased at Costco for $10 or $15. These wines, according to these mark-up formulas, may cost $30 or $40 at a restaurant.
What type of wines do you order at restaurants? Do you ever buy wine by the glass?
http://wellheeledblog.com http://twitter.com/wellheeledblog Savvy Living Through Personal Finance
