A markup of up to 300% on wine is common practice in restaurants, but for the average diner it can feel like a ripoff. We spoke with some restaurant owners to better understand the logic behind high wine prices.
Glancing at a wine list in an upmarket restaurant can be a stressful experience. The listings can be long and intimidating. Diners often employ two strategies when unsure about ordering a wine - either select by price (the second cheapest bottle is usually the most popular), or select a wine that they are already familiar with.
This raises the question, if my favourite wine costs R85 in the supermarket, why does it cost R245 in the restaurant? Here are some insights into the logic behind the seemingly shocking markup margins - and also why you shouldn’t bring your own wine next time.
It is the easiest item to compare
A bottle of wine is the easiest item in the restaurant to compare like for like, for example on an online wine retailers website. It may be the only item on the menu that you can get anywhere else, and it is hard to know the retail price of the Chef’s seared tuna specialty, for example.
Food is also marked up, but it is harder to see
The dishes on the menu are also marked up, but of course it is much harder to compare the rand value when it comes to plate of creamy pasta or your favorite chocolate mousse dessert. Food markups are often aggregated across the whole menu, so that cheaper cost items such as a salad will carry some of the profit burden of the fillet steak, that may only be marked up 50%.
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The food is actually quite cheap
In most restaurants it is not always easy to determine just how chefs helped to prepare your meal. In an upmarket kitchen, the staff in the back of house is always the largest, with approximately one staff member for every 3 guests in the dining room. Wine mark ups help to subsidise this heavy wage burden. This disparity is only exaggerated by special offers and discounts.
Liquor licenses cost a lot of money
Obtaining a liquor license for a restaurant or bar can take months of paperwork, legal fees, litigation and stress for the owner. The lawyers fees alone begin at around R12 000 per application, and often end up being closer to R25 000 after all the admin has been completed.
You’re not only paying for the wine
This is the oldest argument for the markup on wines, but it continues to be as valid as ever. The markup is paying for the Sommelier’s advice and expertise, which comes after years of education and training. The cellaring and storage of older vintages is a luxury that comes at a price. Storing wine in the cellar can impact the restaurant's financial situation, where a large upmarket restaurant can easily have up to R100 000 worth of cash tied up in expensive wines and champagnes. That beautiful Chardonnay glass? High-end glassware adds tremendously to the enjoyment of the wine, but remember that a Riedel or Schott Zwiesel glass can cost about R350 each!
So what’s the deal with corkage?
Wine mark ups are in integral part of the financial health of any restaurant, so having a corkage policy is implemented as a deterrent, in the hope that the penalty will encourage guests to rather order from the menu. The corkage charge is also in place to recoup some of the losses.
Running and operating a financially successful restaurant is indeed a challenge. Newer restaurants pop up all the time, and during the quieter months of the year it can be a constant struggle to entice diners through the front door. It is a fact that alcohol sales keep restaurants open, so if you have a favourite restaurant in your neighbourhood, consider supporting them by ordering off the wine list. It will make all the difference!
