How Restaurants Select and Price Wine

How Restaurants Select and Price Wine

Elliott R. Morss, Ph.D.

I admire restaurateurs – long hours, egotistical chefs, and other staff trying to cheat them at the cash register. But when it comes to the selection and pricing of wine, I have problems with most restaurants. In this article, I offer my views along with those of restaurateurs, restaurant wine providers, and customers.

Ideally, restaurants would price wine to maximize revenues and please their customers. Few do. Yes, I know they are constrained.

Restaurant Wine Provider’s comment – Restaurants have real difficulty in selecting wines. On the one hand they want to have wines that people know and can order by name, on the other, they are constrained by the shelf price of wines that customers already know, so they are unable to earn the same margins. This is a difficult juggling act for any restaurateur.

But what would it take for restaurants to please their customers and make a good return on wine sales? It would take a clear understanding of what customers want and a healthy respect for the bottom line.

The Customer’s Perspective on Wine – What They Want

Restaurants get several types of wine customers:

1. Pretty well-informed on wine – this customer will drink really good wines at home. S/he will not go to a restaurant to taste a fine wine. At restaurants, this customer wants a decent wine at a reasonable price. S/he knows the retail prices of many wines and will be offended by an excessive markup.

Customer’s comment – There is a restaurant in … that has excellent food but we don’t go there because they don’t have a wine for less than $40. Their wine list displays a degree of self importance-take it or leave it.

2. Not really into wines – will look for low price but will not buy the cheapest wine on the list.

Restaurateur’s comment – We never price our cheapest wine as the least expensive wine on our list. Our cheapest wine is usually priced second or third cheapest.

3. Has a favorite varietal.

4. Wants to impress client – with expense account.

5. Wants to impress but without an expense account.

Okay. So those are restaurant customers. What will satisfy them?

A small but significant segment of wine customers know only that wine comes in white and red.

Restaurateur’s comment – Many of our customers know next to nothing about wine. But they think they know a lot and want us to reinforce that when they are ordering wine with friends. That presents us with a real challenge.

Maybe 50% of the wine customers know the difference between heavy reds, heavy whites, light reds, and light whites.

So restaurants should have good wines in these four categories:

  • For light whites, a Sauvignon Blanc from New Zealand is the best choice – good at a reasonable price;
  • For heavy whites, a Chardonnay from Chile or Australia;
  • For a light red, a Pinot Noir from California;
  • For heavy reds, a Malbec from Argentina, a Shiraz from Australia, or a blend of either with a Cabernet Sauvignon is in order (in my wine tastings, I have found that most people cannot distinguish between a Cabernet, a Shiraz, or a Malbec, and most prefer blends).

Having these four selections will take care of my first three customer types listed above. For the person who has a favorite varietal, just have them try the selection from the closest category, e.g., for someone who asks for a Cabernet Sauvignon, ask them to try a Malbec – make it a learning experience for them – “I want you to try….”

Very fine wines in these categories can be purchased wholesale by restaurants in the $5-7 range. That means they can charge $25 and make a nice markup. For the well-informed client, a good wine can be purchased in bulk for $3-5 per .75 liter bottle equivalent. If it is in a .75 liter carafe for $20, even the pretty well-informed customer will be pleased.

The person who wants to impress without an expense account will be pleased with having their waiter speak knowledgeably about two or three wines. Then let them choose – that is all there is to it.

For the customer wanting to impress with an expense account, the restaurant must sadly carry in inventory a few expensive “big name” wines – like a Petrus, an Opus One, or a Latour Bâtard-Montrachet. In most cases, neither the customer nor guest will be able to tell the difference between these and your regular wine selections. Never mind!

Restaurateurs’ Mistakes

There are several major ones:

1. Good food is expensive and the liquor will have to foot the bill.

This means your wines will be unreasonably expensive and diners will take note.

Customer’s comment – The pricing structure jumps out at you when first viewing the wine list, i.e., are they doubling, tripling or just pulling a number out of the air?

2. People want French and American wines. That used to be true. But with the globalization of the wine industry – see http://www.morssglobalfinance.com/the-global-economics-of-wine-past-present-and-future/ – excellent and inexpensive wines are now being produced in Argentina, Australia, Chile, New Zealand, South Africa, and the US. Because of high land prices, Europe cannot compete with these new producers.

I searched the Wine Spectator data base for wines rated 90 or more heavy reds (Cabernet Sauvignon, Mallbec and Shiraz) light reds (Pinot Noir), heavy whites (Chardonnay) and light whites (Sauvignon Blanc) at prices of $20 or less ($15 or less for Sauvignon Blancs). I included the French Bordeaux and Burgundies in the appropriate varietal categories. Australia had the most Cabernets and Shirazes, Argentina the most Malbecs, New Zealand the most Sauvignon Blancs, the US the most Chardonnays (see Table at end of article).

3. Wines priced at less than $30 are suspect. This might be true for some ill-informed customers. But for your well-informed clients, this is nonsense. Consider my search Wine Spectator search results (see table at end of article). 156 heavy reds rated 90 or above priced at $20 or less; 7 Pinot Noirs, 76 Chardonnays, and 41 Sauvignon Blancs rated 90 or more priced at $15 or less.

Restaurateur’s comment – Are they selling it before they pay for it? Not a bad deal for the restaurant if they buy it on credit and the mark it up three times? But a lousy deal for the customer.

4. My entrees are expensive, so my wines can also be expensive. Unlike food, wine is sold by the bottle, and it is easy for customers to check retail prices.

5. I need to have a large wine inventory or else I won’t be in the running for a Wine Spectator prize. I have considerable respect for the Wine Spectator tasters and its database. But making a large inventory of wines to be considered for an award is most unfortunate. Wine Spectator has three award levels:

  • for its Award of Excellence, a restaurant must carry 100 selections;
  • for its Best Award of Excellence, a restaurant must carry 400 wines, and
  • for its Grand Award, a restaurant must carry 1,500 selections!

This is ludicrous. But put yourself in Wine Spectator’s position. They are a wine publication and they want to award restaurants for their wine. Do you want a requirement for that award to be offering 1,500 different wines? What might be used other than number of wines offered? How about restaurants that always have 5 of its highest rated wines in the 95-100 and 90-94 rating categories on their wine lists at no more than a 100% markup over the Wine Spectator release price?

But forget about the Wine Spectator award. How many wines does a restaurant need to carry to please its customers? I think 15 should be sufficient.

Restaurateur’s comment: As people have become better informed on wine, they request different varietals. In order to please them I would say now that a restaurant needs at least 30 wines.

Most worrisome are restaurants offering a large number of wines by the glass – your knowledgeable customers will wonder how long the bottle has been open.

Restaurateur’s comment: Since I carry many wines by the glass, I am concerned that they are fresh. The key is to keep testing the wine. In my restaurant a wine open since more than 4 hours gets tested to insure it is fresh. There is now an aerosol spray that creates a real shield against oxygen that oxidizes wine. I have tested it – it will keep a open bottle fresh 5 days. But I will not serve a wine that has been open more than 18 hours – after that, it goes to the kitchen for cooking.

Wine Spectator Search Results

South

United

 

New

 

 

Wine

Argentina

Australia

Chile

Africa

States

Austria

Zealand

Israel

Total

Heavy Reds

 

 

 

 

 

 

 

 

Cabernet Sauvignon

3

14

9

3

9

38

Malbec

35

35

Shiraz

61

5

6

11

83

sub total

38

75

14

9

20

156

Light Reds

Pinot Noir

2

3

1

1

7

Light Whites

Sauvignon Blanc

1

1

9

30

41

Heavy Whites

Chardonnay

18

7

13

32

5

1

76

Total

76

171

35

32

84

1

36

1

436

Source: http://www.winespectator.com/wine/search

“A mind of the caliber of mine cannot derive its nutriment from cows.” – George Bernard Shaw.

“Men are like a fine wine. They all start out like grapes and it’s our job to stomp on them and keep them in the dark until they mature into something you’d like to have dinner with” – Kathleen Misfud

“I cook with wine, sometimes I even add it to the food.” – W.C Fields

“Wine improves with age. The older I get, the better I like it.” – Anonymous

“If a life of wine, women and song becomes too much, give up the singing.” Anonymous

“What is better than to sit at the table at the end of the day and drink wine with friends, or substitutes for friends?” – James Joyce

“An intelligent man is sometimes forced to be drunk to spend time with his fools.” – Ernest Hemingway

“A meal without wine is like a day without sunshine.” – Anthelme Brillat-Savarin

The content above was saved on the old Morss Global Finance website, just in case anyone was looking for it (with the help of archive.org):
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