Thursday, August 23, 2007

BTG: By the glass wine prices

It was six AM...why was I thinking about wine prices by the glass?

I usually wake up every morning with the clock radio set to the local station with the Bob and Sheri show, a decent morning show - albeit one from the left coast - and occasionally I'm rewarded with some topic which hits home about wine.

By the way, not only is it just nice to hear nationally syndicated radio programs discussing wine, but that venue probably does more for wine sales than many of the stodgy national ad campaigns have ever done...I mean these are "regular" people, and have "wine of the week" picks, which goes a long way towards keeping wine in the minds of the public. And often when I wake they'll be talking about how they were confused in a restaurant by pricing, or a snotty wine steward, etc...
It's all very real and what the "common" experiences of people may be - and that's exactly what the industry needs out there...

Anyways, Tuesday morning the radio flips on, and Sheri is explaining that has realized the only time she's ever really using math is when she's trying to figure out how much she'd be paying for a full bottle of wine when she's buying it by the glass. During their banter (I seen to recall) they start to talk about wine prices in general in restaurants, and how they regularly find wines offered which would only be a small fraction of the wine list price if they bought the same bottle at their local wine shop. On top of that - if not to add insult to injury (financial, that is) - they oft find the same wines listed by the glass for more than they'd pay for an entire bottle!

Mon Dieu! How can that be!?
I've broken down the price most people pay for a bottle of wine before, and what portion of that price the winery actually sees on average once the wholesalers and retailers get their cuts, but I haven't really ever expanded on the "by the glass" (aka, "btg") philosophy of pricing...
There is one big reason why: these prices often have almost no relation to reality whatsoever!

To wit, Bob a few weeks ago on this show complains that at a restaurant he enjoys, he goes to buy a glass of chardonnay, only to see the price at $18.50 PER GLASS! and he knows how much the wine retails for - and it's way less than what he'd pay just for having a glass-and-a-half in the establishment...
How does this make sense?

Well, actually it's just as you feared: it doesn't make any sense at all...

As I mentioned in the breakdown of bottle prices for wine, everyone who touches the bottle takes a share by jacking the price up, and restaurants are no different, only they don't seem to care if they sell anything or not. In general, an eating establishment will double the retail price of the bottle before selling it, though I have seen prices which are triple and almost quadruple what I would expect to pay for the bottle in question from a wine shop. The only rule of thumb I can offer is that restaurants with higher prices per entree most likely will charge the most for a given wine...but that's where logic fails, as they paid the distributor the same as everyone else did, right? So why the disparity over prices when you pull the cork -is all that extra cash just for the atmosphere? (..."yes" is the answer...)
But to be fair, I'll list some of the reasons they do charge more - especially by the glass - and why the price you pay btg is more than 20% of the bottle cost:
  • once a bottle is opened, the wine will start to oxidize and loose its flavor, so if it sits around for a while (say 3~5 days for argument) it won't be as pleasant and the customer may send it back
  • opened bottles may go VA (turn to vinegar) if they have any acetobacter in them and they get a hit of air which allows the bacterias to flourish
  • there are times when the customer returns the wine to the kitchen due to the wine being "corked", and that bottle is then a loss to the restaurant (sometimes if the problem is recurrent, the restaurant will contact the distributor to see if they can get a credit on the wines)
  • wine cellars take up a bit of space in the restaurant, and the increase in price is akin to charging you rent to keep the wine there for your convenience
  • expect wines which don't move as fast as others to be priced higher btg as it's likely the owner is taking more of a loss on those items due to spoilage
  • the restaurant feels they have to train their employees on how to sell & serve wine, or pay more to get those employees who know how to do so
These reasons are the primary ones for this phenomenon, but even acknowledging this does little to stop those feelings that you're being ripped off by the eating establishments.
Especially when you're sitting at the table doing the math and realize that not only is that bottle of wine you just paid $19 for at the local CostPlus or BevMo going to run you $38 or $45, but the $12 btg price would relate to $60 if you bought the bottle one glass at a time!
I've sat down with many proprietors on sales "missions" to try to get them to carry various wines as btg or house wine selections, and have gotten the "how can you suggest I take another wine on btg" look from them...and many times that's a fair question -even when the wine is very good: sadly, their expertise and focus is on food not on the wines that go with them...

Is the restaurant right to jack the price up 100% or more for the bottle alone - even when they don't have the risk exposure from pouring it btg? I don't think so, but this culture we live in has allowed them the carte blanc to do so mainly because most consumers don't seem to know what wine really costs to produce and deliver to the restaurant's door (hint: it's the same as the cost for the distributor to deliver it to your BevMo or CostPlus or Costco...only they see volume discounts restaurants won't get...but certainly not on the order of a 100% mark-up...).

And corkage fees?! Don't get me started!
But to touch on that subject, I can see charging 25% of the bottle price to open a wine IF IT'S ON THEIR WINE LIST, as that represents a wine they stock but aren't turning. But seriously, if they're charging more than $10 as a flat rate for wines they don't even carry, well...that seems a lot like robbery to me.

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3 Comments:

Anonymous winebroad said...

I've heard more than one restaurateur say that the by-the-glass price is often determined by the (retail) bottle price. Why? If they only manage to sell one glass of that wine, they won't lose any money on the bottle. Rather than making cutomers pay ridiculous BTG prices, why not, say, get a decent wine preservation system so the wines won't deteriorate so quickly? Paying $10+ for a glass of wine doesn't exactly encourage experimentation with new varietals/producers. That's why I love places that offer wines by the taste, half-glass or full glass. What fun!

August 23, 2007 9:20 AM  
Anonymous Anonymous said...

I think WBTG is often priced to cover the restaurant's cost, actually. Thus, if a $20 retail bottle costs them +/- $15, they will often charge $15 for the glass to cover their costs. All other pours are then profit. On higher moving items (say a KJ Chardonnay or a Blackstone Merlot), that "pour through" every few minutes, they might lower than a bit.

Alistair

August 23, 2007 10:47 AM  
Anonymous Anonymous said...

As a restaurant owner I find it hard to believe that you would not include overhead in your assesment. there is of course breakage of bottles, overpouring, spillage, paying staff to serve the glass of wine and wash the glass (yes they get paid more than tips). Air conditioning or heating to keep you comfortable while your enjoying your glass of wine. mortgage payments, land taxes, insurance payments, corporate, state and local taxes. I could give you a list as long as my checkbook register. Not to mention maybe a little profit perhaps at the end. The reality is that doubling or tripling a bottle price may seem extreme the actual profit is closer to %20 to %30 on a bottle if you factor in actual costs. Just because the first two pours pay for the bottle does not mean the rest is profit.

November 26, 2011 4:45 PM  

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