Why Is Wine in Restaurants So Freaking Expensive?

The simple answer is, ordinarily, it’s how restaurants stay open.

Expensive_Wine

Ah, dining out — what a luxury! You go down the menu and somewhere in between the burger and the tomahawk steak, the prices have steadily increased. But the wine list: That’s a whole other story! Why do bottles of wine cost way more than the food? Also: Why do they cost way more inside the doors of a restaurant than anywhere else in the outside world? What’s going on here? Alongside Chiara Shannon, a sommelier in L.A. who’s a wine buyer and manager of a retail shop, we’re popping the cork on some answers.

Let’s Cut to the Chase: Why Is Wine in Restaurants So Expensive?
The reason is simple: It’s the business model of restaurants. The food itself has a razor-thin profit margin — just 5 percent or so! That’s even true in high-end restaurants.  (Some foods have a healthier margin, however: Salad is a good example.) Anyway, no business can possibly survive off of this, and that’s what the wine and cocktail programs are for, according to Shannon.

It’s widely known and reported that a bottle of wine on a restaurant’s wine list can be twice its average retail price, and three times the wholesale cost. This is where restaurants make their money.

Huh. Why Not Just Mark up the Food?
Because people primarily come to a restaurant for the food, not the wine list. And people not only shop on price, they also tend to have a decent idea of what, say, a steak, a burger or a salmon filet cost. But wines on a wine list? Far fewer people know what any of those bottles are supposed to cost!

So We’re Being Deceived?
Not really. Restaurants have huge overhead costs: All that staff, perishable inventory, crazy rents that are always increasing, and if the restaurant has a decent wine list, they’ll often have a staff just for that — a sommelier or two and a wine director. These people earn much more money than a bar-back or a cook. They also manage the wine cellar, which is an important part of a restaurant. It’s the cash cow, and a whole lot of inventory is tied up in wine.

Still, It’s Just a Bottle of Wine! One That’s Marked Way Up.
Yeah, even Shannon sometimes balks at the prices she sees on wine lists. As a retail buyer, she knows she can get a bottle of wine that costs $280 at a restaurant for $70 in the outside world. But she points out that, theoretically, you’re getting a lot of added service when you purchase wine at a restaurant that you should take advantage of.

“You’re getting the proper glassware, you’re getting the sommelier who’s giving you his or her attention, giving you good recommendations and being available to answer your questions,” she says. “If you’re paying this premium, you should be getting these things.” Plus, if it’s a special occasion, these things are a nice, luxurious touch.

But It’s the Same Wine You Can Find at the Store, Right?
Yes and no. Restaurants can actually be a great place to experience new wines or rare finds. “In many situations, restaurants get special access to wines that don’t make it into the retail distribution chain, or they get access to special older vintages of wines that you really can’t find, so there can be ways as a consumer to justify [the added cost],” Shannon says.

The hard part is knowing where you’re getting overcharged and what’s a good value, unless you really know the cost of wine, “because you can really find gems in restaurants that have deep wine lists,” Shannon says.

What About Wines by the Glass?
Those are marked up the most! The reason is because restaurants have to open a bottle, so they mark it up to cover the loss of any unsold wine out of that opened bottle. But yeah, if you calculate it by the ounce, you’re paying more by the glass than by the bottle.

There is an upside to buying wine by the glass, though, according to Shannon. Because wines by the glass are popular and a big revenue driver, restaurants take them very seriously. Thus, the cabernet sauvignon, pinot grigio or chardonnay offered by the glass is going to be a very good version of that varietal. “You’re in good hands ordering glasses,” she says. “At a nice restaurant it’s going to be satisfying, hit all the marks and probably be exactly what you expect.”

Do Certain Types of Wine Get Marked up More Than Others?
Sort of. A cabernet or a chardonnay from Napa Valley (where good cabernets and chardonnays famously come from) will likely be marked up more than those varietals from elsewhere. Likewise, certain brands will be marked up more, because people will pay more for a Silver Oak cabernet, a Rombauer chardonnay or a Château Miraval Cotes de Provence rosé.

Who Sets the Prices?
It depends on the restaurant, but generally it’s either the wine experts and/or the people managing the money. It might be the sommeliers and the wine director working with the manager, or it may be a corporate person above them all who’s working across multiple restaurants. At a very small restaurant, it might even be the chef! But no matter who does it, it’s a serious undertaking, as wine is such a huge chunk of a restaurant’s revenue.

So a Bottle Is Going to Cost Different Amounts Depending on the Restaurant?
Correct — restaurants each set their own prices, so a trendy bottle at a trendy restaurant will almost certainly be marked up more than the same bottle at a mom-and-pop restaurant down the street (though Shannon says that trendy restaurant probably boasts a deeper and more interesting wine list that’s worth diving into with the help of the sommelier).

How Do You Find Value Then?
It’s not easy! You have to know a little bit about wine, though the internet is a big help. And, Shannon points out, you can always bring your own nice bottle to a restaurant and pay the corkage fee. They’re not just going to hand you a corkscrew — the corkage fee gets you the same service from the sommelier as if you bought a bottle at the restaurant.

But the best value, Shannon says, can be found in the middle of the wine list. Most people buy the most inexpensive wines, and so those get marked up the most. Same with the most expensive bottles of grand cru or whatever, because those customers know what they’re buying and have no problem paying $500 for a bottle. But in terms of value and the way costing works, you may be able to find mid-range wines from Burgundy or Bordeaux that will cost more than the least expensive wines but are actually a better value if you’re willing to spend, say, $50 more for it.

In any case, you’re not gonna get out of paying a lot of money for wine at a restaurant. But that expensive wine is what’s keeping the restaurant’s lights on, the staff employed and the ambiance lovely. You’re already dining out — you might as well splurge a little!