Why Does Wine Cost So Much in Restaurants?

And Why You Should Keep Ordering Off Their Wine Lists

With the widely publicized closure of Noma, and the reasons given for that closure, the fine dining industry is being examined with a fine-toothed comb by professionals and guests alike to see where there is promise of financial viability. Pre-dating the Noma question, however, is a tightrope that guests and sommeliers alike have had to walk: Wine is way more expensive in restaurants than it is on retail shelves. Is it not simpler and cheaper for guests to simply buy their own wine at a fraction of the cost and simply absorb the corkage fee? It will definitely be more cost effective any way. Especially on the high end, where a bottle of Krug’s Grande Cuvèe runs about $275 in stores, but will touch $450 on some restaurant wine lists. Even if the corkage fee is exorbitant ($50+ in my view) then the guest is still saving money. For now, we will ignore the fact that a corkage program is actually generous in itself. Imagine a guest bringing in their own ribeye and the restaurant charging a ‘searing fee.’ The fact remains though, that when discussing pricing around wine, restaurant professionals are behind the 8-ball when trying to justify the prices paid by guests.

The economic advantage of buying wine for off-premise consumption (at home) appears to be commonly known among American consumers, as approximately 80% of the wine consumed in America each year is purchased for off-premise consumption. Examining the “life-span” of wines in off-premise retailers, reveals the obvious reasons why consumers largely prefer this method. International wines are first bottled and then shipped to an importer in the United States (with a mountain of customs red tape), and then the importer sells the wines to a distributor. The distributor then sells the wine to a retailer (either off-premise or on-premise) and then the wine is ready to be in front of a consumer. For an off-premise retailer, the wine is simply sold to a guest, who takes it home, either to cellar the wine or to drink it in short measure. That’s it, the retailer can collect the guest’s money and restock the shelf for next time.

In a restaurant or bar (where wine is sold for on-premise consumption), the wine only takes one more step, the guest drinks the wine there. So, what? In the process of serving wine to guests, restaurants have lots of expenses that guests assume themselves when buying wines to drink at home. First, the restaurant has to pay someone to order the wines, though retailers of every kind have this expense to consider. Second, the restaurant has to store the wines for guests to consume at a later date. Again, does a store where wine is purchased not have this same expense? Yes, but also no. One thing most people will notice is that at a store, there is almost never a printed list of wines available for purchase. A restaurant, meanwhile, gives the guest a wine list when they are seated at a table. Regarding wine storage, this is indicative of a fundamental difference between off-premise wine consumption and on-premise wine consumption. In a retail store, the wines are displayed on a shelf, waiting for you, the guest, to look around and locate the wines that you want to purchase. Even if you have a store associate helping you, the primary onus of locating that physical bottle falls on the guest, and then the guest (in most cases) brings the bottle to the checkout counter to pay for the wine and go on their merry way. In a restaurant on the other hand, usually a professional graphic designer is paid to design the layout of a wine list, then a sommelier or manager has to spend time editing and updating the list to ensure the selections available are accurately reflected on the printed list, and then the lists are printed, and this is not usually on letter sheets that costs $20 for 20 lbs on Amazon. I have previously worked for a restaurant that spent around $12,000 on menu paper in a year! If the restaurant has a sizable list, often a book that is bound in leather or similar materials is utilized to hold those precious pages. Such books often run $20-$60 per book, so there is yet another associated cost involved in simply having a wine list. Thus, the design costs, editing costs, and material costs of the physical wine list are cost number one that on-premise retailers assume that off-premise retailers avoid.

When I purchase a bottle of wine to drink at home, I take the bottle home and drink it in my lovely Riedel/Zalto/Whichever-brand-you-are-loyal-to-and-can-afford. Stemware is a huge variable in the wine drinking experience, and a quick internet search reveals that whoa, some of those glasses (don’t even start on decanters) are quite expensive. Restaurants who care about wine service must have excellent stemware, and the restaurant has anywhere from 1-3 glasses per available seat in the restaurant on hand at all times. This is because many guests will order multiple glasses or bottles of wine, glasses break, and it looks cheap to run out of glassware or run very thin. Some restaurants even have multiple shapes of wine glasses, which is a can of worms for another post, but it can add expense because they have to be ready to serve any of the bottles on their list in the stemware they think is most suited to the wine. For excellent stemware, the low-end cost is around $7 per glass for a restaurant, and costs per stem can rise in excess of $50 if the restaurant wants those featherweight Zaltos. Considering that a handful of those glasses break nearly every night, its a considerable cost, but one that has a massive influence on the restaurant experience, and the perception of its quality.

Nearly all restaurants that serve wine have a program of wines which they offer by the glass, rather than by the bottle. When a restaurant opens a bottle with the guarantee of only selling one glass from that bottle, the restaurant is assuming a certain amount of risk. While restaurant programs that are well managed have very little spoilage or waste, unexpected things happen, and it is not the guest who is on the hook for that three-quarters of a bottle that gets dumped. This is heightened for restaurants that offer pre-fixe or degustation menus with wine pairings, as there is a constant balance in predicting when to open more bottles and when the bottles will sell. This amount of risk may seem small in a single instance, but when it is taken into account that wines by the glass can often make up for half (or more) of an institution’s wine sales, this conversation turns to tens of thousands of dollars of assumed risk over the course of a year. The fact that restaurants are willing to assume this risk ultimately means they have to charge a premium to protect the business, and though wines by the glass are the among the most affordable by unit in the restaurant industry, they are often among the most profitable for this reason. It’s far less a matter of restaurants gouging guests, and more the fact that the convenience of having a glass rather than a bottle (and the aforementioned risk undertaken) justify a much higher markup.

The conversation around labor costs and employee wages is certainly a sensitive one in the restaurant industry. Tips, minimum wage laws, living wages, and many other factors drive the conversation that is far too large for this blog post. The relevant factor to this conversation however, is the simple ratio of employees to guests. If you go to a wine shop or a grocery store, there are maybe five employees clocked in, manning the wine section at a given time if the shop is really large or places a huge emphasis on personalizing the experience. This number does not really change whether or not there are five or fifty people in the shop. If anything, the number goes down if it’s slower. To serve one three-table section in a high-end restaurant, there is (ideally) at least one server, one backserver or server-assistant, a food-runner, a bartender, and a manager. This is without luxury positions like a sommelier, and so that team can serve a maximum of 40-50 guests on a given night. When the restaurant does 200 covers, there will likely be at least three food-runners, four backservers, five servers, two managers, and three bartenders. While the hourly expenses for these positions does not necessarily match evenly with that of a grocer or wine shop, it also does not factor in the expenses of the back of house team. Since wine is almost never served in a completely isolated environment, it is very difficult to directly compare the labor costs of two completely different business models. The one thing that is for sure, though, is that restaurants are a far more expensive operation to run from a labor perspective than a wine shop. Perhaps a grocery store could compare regarding labor cost percentages, but wine at a grocery store is generally a much smaller percentage of their total sales, and so they have more cushion to pay employees based on their business model. And while I have many opinions about labor and pay as it pertains to the business model of many restaurants, the one thing I can say (opinions notwithstanding) is that labor is usually a restaurant’s largest expense, and some of that labor directly goes toward the acquisition, storage, and service of wine. Therefore, some of that cost has to influence the pricing of wines in the business model, contributing to the higher prices.

When all of these factors are considered, why do some people continue to pay these premiums for wine at restaurants, when the same wines could be bought and consumed for so much less? Here is the crux of the matter, and the point that those who complain about wine prices at restaurants completely miss: Restaurants are not about getting things as cheaply as possible. People do not dine at restaurants because it is the most economically efficient option. This fact does not diminish the value of what restaurants can offer, however. Anyone who has experienced the magic of excellent hospitality, and the poetry of stellar wine service especially, has never questioned whether or not the price was justified. Thus the magic of service and hospitality is glimpsed for a moment in this conversation. A dollar value can never be placed adequately on the leisure of being served, being cooked for, and being welcomed into a restaurant. The leisure of experience is invaluable in this sense, and the magic of a spectacular meal (complete with wine pairings of course) actually has very little to do with the price. The dollar value of a given experience is ultimately a wager on the part of the guest that they will enjoy the experience more than they enjoy having the dollars they spent. And if you have walked away from a magical evening without evening questioning if the price was justified, then you know that restaurants are worth wagering on, and you will hopefully keep buying wine and dining out. If you have a special bottle from your cellar that you have been saving for a celebration, the restaurant can and should be happy to accommodate your occasion. The best wine programs will still have hidden gems, and some value buys that the sommelier can clue you into. So, do not mistake this as an article arguing “yeah, it’s expensive but just shut up and pay.” It does require some inward honesty to say that great wine restaurants are usually at least somewhat price prohibitive. But, before you compare a restaurant’s prices to those on a wine app that will remain unnamed, consider some of the above factors, and then relax, because hopefully you’re not there to get the cheapest experience possible. I hope you’re there to have a leisurely experience, curated by people who are invested in ensuring that you have an excellent time and that every dollar you spend is returned in an excellent meal with great wine and warm hospitality. Perhaps this provides some insight into why guests react so negatively when restaurants do not seem worth the money. They wagered their dollars, and the restaurant did not deliver. Thus restaurants are ever a two-sided coin, guests will continue betting, and the best restaurants will always be those that deliver an experience that merits another wager.