National Consumers League

A reason to whine about wine

samBy Sam Hamer, Public Policy Intern  To all the Romeos and Juliets out there, your romantic dinner may have become more expensive than you anticipated. That’s because wine prices in American restaurants have risen to prodigious heights, or so contends The Wall Street Journal wine columnist Lettie Teague.

In her June 2013 column, “Highs and (Rare) Lows in Restaurant Wine Prices,” Teague surveys the wine lists of several fine-dining restaurants in New York City, revealing that the practice of marking up the price of wine bottles to four or five times their wholesale value has become commonplace. Teague cites such upscale restaurants as Montmartre, a French bistro in Chelsea, where the Pinot blanc (wholesale price $16) sells for a whopping $67 in house. For patrons of Manhattan’s fine dining scene—likely the most gourmet in North America—splurging on a $67 white wine may not be so outlandish. Yet diners across the United States and Canada are feeling the pinch. When CTV, a Canadian news station, surveyed a dozen restaurants around Winnipeg, Manitoba, they found price markups of over 300%.

As Teague warns, this sort of pricing can keep people from drinking wine, a real shame for more than just the Journal’s wine columnist. Of course, no restaurant patron can expect to pay merely retail price for a glass or bottle of wine, and virtually every restaurant wine purchase includes some price markup. Inputs such as a liquor license, fancy glasses, cellar space, and binders and stationary for the wine list don’t come without a price. Restaurant owners must also pay a sommelier and/or train waitstaff in how to pair and serve wine. Moreover, the fact that fine restaurants earn relatively small margins on their entrees makes alcohol sales necessary to maintain relatively high expenses. Even Teague concedes that wine is a “revenue center.”

Whether or not restaurants can justify a four-fold uptick in the price of wine can and will be debated. Some wine aficionados have contended that wine prices should be even higher, analogizing that “it costs 25 cents to make a cup [of coffee], but they’re going to charge $4 because there’s labor, cleaning and all of those factors that get priced into the markup.” With or without markups, wine prices have risen recently as the industry faces considerable production challenges.

In 2012, wine inventories dipped 6.1% to their lowest stock in over 30 years on account of poor weather. Vineyard prices also swelled, with a prime acre in Bordeaux soaring to $1.3 million, 10% higher than the 2011 price. Prices were also driven higher by consumer demand. As the LA Times reported, “Last year, wine sales in the U.S. reached a record high, rising 2% from 2011 to 360.1 million cases worth an estimated $34.6 billion.” The combination of a production shortage, heightened demand, and amplified markups(?) have buoyed wine prices by an average of 5.35% at upscale restaurants in the past 6 months, according to a report released by Restaurant Sciences.

For consumers looking to skirt restaurant markups, 26 states and 6 Canadian provinces grant diners the privilege of carrying in their own wine to be served with dinner. But BYOB laws, as they are called, don’t always let diners escape the additional costs of consuming wine in house. Many restaurants will charge a “corkage fee”—frequently $25 or more at high-end restaurants—to cover the costs of glasses, table service, and lost revenue on account of a customer’s decision to not purchase wine from the menu. So then what is a cash-strapped Romeo to do when he wishes to woo Lady Juliet over dinner and a bottle of Merlot? As one blogger put it, the wine-buying public should seek out establishments that put emphasis on a fairly-priced wine list. By the same token, diners should call out restaurateurs who charge for excessively priced wine, i.e., more than three times the wine’s retail value. For individuals particularly passionate about the issue, the upstart nonprofit American Wine Consumer Coalition (AWCC) provides an outlet for advocacy on behalf of wine consumers.