Wine prices

Why is it so expensive?

Katalin Kiszel-Kohari - April 25, 2020

No, it is most definitely not greed. I have been asked often enough why bottles of wines cost considerably more in a restaurant. The answer is somewhat more complex than you first think.

At least in a respectable fine dining restaurant. I am not talking about chain-restaurants with meal-deals and Curry Wednesdays. They feed huge quantities of people and serving vast amount of drinks and they have an enormous buying power, so that makes things much cheaper, wine selections much shorter, service less personal. Logically you need wines that are cheap and available in great quantities all year around. No disrespect for them. I am not snobbish. Everybody needs quick, cheap food from time to time and there is nothing wrong with that. They are perfectly ok places, but their prices are not relating to a bit more upmarket establishments where you go to have a real treat on a special occasion.

In such a restaurant you possibly find a sommelier with extensive knowledge who assembled the wine list himself while not relying on the local sales rep to bring some ready-made menu that would not change for a year or two. Not to mention that the wine list will be somewhat broader than in the local pub. The sommelier very much likely uses more suppliers for the wines for better coverage and looking for interesting items as well as must haves (Burgundy, Bordeaux). Most suppliers depending on the locality, are counting on selling the bulk of their products from the lower end of the scale, therefore not necessarily stocking a great variation from the higher end. That makes it necessary to look elsewhere, as you do not want to sell the exact same wines as the restaurant next door. First, you need to have a supplier who not just buying through big importers. Although that makes wines again cheaper to an extent, but not very exclusive, even though you can cherry pick your favourites. You better find a good, reputable independent merchant who has exclusive releases, preferably with a good wine buyer. Usually you can find real beauties and fascinating items that might cost slightly more, but you not going to find it in the local pub for half the price. If that sommelier is any good at his job, he will certainly change the menu on a regular basis. When you have limited supply, you can run out of particular vintages very easily and you need to find something similar. A more upscale, continuously adapting, more extensive wine list cost more in stock (just imagine the price of over 400 bottles of wines on a 70 bin wine list and that is still a smallish cellar), in cellaring (larger, appropriate storing facility with fridges), in glassware and other serving equipments (decanters, different types of wine glasses, filters, wine stands, wine buckets, linen kept clean at all times), in trained staff (sommelier, sufficient number of servers) and trivial things like wages, electricity and other taxes. The list is quite long. These things can add up and they do.

In most places the gross profit (GP) is around 60%-65% which sound an awful lot, but it is not an average across all items, and it is not just profit after all. (We just went through how much else needs to be paid from your bottle of wine.) There is another big but here. You should be counting the facts there is a 20%VAT on every bottle, that you must put on it as soon as you sell it. Furthermore, you cannot put this high gross profit on everything, usually just on the lower end. The notoriously expensive Champagnes are usually nowhere near to that mark. (Not to mention the vagaries of the weather that decimated Champagne in the past couple of years, so the prices went up by a significant amount in 2019. Additionally, Champagne has a much higher excise duty on compare to still wines, adding insult to injury.) Pricing works like a sliding scale. The more expensive the bottle is, the higher chunk becomes VAT and the less gross profit can be realised. It is a common misconception that the cheapest bottle is the value for money item.

Although a good sommelier would put a good, decent allrounder wine as a house wine, but it is a fact of life that said wine is possibly cheap with the highest GP on it. You got ‘more’ wine for your money if you go above the house selection. On the sweet spot of middle ground, you can find the interesting stuff, those maybe forgotten, underrated items that can put a real smile on your face. After all we have been talking about a special occasion, you are not doing it every night.

I am not saying that these are the rules everybody is abiding to. This is not set in stone, but more like a common practice that has its financial and economic reasons. All I wanted is to give an idea about how pricing as such works and to point out there is much more to factor in than you might think.

Photographs by The Tannin Addict.