Article first published as Wineries and Vanity - Could I Be Wrong? on Technorati.
I buy wine for a specialty wine retailer, and I’ve been buying wine for one establishment or another for over 17 years. I’ve purchased a lot of wine during that time, and during that time I’ve built up quite a bit of curiosity and resentment toward the advantaged pricing structure and preferential treatment that wine wholesalers show restaurant wine buyers. Why on earth should restaurateurs pay less than retailers for the same bottle purchased from the same wine wholesaler? In trying to answer that question let’s consider a few things.
First, consider that wine retailers sell one hell of a lot more wine than restaurants do. Many more people will shop in a wine store on a given day than will consume wine at lunch or dinner, so the rate of purchase/consumption in restaurants can safely be described as very low versus that same rate among those visiting wine shops to buy their bottles. Obviously, wine wholesalers end up making much more money doing business with retail shops than restaurants…so why do they give restaurant wine buyers preferential treatment?
Second, the profit margins that restaurants build into wine are tantamount to highway robbery, to put it nicely. Much of a restaurant’s profit, at least in Colorado, is derived from beverage mark-ups because mark-ups on food are less easily disguised. The mark-up on a single bottle of wine can be anywhere from two to five times as much as the wholesale price that the restaurant paid the wholesaler for the bottle - ridiculous.
Not only is a wine lover held hostage by a restaurant’s wine pricing as they dine, but those who go ahead and spring for a grossly overpriced bottle of wine to pair with their meal end up paying at least double what they would for that exact same bottle had they purchased it from a wine retailer. What’s more, in the majority of cases the wine on the restaurant’s list is the same vintage that is currently available on retailer’s shelves; rarely can an argument be made that the higher price of a restaurant’s bottle is to compensate for the cellaring equity the bottle represents.
The fact is, for the average customer, buying wine ‘A’ in a restaurant is much more financially prohibitive than buying wine ‘A’ in a retail shop, proving that retail stores offer preferable access to wine from a customer’s financial point of view. These things would suggest that retail shops would have a higher level of importance to wholesalers than restaurants do, but this is not borne out in reality…so, again, why do they give restaurant wine buyers preferential treatment?
Third, the diner-sommelier relationship can be a difficult one. Sometimes diners end up swallowing (pun intended) the wine recommendation given by a sommelier, but a diner’s feelings of ignorance surrounding the subject of wine, the diner’s need to avoid feeling taken advantage of, or even the diner’s skepticism surrounding the sommelier’s abilities can be at the root of unease between the diner and the sommelier.
A friend of mine, a well-educated wine person who used to work as a sommelier and currently works for a wine wholesaler explained the diner-sommelier relationship to me like this, “a lot of diners are intimidated, or figure that they’re getting screwed or being up-sold by sommeliers, so diners often end up ordering a name on the wine list that they recognize in order to avoid the sommelier or the sommelier’s suggestions.” Now, I’m not claiming that things always go this way in a restaurant, but a meal-long relationship with a sommelier is more enduring and potentially challenging than a short exchange with a wine specialist at a retail wine shop.
The length of an exchange at a retail shop is easily dictated by the consumer, it’s usually brief, and often there is plenty of objective information provided right next to a given bottle in the form of ‘shelf talkers’ that list critics’ ratings and reviews. So, the retail wine purchasing environment provides objective and information-rich, short interactions, controlled by the consumer. It’s hard not to think that retail interactions when buying wine are more consumer-friendly than restaurant interactions, which ultimately benefits the wholesaler via the sales of the retailer. So, one more time, why do wine wholesalers give restaurant wine buyers preferential treatment?
In the end, retailers push much more wine, at much lower prices, to many more people, and do not present the encumbrance of the potentially contentious sommelier-customer relationship. Yet wine wholesalers still give preferential treatment and pricing to restaurant wine buyers.
Why!?
I asked this question to a wine broker not too long ago (wine brokers are those who represent one or more wineries and act as a liaison between the winery and wine wholesaler, often offering sales support and other benefits), and the broker said that it was the wineries themselves who make restaurants a priority. Regardless of the fact that retailers sell the vast majority of most wineries’ products, those who own wineries choose to offer price breaks to their wholesalers to pass along to restaurants. Not to retailers.
Does this make rational business sense? Restaurants sell less wine, sell wine at higher prices with much higher mark-ups, and sell wine to far fewer people than retailers, but wineries direct their wine wholesalers to give restaurants preferred pricing while thumbing their noses at retailers…the same retailers whose wine sales to the consumer are keeping those wineries viable as business entities.
Why would wineries do this, you ask? Vanity, I say. They crave the opportunity to say “our wines are poured at Blah de Blah restaurant, don’t you think we’re the bee’s knees?” and have someone respond “yes…yes, you are.” Vanity. What else could it be? You tell me.
Nathan Frye, CWE, CS, CSS
Manager
Grapes Wine Market & Spirits
www.grapeswinemarket.com