I am probably the worst person to bring up the topic, not because I am not qualified on the subject – although that may be absolutely true – but because I understand and am sympathetic to all viewpoints.
Usually people who “stir it up” have an agenda or are fully on one side of the issue at hand. Me, I’m pretty certain I can see all sides. But someone has to bring reason and sanity to the fore. That very seldom falls on my shoulders but in this case, it has to be someone and I’m handy.
Restaurant pricing and policy regarding beverages is all over the map and a pitifully few restaurants are on the right side of this issue. It’s important to vent this topic because some restaurants are actually costing themselves valuable income with their policies and they are blind to the loss.
In fairness to those establishments, you cannot measure a loss of revenue that never even comes close to being apparent at your place of business. But there is a monetary loss and it can be significant.
First of all, in most restaurants, the pricing of wine and cocktails is way out of line. The diner is paying too much for these items. What many restaurants use as the formula to upcharge what they pay for the product, like the wholesale cost of a bottle of wine, is out of date. And the application of the percentage mark-up to the wholesale cost of a bottle of wine to arrive at the diner’s cost is, in the long run, hurting the bottom line it is supposed to support. The diner resists items priced above a certain cost, which varies from diner to diner. If a price seems too high, then it’s a no-go. Prices that seem reasonable are magnets for purchase.
Some restaurants use 20 percent of a wine’s wholesale cost as a mark-up number. Others use more. Few use less. But as the cost of a bottle of wine to the restaurant varies, then the restaurant applies a sliding scale. Let’s say the raw cost of a bottle of wine is $11. Applying the 20 percent rule does not yield to the restaurant enough profit to cover the cost of purchasing the wine, storing the product, holding it for some period of time, and then the cost of paying a server to get it to your table along with glasses which the restaurant has to buy. So a higher mark-up is applied and consumer purchasing resistance begins to set into the experience.
Using the same example, if a bottle of wine costs $130, as some Champagnes and fine wines do. then the 20% upcharge is far too much to cover those cost items outlined above. Many restaurants just feel overall it all averages out. But it does not, leaving the folks who purchase better wines with the burden of covering the serving profit for those folks who select from the lower price category on the list, and this is where the action is.
Many restaurants simply factor in a “reasonable” amount of money, not necessarily a percentage, which they think they need to have wine and cocktail sales be a profit center on its own merit. The grander white tablecloth restaurants use a higher percentage which actually turns out to be more of a dollar mark-up than those casual dining spots who do not offer as complete a selection across all price points or points of origin for the wine.
As for cocktails, pricing is usually based on what the establishment thinks the market will bear. Factoring into the pricing decision is what the competition is charging for the same drink. All cocktail pricing is based on point-of-resistance from the customer. Where is the level of pain the consumer sets in his/her mind?
What is missed on all approaches is that today’s diner is a knowledgeable consumer. They may not have an exact figure in mind but we are all carrying around instruments capable of delivering the facts about pricing on every item. The diner’s smartphone can be used at the table while considering the beverage purchase. Consumers are no longer flying blind as to the best deal on the wine list. Verifiable proof is at our fingertips.
If a restaurant gains a reputation as being fair about wine costs, and there are darn few, they tend to attract more diners, sometimes even with the consumer forgiving a less than stellar food offering, but that is not a usual path in food-savvy New Orleans. Since I assume that restaurants want to have butts-in-chairs, those who take the right and fair road for the consumers can win a big game: more butts hitting the chairs more often.
The other key point where many restaurants are standing on the dock watching the boat sail away is wine corkage. There is no logic to high corkage costs. Those high charges for the diner to bring in their own bottle would be in the range of over $14.
What is the real cost for the restaurant for working with a bottle the diner has carried across the threshold? Glasses and a little labor. Many restaurateurs charge a high corkage because their minds are focused on all the wine they had to buy and store in the back and they are not selling it to people who bring their own product to the table. But, unlike beef and crab, wine is not a perishable item. In fact, older wine becomes more valuable. There is really no loss to the restaurant for consumers carrying their own stuff with them. And as the restaurant’s wines age, there is every reason to charge a higher price when the wine is ordered at another time.
Plus, those older wines on the list can become a magnet for knowledgeable diners who can get the wines no place else.
Words of wisdom to consumers who want to bring their own wine into a restaurant: be considerate. Don’t bring a wine into a restaurant just because you don’t want to pay the restaurant’s prices for wine. Bring your own wine into a restaurant because it is special and time to be enjoyed with the restaurant’s cuisine. Stopping by a discount wine store to pick up a cheap bottle for your dining experience is not right or fair.
Nor is it fair to bring a wine into a restaurant when that wine is on the wine list.
I heard this week of a restaurant that told a potential patron who called to see what the corkage policy was that the restaurant does not make money on the food so bringing wine in was literally putting the restaurant out of business.
Are we children here? Who believes that a restaurant does not make money on its food? And it if does not, maybe its food and prep costs are way too high or maybe the restaurant should get into the bar business full-time.
The Voice of Reason on this entire issue has gone hoarse. Fairness and common sense to all parties is achievable. Now, let’s eat, drink and be merry!
Read Happy Hour here on MyNewOrleans.com every Wednesday, and listen to The Dine, Wine and Spirits Show, hosted by Tim, every weekday, 3:00 – 5:00 p.m. on WGSO 990AM and streamed at www.wgso.com. Also check out Last Call, Tim’s photo-feature every month in New Orleans Magazine. Be sure to watch "Appetite for Life" every Thursday evening at 7:00 p.m. on WLAE-TV, Channel 32 in New Orleans.