Wine prices: retail vs restaurant

One of the things that you often hear from wine marketers and salespeople is that wines that are available on the high street are very difficult to sell to restaurants. The reason cited is usually that the patrons are not willing to pay the markup that restaurants place on bottles (which can be upwards of 300% at times) if they can compare the price to their local Sainsbury’s, Tesco or Waitrose.

“I’m not paying 25 quid for that! I can get it for £6.99 at ASDA!”

Chatting to friends and fellow wine drinkers it seems that the trade sentiment is a fair reflection of general opinion and the rise of BYO culture in the UK during the tough financial times further testifies to this.

But why is this approach so pronounced when it comes to wine as opposed to other alcoholic drinks?

Walking into my local Tesco store this week I was welcomed by a beer promotion. Three cases (15 x 275ml glass bottles) for £20. This works out to about 45p per bottle. At normal price they’d still work out to just 66p each.

A thirty second walk  from the store is the Pizzeria on the Green. This popular local serves great value pizza and pasta and I usually have a bottle of San Miguel to accompany my meal – the same beer that is on promotion at Tesco. The pizzeria’s beers are priced at £3 which is a fairly reasonable price by restaurant standards. But that is still almost 5 times the regular price in the supermarket up the road.

Why is it that consumers are evidently so quick to complain about the markup on wine, but are happily coughing up for the same beer and cider brands that are stocked in every high street retailer and supermarket? That logic doesn’t seem to stack up.

  • Is it because the markups are more noticeable on a higher priced product? £25 opposed to £7 is a lot tougher on your chip-and-pin than £3 opposed to 50p.
  • Are beer drinkers are more loyal to their brand and are quick to order their regular? Perhaps Lulie Halstead at Wine Intelligence could shed some light here…
  • Has the discounting associated with supermarket wines (by association to those that don’t discount) cheapened the image of  these brands, making them unwanted on a restaurant table when you’re trying to impress?
  • Does all the promotion and advertising that beer (and spirits) brands elevate them above the same pricing rationale faced by wine producers? The fact that Champagne bucks the still wine trend may support this.

Wine brands are often designed with a very clear distinction between being on-trade (restaurants, pubs and bars) and off-trade (retailers) focused. Men and women with fancy glasses and tightly fitting clothes spend many hours tweaking labels and packaging to best communicate with consumers in the target channel and demographic.

I’m not saying that wine brands can be compared to all other consumer goods or drinks categories. But the apparent difference in the perception of price barriers in consumers minds when comparing wine to other alcoholic beverages should be something for wine marketers to consider. Crazy drinks markups in restaurants are damaging to producers, but the difference in perception is worthy of further discussion.

Please leave a comment below if you can shed some light on this topic!

4 Responses to “Wine prices: retail vs restaurant”

  1. Excellent post and one of the annoying trials of being a restaurateur. I think you’re right when you say it’s to do with the actual cost. How much does a litre of post-mix coke cost – single figure pence I believe but we still pay pounds and pounds for it at every venue from McDonalds upwards with nary a whinge. It just seems that amounts under a fiver don’t register on the scale. How to counteract this? No ideas – possibility of going to the old-fashioned carafe of house wine might help more casual restaurants but in general, I think people just have to try hard to source different products from retail. Thank god I sold my restaurant 2 years ago!!

  2. harry says:

    Great Post. I think you nail it with the first an last reasons for this difference in perception.

    I also believe for a lot of people there is a small fear in ordering wine, especially when the price starts rising. I think this is because many people – most people really, including myself – are not always 100% sure what you are going to get. With a lack of knowledge it is very difficulty to asses what sort of value you are getting.

    I don’t minds spend R50-60 on a bottle of wine that I may not really like, but to spend 200 on a bottle that could possibly be so overoaked you may as well have B.Y.O from B&Q; well that you are less inclined to do. The more we learn about wine the less dangerous those situations are for our dinner and our pocket. In good restaurants there should always be one or two wines that really offer value. That over deliver. but it isn’t always obvious.

    With beer it is different. I know if I order a Heineken I’ll get a Heineken. This is perhaps where advertising and marketing come in. With Champagne we are pretty sure what we are getting. Something fun, something fizzy, something that generally costs a little more. Spending extra money on Champagne is part of the fun, it also insists that you enjoy it.

  3. Chris says:

    It is true that for average wine consumers like me the wine list remains challenging, especially at the middle of the road restaurants where there is not a knowledgeable person to help you. With my budget I tend to explore new wines through retail purchases, so when it comes to ordering at a restaurant I tend to go regional and hope that I am lucky with the producer as I rarely recognise them. I guess a quick smartphone search would do the trick!
    What do you think about fixed value mark ups as opposed to a percentage or margin? Perhaps with a couple of price tiers built in. As you have both been in the restaurant industry, is that a feasible option? If a bottle of wine that costs a restaurant £10 is worth the markup of £20 to get to a selling price of £30, surely a bottle that costs £50 can’t logically be worth an additional £70 to get to a price of £150 at the same markup?

  4. Sandi Bryant says:

    A fascinating discussion, Chris. Indeed, the discrepancy doesn’t seem logical – seems that middle-market restaurateurs are in a no-win(e) situation!