Where does my wine money go?

If you’ve ever felt brutalized by restaurant wine prices, you are not alone. Let’s take a high-level view of where your money goes when you drink at home or in a restaurant.

Here, an imported bottle that a winery sells to an importer for $10 ends up as $28 retail and $59 in a restaurant. Following the charts clockwise, you can see how the price builds from winery through to restaurant or retail.  These numbers represent an average case and are based on Deborah Gray’s How to Import Wine.

restaurant retail

As you can see, restaurants are aggressive with their wine markups– bottles typically sell in New York for three times wholesale. Rarely will you see lower markups, but you often see higher. Clearly, drinking wine at home is a better deal. Another option is paying corkage, which at $25 a bottle in many places makes more sense than paying the markup — not to mention you can bring a better bottle of wine. Good BYOB restaurants are also a nice option.

I think the gouging that happens in restaurants is a bit sad since it  flies in the face of the concept of wine as an everyday beverage and an essential part of eating well. On the other hand, wine drinking is booming in America so I may be wringing my hands over nothing. Ultimately, as more people drink wine they will demand value and quality and hopefully these markups will fall.

Retail prices, however, actually amaze me. To drink a delightful top-quality Beaujolais for $20 is nice. But to have it thousands of miles from its origin, in perfect condition and available right down the street — that is great. Considering all the costs involved, I tip my hat to the better wine stores of New York for offering such value while turning a profit.

For simplicity these charts do not include sales tax, and other costs (such as import duties) are embedded in the figures. By “retail” I mean a quality independent wine store such as those I list on this site, and by “wine” I mean artisan wines from real wineries — not industrial-scale products, for which the business model is different. Similarly, markups on very cheap or very expensive wines may differ significantly.

For a nice overview of fine-dining restaurant wine markups see this article from the Wall Street Journal.

About andrewy

I love wine and writing about it, because it's basically the most interesting thing in the world.
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5 Responses to Where does my wine money go?

  1. This always astounds me. I have a colleague who is a wine buyer who refuses to buy wine in restaurants for this reason. I bought some wine from my company at R50 (RSA) a bottle at cost plus vat. I then saw it in a on a menu for R210. It blew my mind. Corkage is really the best option.

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  2. Mariana says:

    I’ve often felt brutalized by restaurant wine prices. That’s why I now drink box wine. At home. Thanks for your post!

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  3. It still amazes me that a retailer gets to add that much to the bill. One of the many reasons we buy as much as we can in Europe straight from the winery and bring it back on the plane (usually 15 bottles per person)…even if US customs would charge us customs duty (which they yet have to do, even when we brought 30 bottles each), I would gladly pay that.

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  4. mvcrews says:

    It’s easy to call restaurant prices egregious, but they do have to make money somehow and generally all of their margins come from alcohol and not food sales. While I’m a cheap skate and always opt for take out, I recently finished putting together the wine list for a Portland restaurant and can offer some insights into where the values.

    Wine by the Glass – This is where the restaurant makes the most money. Glass prices usually reflect the wholesale price the restaurant paid for the bottle, so assuming you get five, 5-ounce pours per bottle you can see why they restaurant really wants you to buy by the glass.

    Lower End Bottles – These sometimes seem like the best values and a lot of people instinctively buy “second cheapest” bottle on the list. But restaurants know that these will sell by virtue of their price point and so these bottles always have highest markups built into them.

    Higher End Bottles – If you can afford it, this is the best chance at finding a decent value as this is where the most pricing inconsistencies exist. Because these have higher inventory costs and are generally slow sellers there’s often some inconsistencies in the markus up these because either the restaurant wants to move it or because the person who priced it did so years and doesn’t reflect current value.

    Great blog Andrew!

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