Wine Markups Getting Marked Down

You know the feeling. You’ve just sat down at a restaurant and are getting ready to order the wine. But what’s this? That modest little Merlot you paid just $10.99 for at the wine store yesterday costs $32 here. So you order something else--or you order nothing at all.

But slowly, Southern California restaurateurs are re-evaluating their wine-pricing policies and winching prices downward in response to what some wine industry executives see as a backlash by consumers tired of paying more for wine than for entrees.

Although this downscaling of wine prices isn’t commonplace yet, the new policies of two restaurants, announced last week, is a strong indication that lower wine pricing could generate more profits and more loyal patrons.

At Clinton Street (in the West Hollywood spot that once housed the Melting Pot), prices for the 20-wine list are established by taking the wholesale price of each wine and adding $8 a bottle. Or, in the case of our theoretical $10.99 retail wine, about $19.

A similar policy will go into effect at Vida, which chef Fred Eric plans to open this month in the Los Feliz space that was until recently Duplex. Less than $8 will be added to the suggested retail price of each of the approximately 100 wines on the list. Using our $10.99 retail wine again, about $18.

The programs were instituted by owner Russell Ruscigno at Clinton Street and general manager Dean Gold at Vida; both feel diners should get better wine values and view standard pricing schemes as flawed.

Dining out, often a pleasant or celebratory occasion, ought to be the perfect time to order a bottle of wine. And decent wine enhances the flavor of food. Yet many restaurant wines are priced out of the reach of average customers. Following a standard pricing formula, most restaurants take bottles of wine that cost $10 wholesale and mark them up to $30, or more.

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Certainly, the small percentage of restaurants that cellar great red wines until they mature are justified in charging more because cellar time equals money. But most wine lists have few older red wines, and it seems that currently available wines should be priced with more attention to the real-world price of a wine.

Instead, pricing policies are often justified by restaurant managers, who say, “Well, we have fancy glassware,” or “We carry a large inventory,” or “We have a Monet in the men’s room,” and wine sales are expected to pay the bills for those things. Especially now, it’s tough for restaurants to make a profit and restaurateurs see liquor tabs as one of the few ways left in the business to make any money.

But formula pricing is changing, says Reuben Katz, director of food and beverage operations at the Culinary Institute of America at Hyde Park, N.Y., who admits that a three-times-wholesale (or twice retail) formula once was a part of culinary education programs.

“Today that formula is getting reduced,” Katz says. “(Restaurant) people are picking lower multiples because they are finding more resistance. Customers are better educated. They question pricing more than they once did.”

At Green Street in Pasadena, wine is now priced at just twice wholesale. The new Tommy Tang’s, set to open soon in Pasadena, will price its wine in the same manner. (Prices are higher at the original Tommy Tang’s on Melrose, with a markup of about 2.6 times wholesale.)

Butterfield’s on Sunset lowered wine prices more than a year ago and response has been so good that wine buyer Joy Shollenbarger says she is trying to keep the markup at less than twice wholesale.

The Silver Grills in Encino and in Beverly Hills offer special wines at cut rates, such as the current Ferrari-Carano Chardonnay and Cabernet Sauvignon at $22 a bottle; it sells for as much as $35 elsewhere. At the Capri in Desert Hot Springs, all wines are priced at about $10 over cost, including the 1989 Guenoc Langtry Red, which is selling for $35, the same as you would expect to pay in a wine shop. Three other restaurants with inexpensive wine pricing policies are San Gennaro in Brentwood Village, and two Newport Beach restaurants, Sapori and Sabatino’s Shipyard Co. All buy wines at special short-term discounts (called post-off pricing in the trade) and they pass along the savings by simply doubling their costs. At San Gennaro, for instance, most bottles are priced at $10.

Other old favorites with reasonable wine pricing include Misto in Torrance, where co-owner Michael Franks says all wines are priced just over twice wholesale, and Les Freres Taix on Sunset Boulevard, where Michael Taix has hundreds of wines priced so low you think they’re a misprint.

“You take dollars to the bank, not percentages,” says Clinton Street’s Ruscigno. “It’s great to charge three times cost for wine, but you might not sell it. I’ll charge eight bucks over what I paid and I’ll sell it.”

“(The usual three-times markup) doesn’t work in cities where warehouse stores are prevalent,” says Evan Goldstein, a master sommelier and director of the Sterling Vineyards School of Service and Hospitality, “though it still exists in hotel restaurants.”

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But even some hotels are catching on. The Tower at the Holiday Inn on Lakewood Boulevard in Long Beach has a wine list with most wines priced at less than $20. Since the inception of that policy in November, wine sales have doubled, says Baldissari Sanzone, director of food and beverage and executive chef.

He says that the hotel’s owners will keep the low-price policy for six months and then evaluate it. If successful, he says, the policy may be adopted by other hotels owned by the group.

“When consumers see Kendall-Jackson Chardonnay at $6.88 in the local discount house and $25 or $35 at a restaurant,” says one wholesale wine executive who asked for anonymity, “they feel they’re getting ripped off.” Customers know that while retail discount shops often pass along savings, restaurants rarely do. But, he adds, the backlash is silent.

“Nobody is comfortable dickering over price,” he says. “Nobody says to the waiter, ‘I like the Mondavi Chardonnay, but that $35 price bothers me. I’ll offer you $28.’ They don’t do that. They just clam up.” Many simply order no wine at all.

“In the last few years, wineries have taken smaller margins, wholesalers have taken smaller margins, and retailers have taken smaller margins,” says the executive. “The last part of the system to take a lower margin is the restaurant, and now that’s happening.”*