Blog post

Marking up

The first few months of the year are traditionally the time for a bit of judicious belt-tightening. And no surprise that, as people trim back their expenditure and our economy rolls over and goes back to sleep, the venting of spleen should be particularly enthusiastic: bankers, gas suppliers, MPs... they’ve all been fair game.

But so, too, is the on-trade. I’ve had a few sommeliers call me up in varying states of fury and dismay over the last few weeks to point out an article pointing the finger at restaurant wine mark-ups that appeared in Decanter. While at Vinexpo’s annual ‘state of the wine market’ (also in January), the show’s chief executive, Robert Beynat, waded into the debate, commenting that he thought mark-ups in the UK were too high.

Leaving aside the fact that the chief of a Bordeaux-based trade fair is unlikely to be au fait with rental costs in the UK, I still think you can argue that one comment could be dismissed as misfortune, but two looks like something altogether more significant. Is there, perhaps, a groundswell of feeling that restaurants are ripping people off with their wine offering?

Now, I accept totally that restaurants need to make a certain amount of money, and that if it doesn’t come from the wine list, it’ll have to come from somewhere else; that just saying ‘charge less for wine’ would see burners being turned off all over the country. I can understand, too, why restaurants might feel, as one chef/patron put it, ‘disappointed that the country’s main wine magazine is trying to paint restaurants as the bad guy.’

And yet Tom Cannavan’s piece in Decanter struck me as being fair and well-balanced – albeit from the somewhat rarefied perspective of your average Decanter reader. He made, essentially, three main points: i) that most serious wine lovers object to paying upwards of £200 for something that they might have bought for their own cellar at £50; ii) that more restaurants are permitting BYO, and iii) that this BYO renaissance could ‘change wine’s place in fine dining permanently’.

Dealing with the latter two points first, I’m not entirely sure that there is a BYO renaissance. Yes, a few restaurants have signed up for the BYO Wine Club, but since it costs punters £99 up front to take part I’m not sure that it’s exactly going to transform eating out habits. Nor do I think that restaurants will still want to sign up for it once our etiolated economy regains some colour.

As for defending the rights of customers to pay less money for wine in restaurants – such sybaritic egalitarianism would have had rather more resonance had it not been written in favour of the top 1% of wine drinkers.  I think you could pretty squarely put a case for saying that diners who have cellars full of £50 bottles of cru classé are the very people who can afford to pay more for wine when they eat out; that if they want to drive a five-series BMW and take three holidays a year then drink house wine when they eat out in protest at wine mark-ups then, frankly, they might want to rethink their priorities.

Does a German car manufacturer/ French villa owner really have a more compelling moral case for receiving your hard-earned than the struggling restaurateur on the corner?

Having said all that, I think the on-trade’s attitude to pricing does, as the Decanter article suggests, need some serious thought. It doesn’t hurt to revisit the pricing of some of the trophy wines on your list if they’ve been sitting there a while. As Thierry Tomasin at Angelus once put it ‘I would rather have a good cash margin in the bank than sell nothing at 70% GP.’ Top-end restaurants in the City who have intermittently knocked 30% off the price of their Supertuscans have seen take-up rise hugely. 

But more significant than such top-end fiddling, I think, is the industry’s attitude to BYO. A couple of issues ago in Imbibe, sommelier Mark Deamer wrote a piece for us on this subject. Some restaurants were openly hostile to it, most were grudgingly accepting of it if backed into a corner, viewing it much as they might tax returns and root canal surgery - as a necessary evil. 

Pretty much none were positive about it. In fact, the fact that someone has felt the the need to set up a BYO scheme that costs people money to sign up for it, when the on-trade could have introduced such a de facto option for nothing, is a fairly damning indictment of the industry’s attitude in this area.

While the on-trade likes to use the ‘margins and overheads’ argument to justify its hostility, I suspect it’s as much to do with bruised ego: restaurants simply hate the idea that customers don’t want to order off their lovingly-constructed list. They see people rolling up with bottles of their own as an affront to their dignity, a slight on their professional abilities.

If everything is going swimmingly, then I can understand this. But survey after survey – and, indeed, the feedback from our readers – tells us that restaurants are finding it tough at the moment. No surprise there, given that we’re heading for a double-dip recession.  But this, in other words, is a time for pride-swallowing pragmatism, not prickly sensitivity.  

Far from dismissing BYO it should be high on the list of promotional options for any restaurant that’s not selling out every sitting.

At the lower level, it offers a chance for diners to shave a few pounds off their bill, and feel like they’re getting a deal, while the restaurant can still make decent money for zero investment from customers who wouldn’t be there otherwise.

This may have limited appeal on a Friday night, but why not actively promote Tuesday night, say, as BYO night? If nothing else, it would send a strong signal to the public that you’re ‘on their side’ in the battle against poverty; that you understand their financial pain and are trying to work with them to make it bearable.

Restaurants might not like being under attack for their pricing, but their stubbornness in this area means they only have themselves to blame. A more enlightened attitude to pricing generally, and BYO in particular would silence at a stroke anyone looking to take a pop at ‘rip-off restaurants’.

7 comments

Xavier R. 02-02-2011

Chris

We tried to do free BYO at Texture last January and it fired back with sending the wrong message (we were desperate for business, going bust amongst other stories!!) we had to stop before the end of the month! Great shame, but what also noticed that month is that people were buying their wines from a local wine shop, then coming to the restaurant asking us to chill the wine! Not the idea i've got of fine dining and the experience that goes with it, but rather home cooking! The day customers will pay the real price of food, i'll be the first one happy, so would be the wine trade in general as i (like a lot of the wine trade) dine and wine out a lot!!

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Christine P. 03-02-2011

Chris,
At Hakkasan we charge corkage if people bring a bottle, and I'm always surprised how grateful some customers are. Apparently a lot of places make them feel like criminals for even asking. That said, it doesn't happen every day, and it's mainly people who want to bring something rather special. It makes them happy, and so it makes us happy too.

But a couple of points need to be made:
first, that a decent restaurant list is packed with wines that are difficult or impossible to find in the high street, so if you want to drink the exciting stuff, a restaurant is (or should be) one of the best places to do it.

Secondly, that the wholesalers who supply these wonderful wines need to make a living too, and any significant shift towards diners drinking ‘high street’ byo wines in restaurants is going to put pressure on these specialist merchants (and thus on some wineries too).

Tom Cannavan is right, then. If the BYO movement grows strongly, it will indeed ‘change wine’s place in fine dining permanently'. This change might benefit those with well-stocked cellars at home, but for most people it would cut off their access to many interesting wines, and remove a key distribution channel for some of the world's best winemakers.

We make an effort to charge a fair price for the wines on our list, and we're not against BYO. But, as they say, ‘be careful what you wish for’.

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Janice G. 04-02-2011

It must surely be only the restaurant and pub trade that is subject to this kind of scrutiny. Why does no-one debate the price of a pair of socks in M and S? We never query what the mark ups are on any other product like we do on eating out and drinking in bars. We have been in this business for 25 years and just don't tolerate this kind of criticism, the customer is certainly the one that decides our price but only on the basis that they are happy with our offer as a whole i.e surroundings, service, ambience, quality of food. It is as impossible to compare a bottle of wine from your cellar to one sold in a restaurant as it is to compare the price of a couple of metres of cotton to buying a shirt in M and S.

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Roger J. 09-02-2011

Chris – Why don't you stick to what you do best – Publishing, and not give advice out of your comfort zone.

Like Xavier we offered BYO to the public, similar to our very successful trade offer that we do every January & February, it was a complete disaster. Punters bringing in warm Sparkling Wine and cheap offensive wines.

If they are happier drinking crap supermarket wines they may as well sit at home eating supermarket food. Blaming the price of wine for a dead restaurant is hiding from the truth, and failing to live up to reality.

I would reiterate Christine's comments that successful restaurants go that extra mile and offer exciting wines, aged wines and something far better than you can get in your ordinary off licence or supermarket.

Wine is rising in value far quicker than your £ in the bank, hence if wines sales of your top wines are slow you can always look forward to putting them up later in the year as their value increases.

Also look at your cash flow when sales have dropped, it means you don't have to restock – there is always a plus side!

The same principle goes with food, the restaurants who cut prices are the ones which will fail as they will encourage bargain hunters and alienate their regular customers, if a main course was worth £25 in December it is still worth £25 in January. And don't insult the punter by buying in cheap cuts, customers used to Wild Line Caught Sea Bass do not want Pollack however sustainable it is.

kind regards

Roger

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Xavier R. 12-02-2011

Chris,

Glad you started a debate but it will be (as you can see) a never ending stories, not sure that there may be a revolution in the fine dining world anytime soon as might be suggested by Tom Cavannan

I'm yet to meet a CEO of a successful company who will BYO in a top restaurant to entertain his customers!

Having now opened 28-50 (bistrot style food with good value fine wines) and also Texture as fine dining restaurant, i can guarantee you by looking at the monthly P&L, i'm not able to apply what works at 28-50 for Texture, the overheads are far too high!
what would make a customer happy (BEST food in the BEST city in the world, the BEST wines served in the BEST glass by the BEST waiter in the BEST decor at the BEST price possible!!) is just not realistic! we tend too often to forget that quality has a price, and yet it doesn't please us to pay but it doesn't please me either to pay the price for a a top laywer, a top builder, top butcher…the stories goes on…i just wish that some of the hyper critical people will spend a week with me and see the REAL inside of our profession and the amount of labour that goes in to make it competitive!
Xavier R

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Jo E. 18-02-2011

Chris,

As an industry, we work incredibly hard, long hours for a very small and uncertain margin. So it's no surprise there's a howl of rage if you're thought to be kicking away at one of the underpinnings to that margin. You could perhaps mitigate the need the grow a beard and wear a baseball cap and shades for the next few months by writing an article explaining to the General Public how every £1 taken in a restaurant or pub is nibbled away – by rent, rates, power, wages, regulatory costs, maintenance, insurance, marketing & PR, IT systems, training, recruitment fees, food & drink costs (including above-market beer prices if you're a tied pub) – to less than 10p – much less than 10p in most cases – in the business's pocket. But then Gen. P is entitled to write back pointing out how their income is nibbled away too, to the point where paying 3x the value of any bottle in a restaurant also feels like a kick in the teeth!

Thing is, we go abroad and pay much lower prices for restaurant wine in France, Italy and Spain, which makes British prices look a rip-off, even if only because much lower alcohol duties set a lower base price for the GP multiplier. Or we go to a good restaurant in Australia, clutching a paper bag of wine and are welcomed. I took BYO to Tetsuya in Sydney – unwilling to entrust my Clare Valley gems to a Qantas hold – and they were served with respect at a reasonable corkage charge. The sky didn't fall.

If you're one of the top 1% of London restaurants serving the richest 1% of British diners, then you may not need to change – although if one of your guests did want to BYO it might be the hospitable thing to charge corkage and indulge them. It's unlikely to be Blossom Hill.

But if you're one of the rest, just be aware that your wine prices ARE one of the things putting people off coming out more often – especially if you continue a straight GP multiplier all the way up your list. Yes, some people (too few) want to be adventurous, but many are put off gambling on an unknown wine by the number of pounds against its name, when they know it's a 3x multiple of its value (and in London you then plonk 12.5% on top of that!!!) Out in the provinces, where exponentially fewer people than in London will pay over even £25 for a bottle of wine, I take a £15 cash margin on things like John Duval Plexus or a Massolino Nebbiolo – just because I'd rather sell it than a bog-standard New World Pinot – and I know that people will love it if they get it in their glass. That means I have to taste hard to find great engine room wines to sell at full margin, so that I still make my GP overall, but it's worth it if the guests rate us for serving quality wines they can afford to drink.

So would I go BYO? Well, no. Not every day – because a lot of my guests would bring Oxford Landing and unless they were happy to pay a tenner corkage (which they'd see as even more of a rip-off: "What did you have to do? It doesn't even have a cork!!) we'd soon go out of business. But as pubs we hold masses of special evenings to cement our place in our towns with our regulars and, do you know what, I'm going to go and ask our guys what they think about a Tuesday night BYO. In these hard times, anything that makes your guests feel you're part of the solution, not part of the problem, is worth considering.

Jo Eames – Peach

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Nino 24-03-2011

Chris
Your good article Guilty as Charged makes 2 points: the first wine pricing in restaurants, the second BYO. My comment relates exclusively to no. 1. During March I visited several London's restaurants – this confirmed my overview that most places care very little about customer retention by applying an exaggerated mark-up on wine: some try to extract as much money as they can get away with it and others are more content with a decent cash return – and the return of the customer! Of course there are several factors to take into consideration: one is the price of food. This, sadly, is sometimes considered ‘flexible’: in my book the real price should be paid always – after all, a customer may dine sipping a glass of tap water and if you are not charging appropriately the House loses money. Secondly, if a place like Bob Bob Ricard sells half a bottle of Chateau d'Yquem 1966 for £ 110 (close to its retail price) whilst the price for it at Restaurant Gordon Ramsey is £ 310 (source: Imbibe Magazine March/April 2011!) don't you think people might think that Gordon, in reality, is Dick Turpin's long lost twin? Another example. Gauthier Soho has a shop that sells wines also sold in the restaurant – at half the wine list' price. Both are clear examples of decent mark-up, liable to encourage repeat, frequent custom. If all this is taken into consideration then I do not see the point of sommeliers and restaurateurs blaming avaricious customers for not offering their wallets as soon as they step-in on their premises – no, they are only cost-conscious and do not wish to be taken for a ride.
Regards,
ENdA

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