I went to a restaurant in Pacific Heights recently, ordered an $18 glass of wine and even though it was a Burgundy, I felt that the pour was a little stingy.
Sure, the rent is probably outrageous, but I still could not help but feel like the reason for the high price was the neighborhood and a feeling that people will pay more on Union Street than on Valencia Street. I relayed this experience to a friend who shook her head and responded, “Sometimes I feel like I’m renting space in a restaurant.”
There are legitimate reasons for high wine prices. San Francisco is an expensive place to do business. Rents are steep, there is a citywide payroll tax and the minimum wage is one of the highest in the country. I’m not saying I think these are bad things, but merely a reality that effects the bottom line.
The average retail markup is 1.35 to 1.4 times wholesale. Less-expensive wines generally have a higher markup than superpremium wines. For example, a wine that costs $10 wholesale is likely to be sold at $13.99 or maybe even $14.99, while a wine that is $50 from the distributor won’t cost more than $65 in most stores. When you see “suggested retail” in magazines and other publications, a 1.5 times wholesale benchmark is used.
Larger wine shops have more buying power and usually get better prices than smaller outfits. This is one reason why big stores have lower prices. The other is that sheer quantity makes up for a lower margin. Don Durante, a veteran Bay Area restaurateur, once said to me, “You take dollars to the bank, not margins.”
How true. Small, specialized shops try to compensate for not being able to match low prices by providing excellent customer service and offering wines that are difficult to find.
Most restaurants work on a 2½ to three times markup. Wines by the glass are generally more expensive though some places just divide the bottle price by four to get the glass price so it is more or less the same.
Why then are you paying $60 for a wine in one restaurant and $52 in another? While taxes and rent effect nearly all businesses, some have higher food costs than others. The place that is charging $52 might be in an enterprise zone and have a tax credit that gets passed on to its customers through wines by the bottle. Besides cost, you could be paying for ambiance, glassware, the sommelier or the many touches that went into the initial construction or a renovation of the venue.
In spite of all the rationalizations for pricing, we often have legitimate reasons for feeling like we have been overcharged. Your wallet is a very effective way of making your voice known. However, also keep in mind that there are justifications for pricing in both restaurants and wine stores and that if these folks lowered their prices, they might cease to exist.
Pamela S. Busch is the owner of Skrewcap.com, founder of CAV Wine Bar and a Bay Area wine consultant. Please submit your questions to Pamela@Skrewcap.com.