Why do restaurants mark up wine by 3-4 times cost and why don't market forces work in getting prices down

Answer 1

Ever noticed that FOOD is more expensive at restaurants than in supermarkets too?

At one, you are only getting a good; at the other you are getting goods AND services.

If you don't want the services, then only procure your food and beverages at the business that only provides goods.

Moreover, supermarkets don't incur expenses such as laundering linens. Amplifying that even further is the fact that most retail outlets are part of a regional or national chain that have much larger economy of scale than a more localized "small business" like a restaurant. (The vast majority of restauranteurs ARE "small business" owners, and thus have to charge more just to keep the rent paid and the lights on. And just because the place is charging a higher price doesn't mean it's as profitable as a business charging lower prices.)

Incidentally, have you noticed the high failure rate of small businesses in general, and most restaurants as a sector in particular? The changing whims of consumers come less into play in something more utilitarian like Walmart than with something already more subjective and discretionary income-oriented like entertainment and restaurants.

Imagine how much more they'd have to charge for that wine (and perhaps how much sooner they'd have to close the doors) if they were forced to compensate their waitstaff like any other business! It's hard enough to sustain a restaurant as it is. Very few outside of fast food outlets remain in the long term.

When one's own personal preferences aren't made the standard for all, that doesn't mean "market forces" aren't working. The "market" consists of other people besides yourself.

Answer 2

There is a captive gross profit percentage that all restuarants aim for on all their products be it wine or food. That percentage is anywhere between 65% & 80%. The higher the GP the more chance there is of that particular outlet being run by profiteering monkeys. The GP has to be set at around 65% to ensure the running costs of the business.

Everyone thinks that restaurants over charge and in some cases they do but generally they are just making a living. Remember that the chair you sit on and the table sit at were probably very expensive indeed. I run a restaurant in and the chairs we use cost £149 each. These have to be paid for somewhere!

Answer 3

Good point. I have wondered the same thing. The only answer is because " they can." People go to restaurants and order wine to be festive and have a good time. They don't balk at the price because they are there for friendship, romance and just to enjoy. Price does not enter into the equation. If you are trying to impress your date you don't ask the price. I do agree, however, that the mark up is extreme. A ten dollar bottle of wine will cost you at least forty dollars in a restaurant.

Answer 4

Who answered Market forces are at work??????

Sounds like that guy works in the trade to me.

Little white bull got it about right, when you when looking for somewhere to eat we rarely think about the cost of the wine but we do compare food which is odd. When your in the place, it's a tight fisted man who will drag his woman somewhere else because it's £3 a bottle cheaper down the road.

There is licencing costs, etc but i think it's a way for restaurants to make big money and we only have ourselves to blame.

If we made a stand and refuse to buy where the prices are extortionate maybe we could make a change, or would we just put some of the smaller restaurants out of business?

Answer 5

Well, the simple answer is that they can. Market forces are essentially nonexistent; the only pressure bearing on restaurants is that if prices get too high, you'll bring your own wine (for which they will assess you an uncorking fee).

Not all restaurants mark their wine up that much. I go to a few where you can still have a nice glass of Beaujolais over lunch for three or four dollars.

Answer 6

I don't know what restaurants you go to, but the ones I have been to usually double the price of the bottle in the liquor stores. So a $20 bottle of wine ends up costing about 40-42 in restaurant.

I usually just order a glass now, at the most 2.

Answer 7

In the restaurant/bar industry it is standard to mark up food and beverage by 3 times that of the selling price. This help recover the cost of rent, labor, insurance, etc.

Some items are much more profitable.

A glass of tea only cost .02 cent to make but sells for as much as $2.

The reason why alcohol is so expensive it that it is against the law for restaurants to buy from the manufactures.

They have to go through a middleman and everybody has to make something off it.

Answer 8

It's a "profit center". Just like the bar is. A lot bigger margins between their cost and selling price. That's why they steer you into the bar to wait for your table. And think of the profit when you buy that $12 bottle of wine for $30. The only way market forces are going to force the price down is for people to stop ordering it. Unlikely, don't you think?

Answer 9

I cannot believe this question is even being asked, and so many donkeys are agreeing or complaining.

Chain of supply: if you own a cow, you can cut yourself a steak from it. If not, ask your mate who has a cow. However, why should he give it to you when he paid good money for it. Don't know who owns a cow, ask your mate who does. Whoa, his services cost something too... and so on and so on...

Get real people, here is an example:

I work for a company that designs and sells mouthblown wine glasses.. We are a recognised brand with over 45m unit sales yearly. The raw materials cost 33 cents. Our factory makes one wine glass at 70 cents, mouthblown by a guy in 8 minutes in Poland, shipping costs us 15 cents. We sell it to a high st shop at 2.00 and the shop sells it to you, the consumer, at 5.00. Good value, quality piece of merchandise. But from 0.33 to 5.00... there you have your answer.

Answer 10

The distributors to Restaurants and to grocery stores are different, so pricing from one does not affect the other. There is no real rule of thumb for restaurants when it comes to markup on liquor of any kind, though on average, it seems to me that wine is marked up a minimum of 100%. For instance, I paid $42 for a bottle of 2003 Benton Lane Pinot in a restaurant, and loved it so much that I bought it online from the winery for $21.99.