Wine and coffee mark-ups

Why are you charged so much when you buy your wine in a restaurant or coffee from a cafe?
 
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01.Wine mark-ups under the spotlight

Why is the mark-up on retaurant wine so great?

Is the hefty mark-up on restaurant wine justified?

When you’re dining out at a nice restaurant, you generally accept that you’re paying a premium for the atmosphere, the top-notch service (hopefully!) from the waiters and a night off from doing the dishes.

But when it comes to ordering a bottle of wine that isn’t any different to the one available in your local bottle shop, how hefty a mark-up – if any – is justified?

In this article, we tell you:

How much more are you paying?

CHOICE priced a number of wines available at some of the leading online bottle shops and compared them against the price charged for the very same bottle in a restaurant. We found price hikes of up to a staggering 250%. 

Craggy Range Te Muna Road Sauvingon Blanc 2012

  • Aria, NSW: $70
  • Dan Murphy's: $29.99

Shaw and Smith Sauvignon Blanc 2013

  • France-Soir, Vic: $60
  • Dan Murphy's: $24.99  

Kooyong Beurrot Pinot Gris 2011

  • Jackson's Restaurant, WA: $60
  • Vintage Cellars: $33.77 

Ducks In A Row Nero d’Avola 2011

  • Auge, SA: $60
  • Australian Wine Centre (NSW): $25.99

Why the wine price hike at restaurants?

Experts in the hospitality industry told CHOICE that the cost of wine in restaurants is typically marked up between 120-150% – with some restaurants adding up to a 250% margin on carefully selected bottles. 

However, some argue that customers are paying for the entire wining and dining experience, not just the bottle itself. “Customers know they can buy a bottle of wine and sit and home and drink it. When you head out to a restaurant, you’re not only paying for the wine, you are paying for the experience," says one Sydney restaurant owner who asked to remain anonymous.

Tony Eldred, industry expert and founder of Eldred Hospitality, says some restaurants opt for unheard-of boutique wines to make customers feel they’re getting value for money. “They are very clever at buying wines from smaller boutique wineries that are of excellent quality but unknown in bottle shops.

“What they do is test taste and establish the perception of quality [of wine], and then put a retail price on it. Essentially, they try and get as much as they can get for the wines."

Our anonymous Sydney restaurant owner argues eateries veer towards boutique wines not because they’re unheard of, but because they offer more variety to the clientele. “Wine lists – particularly those composed by sommeliers – also have the task of reflecting the food being served and the mood of the restaurant," he says. “Boutique wine vendors tend to offer palatable and complex drops that fit this purpose."

So what are you paying for at a restaurant?

John Hart, CEO of the industry association Restaurant and Catering Australia, argues restaurants aren't gouging customers with their wine mark-ups – they simply need to make a profit where they can to stay afloat.

A 2013 report by The Age found that due to an explosion in the number of restaurants in our capital cities in the past 20 years, Melbourne and Sydney in particular are currently 30% oversupplied with restaurants. While healthy competition keeps the cost of food down, which is good news for consumers, restaurateurs rely on their wine lists to compensate for infrequent customers with a wealth of choice.

“All restaurants are commercial operations, and of course they aim to make a profit,” says Hart. "On average, they make 3.6% profit, so clearly there is not a huge mark-up that is flowing to the bottom line – on wine or anything else.”

Hart also argues consumers should keep in mind that when buying a bottle of wine in a restaurant, you're not just buying the wine, but the served wine. The costs associated with served wine include delicate glassware, the décor, storing, decanting and serving the wine and washing your glasses. Increasing running costs such as rents and wages will also be reflected in the prices charged. 

"Up to 50% of all revenues earned in restaurants are spent on wages," says Hart. "The predominant cost is therefore the service, not the cost price of the food or beverage." 

 
 

 

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