David Coffaro Vineyard and Winery Winemaker's Diary

Week 14
April 1, 2001 to April 7, 2001 

Monday April 2,  2001

Brendan and I have spent some time today responding to a great E-mail from Mark Brown concerning "restaurant wine pricing" I agree with most of what Mark has said and what Brendan has responded. I can't understand how the California restaurant establishments have decided to rip us off (we consumers) to even a greater extent than the wineries. I  have complained about the incredible pricing of the Napa valley cabernets that are selling for over $100 a bottle, but as most of us know in California, where wine is consumed liberally in restaurants, there is a greater mark up. I assume that states that do allow wine to be served ( some don't) also charge high prices. I have asked those in the restaurant business why they charge so much. They say they have to make up the cost of food. Now that is no excuse. Why should we wine lovers be taken advantage of because we love wine? Why don't these restaurants raise the price of their food? Why do these restaurants charge a corkage fee now ranging up to $50+ a bottle? It seems we are captive more in a restaurant than in a wine shop. In a wine shop we can choose not to buy a $100 bottle of wine, but in a restaurant if we bring in our valued wine that we purchased at reasonable prices, we are still charged a corkage fee of between $10 and $50+ for the right to drink it. If we don't choose to bring in our own wine we have the right to buy a wine for $30 to $200+ that we could buy in any local retailer at $10 to $100. I hope this doesn't encourage these restaurants to charge even more for their food: BUT why don't they raise the price of their food; that way they won't be taking advantage of us? I know we see places like the French Laundry charging twice as much for their food than less established restaurants, but isn't it interesting that Napa cabernet producers are charging as much as 5 times the cost of less established producers of good wine. I am afraid that what we will see in the future is that these so called high class restaurants will charge an increasing amount for there food and then continue to charge even more for the wine. 

That is my small input into this subject and here is Brendan's response to Mark Brown's public forum E-mail

I have been thrilled to see the responses and discussion about retail wine pricing that Dave and I have spawned. One additional neglected off-shoot of this pricing debate was brought to our attention  by one of our customers. He pointed out that although retail pricing can be bad, restaurant pricing is absolutely ludicrous. We fully agree. 

There seems to be an unspoken rule in the restaurant industry that is treated like the very word of God...  Thou shall not kill . . . Thou shall not covet thy neighbors wife . . . . Thou shall alienate thine customers and limit thine business by charging $24.00 for a product worth $12.....I often am fascinated by the fact that in an industry that is so competitively driven, most restaurants have chosen not to change one of the few things (their winelists) that could make them stand out more clearly in a very crowded field. Unfortunately, simply deciding to markup their wines up 250% instead of the industry average of 300% is looked upon as downright revolutionary. Restaurants need to start reevaluating the entire basis of their wine programs if they want to stand out in a crowded market. The truly amazing thing for me is the level of resistance and layers of excuses that form the foundation of the current system. My amazement stems from that fact that for two years I ran the wine program for a small, wine-oriented  restaurant in Santa Maria (2 hours north of Santa Barbara) and  saw firsthand how transparent many of these excuses are. 

At the time, my wine program at the Vintners Bar & Grill was based on things that pissed me off.  Thick, stubby glasses; short poorly thought-out winelists; pitifully small By-The-Glass selections;  lack of staff wine training; and, the thing that absolutely infuriated me, the fact that I was  forced to sell vital organs in order to afford even the simplest wines on a standard winelist. I was a surly young man. Luckily I had very cool bosses (Lee Lauthowers and Executive Chef Paul Kwong) who were interested in building the type of restaurant that we would actually like to go to.  Being in California's beautiful Central Coast we chose to carry only local wineries and carried 200 wines from 110 wineries (every winery in San Luis Obispo and Santa Barbara Counties at the time). We marked our wines up $3.00 above their standard retail prices, we had the only two Wine Stewards on the Central Coast (Myself and my partner Gerri Diamond), we served all 200 wines By-the-Glass (Yes! All 200!) and we used big 16 oz. goblets for glasses. 

Using conventional restaurant wisdom we should have failed horribly but after our first year open we crunched some numbers and found that compared to the same period of time for the previous restaurant our food sales were up 60% and our wine sales were up an impressive 300%. We also got those increases in our first year of operation, in a small town like Santa Maria (not San Francisco or Los Angles) and with literally no marketing budget and therefore almost no publicity for the entire year. Our second year went just as well.  To be honest I don't know how the Vintners Bar & Grill is currently doing. The last time I check they had moved to $5 above retail and I think only 150 wines By-The-Glass but still pretty consistent. We became a living example of how a good selection and reasonable pricing can actually work. Imagine that! 

On a slightly separate but related tangent, I was fortunate enough to spend a week in Paris on vacation about two weeks ago.  I was quite happy to find that as I went from cafes to brassieres to restaurants that I often had to really work to find wines that were over $25/bottle on their wine lists. The average wine price seemed to be about $10-$14 for some really great wines. Also, almost everything was available in either 250 ml, 500 ml, or 750 ml sizes. This (combined with the fact that it is France) insured that at every meal wine was a prominent fixture on every table.  I miss it already . . . . 


Brendan is an interesting guy and I am fortunate to be associated with him in our venture to achieve great wine and have him as a good friend. 

Wednesday April 4,  2001

I Need to comment on a few of your replies to Brendan's and my restaurant pricing criticism. But first I must mention two other matters. 

Tomorrow I have decided to have Lasik performed on both of my eyes. I have 20\400 vision so this will be an interesting event in my life. I will still have to wear glasses to see close, but it will be interesting to finally be able to see in my shower. 

I must also make a comment on the frost all of the wine country experienced this morning. The good news for us is we have no damage, the bad news I am sure we will hear that some of our fellow vineyard owners will confirm that there was indeed some loss of crop. Many areas in Sonoma and Napa Counties are more sheltered and thus more susceptible to cold weather. To damage the potential crop on a grapevine requires temperatures below 30 degrees. This morning we reached 30.5. Tomorrow, there is a prediction of higher temperatures, but the temperature tonight at this time is much lower than last night. 

There has been some postings in the public forum that I need to comment on. A. Simpcax has stated some presumed facts about our operation that I need to respond to. I have not heard this name before, but do know he or she is a customer of ours. 

First of all I agree that we will hopefully sell half of our potential production at $13 a bottle, but there is no way we will average $17 for the remainder. We have just gone to $16 on our 2000 offer and we have sold 80% of our 2000 wine. 10% of the remainder of the wine will be held for retail at $15 a bottle. So to be more accurate and respectably correct Simp, our average bottle sales price will be closer to $15. That still leaves a gross of $600,000. 

Now, I don't deduct the amount of money I could gain from selling my grapes from this gross. I like to consider this source of fruit as free. I pass it on to you. So we are back down to $140,000. Now, that does not include the expense of the new building we are constructing or equipment we buy every year. Actually, I expect that our cash flow will be balanced. We will spend the same as we take in. Without the building and new press draining us next year, I am hoping that we will be taking in more money than we dish out. 

I must mention that part of the reason for my posting about restaurant operations is that I have always wanted to start a bistro. I don't like the late hours and I don't want to be the cook this late in my life, but I would like to bankroll such an operation---only if I had complete control. I can guarantee you that the wine we sold in our bistro would be only $5 above our cost. I don't agree with Brendan or some of you others that claim that wine prices at $5 above retail is fair. Remember that these restaurants buy the wine at wholesale and mark it up on average 250 to 300%. Brendan proudly states that the restaurant he had worked for is probably charging ONLY $5 above retail even now. You must remember that if this restaurant buys a wine for $15, that retail markup would be $22.50. If they mark up the wine $5 that equates to $27.50. Thus they are making a profit of 83.33%. Not bad for just opening the bottle and providing some glasses. 

Sure, all of you who are cooks, and buy the food you process for your family at home, know the cost of the food at a grocery store is one third the cost of food in a restaurant. Of course we have to provide the labor, but we sure have saved a great deal of money. Restaurants have many expensive, I am sure, that I have no clue about. (please I need input from you restaurant owners---if you are not too busy to read this diary) But, I still ask why they charge so much, for wine or for that matter other drinks, when it costs them so little to serve it? Is it tradition? Again if I was associated with a bistro, I would charge what is fair for all drinks. Am I clueless, probably, yes. I do know that a business establishment must know cash flow: --the balance of money that comes in and what goes out regardless of profit or taxes. 

Thursday April 5,  2001

This will be just a quick note to let everyone know that I made it through the operation (Lasik) to correct the vision in my eyes. I am having a great deal of trouble seeing--not because of the surgery, but they have taped some protective goggles over my eyes so I don't rub them. These pieces of glass are thick and distorted, but what I can see through small holes is encouraging even 5 hrs after the operation. 

Also I wanted to inform you that we did get down to 33 degrees this morning with no damage.



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