Re: Restaurant Wine Pricing
    A. Simpcox, April 3, 2001

    David Coffaro makes what is probably the most reasonably priced premium wine in America. Now what is he really doing in terms of income? Let's say he sells 4000 cases of wine. The 2001 futures are an average of $13/bottle (yes, the Sauv. Blanc is less and the Aca and Block 4 are more). He's allocated 1/2 of it in the initial release.

    So that's $312,000 gross income for half of his production. Now he'll raise the price several times through the year for the rest of the wine, but to make things easy, let's use the current 2000 Futures in the barrel which are an average, give or take of $17/bottle. So for the OTHER HALF of his production he has a gross income of $408,000. So now we have $720,000 gross income. Of course he also gets some "float" on all that money that people send him a year in advance, so let's add in $20,000 for that (I'm no mathematician, maybe it is more, maybe it is less... Dave will know). That now $740,000 gross income.

    Dave says including EVERYTHING, it costs $10/bottle, tops, to produce the wine . . . $480,000. Therefore his net income (before taxes, but who counts taxes?) is $260,000/year. (Dave likes to subtract his living expenses here, but that doesn't count.)

    OK, Dave owns the grapes and a lot of winemakers don't, so they'd make less money... Dave says he allocates $2.50/bottle for grapes, so let's take out $120,000. So our hypothetical winemaker has a gross income of $140,000/year. (Now maybe big producers don't scale the same way, but a lot of what we're talking about here are boutique wines anyhow.)

    $140,000/year. Not bad. More than a LOT of people make. More than MOST people make. But a LOT? Not particularly. Be honest to yourself, if you could get your boss to bump up your salary to $180,000 year, wouldn't you. How far would you go before you thought you were making too much and kindly told your boss that you didn't want any more of his money?

    So where does that put the restauranteur? He's in a business to make a living. Its one of the hardest business I know if you are the owner/chef. You work from early morning to late at night often in horrible conditions, maybe 6 days a week, or more. So maybe he has a couple of kids and they want to go to college, and maybe he'd like to have a nice home to get to if he ever gets home. Maybe even an S.U.V. with a ski rack.

    Is he entitled to a decent profit? What's decent?

    Now if you talk to a lot of "high end chefs," guess what, there's NO money in "the food." To create the kind of high quality food *I* want to eat, just about all of the money for the food goes into the cost of putting it on the plate (especially in the sort of place that tries to use the VERY best ingredients; not to mention labor and the rest). So raise the prices? Nope. There's a limit. Except for the most chic places where money is no object to anybody (and they change the plates, linen and Reidel with every course), you can't raise the prices to the point you can make a profit that YOU'd like to be earning since nobody would come and eat. Personally I almost never eat out. I cook better dinners at home than I can get out. The one exception is a place that puts virtually all the food price into the food with consistently top notch ingredients and tries to make up the difference with, you knew it was coming, 250% markup on the wine.

    Let's take a small, high end restaurant as an example. Let's say they do 100 people/night. We'll use Los Angeles mid-range (for high end) prices: $8 for appetizer, $22 for entree and $6 for dessert = $36. Give them a night off, that's $1,123,200 GROSS income. Let's be REALLY easy on the owner and say the place actually makes 25% on the food (doubtful if it's really GOOD food). So the income before taxes and wine is $280,000. But the really GOOD places, I'm told and believe, if they're REALLY good, don't make that percentage. Nevertheless, for such a hard job shouldn't he or she maybe get a half mill?

    DAVE doesn't want to make more. Face it, he could. We KNOW he can. He refuses to. He's the only one who does. MOST people in MOST professions would try to make more. YOU probably would. The markup on the wine is where the profit IS (and if you think that's a rip, ever buy hard liquor in a restaurant or bar [and don't forget the bartender's tip if you want a real drink the next time]? ... Anybody complaining about THAT markup?)

    If Dave upped his prices by a measly $2, which lot of people recommended to him when he was struggling with LOWERING his prices, he'd be up by almost $100,000! I just don't think many people would turn that down.
    Would you?

    So Brendan's place in Santa Maria did great business. But we don't know why the owners didn't want MORE money. Maybe they didn't think they could get it for the type of food they were making (I don't have a clue, never heard of the place or maybe they're like DAVE... a rarity.)

    There's a place in Los Angeles that is said to be making a lot of money. They got their reputation by charging no corkage and then $2 corkage (the increase may be apocryphal, but I heard there was a religious institution behind them that complained). Now their food isn't mediocre and I know people who think its pretty good; but its no great shakes for a really GOOD place, and what's more they apparently do 3 seatings a night instead of the more average 2. IN fact I've heard tell that people have been told to leave if they lingered too long (perhaps over that nice wine they brought). So that place has found its way to make a profit, but if you are into food, YOU aren't going to be eating there.

    So if you do take it as gospel that in a really good place (and I'm not talking neighborhood joints that aren't putting world class faire on the table) there is very little profit in the food, and you want that great place to stay in business so you can enjoy really great food you can't or won't cook at home, then you'll let the people who want to pay the wine markup (or corkage) do so and you won't . . . And maybe one day that great place with some of your favorite dishes will disappear 'cause its easier to go to law school.

    Hey, do I like this? NO way! Just somebody prove me wrong... PLEASE!

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