Saturday, September 18, 2010

Wine by the glass has an even higher mark-up

New co-blogger, Professor Mike Shor was quoted in the Weekend WSJ:
Prof. Shor, who teaches classes in pricing, examined the wine list prices of major Nashville restaurants and ranked them according to bottle markups. (He stopped going to a few of the restaurants as a result.) Prof. Shor couldn't do the same study for wines by the glass, he said, because his students reported that the wine poured varied wildly, between four and six ounces. There was, however, one consistent theme, according to Prof. Shor: "The cheaper restaurants issued smaller pours. The more expensive establishments gave a bit more."

1 comment:

  1. Wine vendors offer restaurants deep discounts for wines offered by the glass. Vendors can offer the wines at discounts because they know that they will be able to sell more cases of wine at reduced marginal costs. The wholesalers do not offer the same discounts for wines-by-the-bottle. Restaurants use the discounted pricing to increase the margins of their wines-by-the-glass. The customers that buy wines-by-the-glass are typically a small group (1 or 2 people), have a lower check average and are lower valued customers. The higher margins on the wines-by-the-glass allow bar managers to price their wines-by-the-bottle at a lower margin making that pricing more competitive. The wine-by-the-bottle customers are typically a larger group (3-6 people), have a higher check average and are higher valued customers.
    The goal of the bar manager is to balance her wines-by-the-glass and wines-by-the-bottle pricing to come within her overall wine budget (typically 31% of wine sales, or 69% mark-up from wholesale). If she is able to make better deals with the vendors for wines-by-the-glass, she can reduce her margins on her wines-by-the-bottle, thus decreasing the prices for her higher valued customers.