Restaurant Wine Wars and The Curse of the Second-Cheapest Wine

bottomlineEdmund Osterland, M.S. Wine & the Bottom Line. Washington DC: National Restaurant Association, 1980.

Yes, that is a $100 bill that the corkscrew is drawing carefully from a bottle of wine in the illustration. It is the cover of a book that Master Sommelier Edmund Osterland wrote back in 1980 for the National Restaurant Association.

It was billed as a restaurant training manual, but it is really best seen as a manifesto written by someone who loves wine and who wants to see restaurants sell more wine and their customers drink more wine. Even today more than 35 years later it makes informative reading.

The message, as if you couldn’t guess, is that there are big bucks in restaurant wine if you do it right. But how?

Restaurant Wars

I found Osterland’s guide when I was writing my most recent book Money, Taste and Wine: It’s Complicated and Osterland’s manifesto became the inspiration for a chapter called “Restaurant Wars.” That title in turn was inspired by the Bravo network television series Top Chef.

There are many tense moments on Top Chef, a “reality” show where groups of talented culinary professionals compete in various elimination trials in order for one of them to emerge as the king of the kitchen hill. Perhaps the most stressful Top Chef episode of each season is a team competition called Restaurant Wars.

Randomly chosen teams of the surviving chefs must work together to open a pop-up restaurant for one night. They have to choose the restaurant’s name, the menu, decorate the space, purchase all of the glasses, dishes, and serving gear, train the wait staff and work the house. Oh, and they must purchase and prepare the food as well. The diners and judges compare the two teams’ results and pick a winner.

No one on the wining team can be eliminated, but someone on the losing team must go home, dreams in tatters. The trick to surviving the Restaurant Wars is not to be on the losing team and that means working together with the very people who you fear are trying to throw you under the bus. Easier said than done, which is why this is the episode that viewers love and the would-be Top Chefs hate.

Restaurant Wine Wars

Top Chef‘s Restaurant Wars have something in common with the wine experience in some restaurants. War is Hell we are told and Wall Street Journal columnist Dan Ariely says that restaurant wine is hellish combat. “The first thing to realize when picking from a wine list is that you are in a battlefield. This is a battle for your wallet—a fight between the restaurant, whose interest is to get as much of your money as possible right now, and your savings account.”

And it’s not an even playing field, either, Ariely says. “The restaurant’s owners have much more data than you do about how people make their wine decisions, and they also get to set up the menu in a way that gives them the upper hand.”

Osterland’s book was written to try to shift the combat from a wallet war to one where diner and restaurant work together to defeat the common enemies that keep them from having that enjoyable and profitable wine experience that both clearly desire. The fact that many still think of it as a fight over the bill all these years later shows that, while much has changed in the restaurant wine scene since 1980, much work remains.

Some of the advice could have been written yesterday. “Better informed, and with well-defined tastes, these “new “ consumers of the 1980s will also be very definitely interested in GETTING VALUE FOR THEIR MONEY.” The caps are in the original, which suggests that Osterland thought he needed to shout to get his readers’ attention. “Because they will be vastly more knowledgeable about wine, they will know the approximate costs of varying wines …  [t]hey will want to shop for the better values.”That paragraph has a contemporary ring to it, don’t you think?

“For the first time you will experience customers who enter your restaurant and ask to see the wine list before the menu. … YOU MUST MAKE WINE A MAJOR PROFIT CENTER.” Okay, okay – you don’t have to yell. But how?

Bluffer’s Guide to the Second-Cheapest511cm077stl-_sx307_bo1204203200_

Osterland called for improved wine knowledge among diners and restaurant staff and a lot of progress has been made here on both sides but much work remains. A WSET survey of British diners, for example, found that almost 20 percent of respondents said they generally bluffed their way through the process of ordering wine. They pretend to study the wine list, they said, and then carefully pick out the second-cheapest bottle.

This “second-cheapest wine” rule of thumb is not limited to just the British, of course, but I was amused when it showed up during a recent trip to London. Our waiter was obviously a bit impatient with the time we were taking ordering wine and so he just cut to the chase. “Why don’t you just order this one,” he advised. “It’s the second-cheapest.” Of course!

Why are diners so timid that they fall back on amateur bluffs and second hand rules of thumb? Wine can be complicated and intimidating, of course, but there is also the price issue to consider.

Perhaps the most radical part of Osterland’s manifesto was his plea for lower wine mark-ups, which he saw as a way to sell that elusive and profitable second bottle of wine to a party that might otherwise nurse the first bottle all night (or not buy any wine at all).

A General Principle?

More bottles, more regular diners, more money. That was Osterland’s message then and it is a message to consider today. Are restaurants leaving money on the table because diners don’t put more wine bottles there due to high prices?

There may be specific cases where the second-cheapest wine rule works, I suppose, but it fails as a general principle. Are lower restaurant wine prices a good general rule, as Osterland proposed? Or are there specific conditions necessary for success? More to follow.

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Read this article to understand why you shouldn’t order the second cheapest wine, then look at this video to understand why people do.

10 responses

  1. The fundamental problem is that restaurants make more than half their profits from the beverage list. When wine markups approach 300% of cost, everyone looses. I would venture that 200% is also a dangerous threshold. This means non-drinkers are subsidizing those who enjoy wine with a meal. It also means that wine quality to price ratio is likely less than the food quality to price ratio.

    This incentivizes high wine prices with less pleasure provided by the wine. Ultimately it sabotages the dining experience instead of placing pleasure at the top. It compromises the relationship between the venue and the guest. It weakens loyalty and prevents it from developing in new diners.

    The rationalization is the venues have to capitalize the cost of buying, storing and holding the wine until sold. Nonsense. A well managed list need not have excessive carrying costs. Lower priced lists move faster anyway. And lower prices increase customer loyalty.

    Corkage is another issue. Most sophisticated casual to fancy restaurants have corkage of $20-$35. Some as high as $50 or a limit of two per table, regardless of how many diners. At the same time they have lesser bottles of wine, such as rose or imported varietals, priced close to or equal to the corkage fee. This reeks of exploitation. It is the indication of a lack of a relationship between the venue and the guest, and the diminishing chance of developing one.

    The venue is guilty of short term thinking and profiteering at the expense of forming relationships with diners. The single most important factor determining success reported by restaurants with 10 years or more of continuous business is customer loyalty. Encouraging them to think of the venue as their own private dining room is the key to longevity and profits.

    Make them feel, known, welcome and that their experience is primary to every visit.

    Who would have thought it was not about food, wine, status and exclusivity? Only those who love the trade enough to see it from the diners’ point of view.

    • Few see it from the diner’s point of view. I live in a part of the world where restraint wines mark up less than 100%, and food is the star in really good restaurants. That said, wine still makes up about half of the revenues.

      • Does that mean people are not coming for the food but the modestly priced wine? They key is profitability. If lower wine prices increase longevity, that is something proprietor’s should acknowledge and incorporate into their business plans.

  2. Restaurants could sell more wine and should if they would price it different. If you drink decent wine and buy it regularly you know the price. I have two wine apps on my phone that also tell me the price of the wine. With technology and wine education its no longer a secret how much you are over paying for wine. The idea that you have to pay 21/2 times to 4 times retail in a restaurant is insulting. I for one eat at more BYOB’s than I used t. I also have switched to beer when I go to restaurants that sell wine and booze. I drink the good stuff at home or at BYOB’s.

  3. ALL the sommeliers I know raid their own cellars and bring their own great reds to a restaurant they visit, negotiating lower corkage in advance, and usually consider it fair to order a bottle of inexpensive white to placate the owners / wine servers. Sommeliers who work in the US with the absurd 20-25 % tipping policies love that there are really expensive wines, but rarely, if ever, buy them at any menu price.

  4. The American model of wine markups is a sham. Of course restaurants would sell the second bottle if they didn’t gouge on prices. Also the standard model of the bean counters is to markup the cheaper bottles MUCH more than the expensive ones. it is a a way to reward the rich as usual. I almost never go to “nice’ restaurants anymore and one reason is the wine gouging. The rich don’t care and that is the customer the somms care the most about anyways, because they make all their money off them.

  5. I just quit order inexpensive wines at a restaurant if more than $8 a glass. There is no reason for an inexpensive food friendly wine to cost the restaurant more than $5-6. If I go to a more expensive restaurant it is for the food, wine is expected to play second fiddle. I have often wondered why mid-up scale restaurants don’t feature a house wine, say a step or two up from typical twobuck chuck (or stated differently mid to high 80s), but in any event not as primo as the food. I’ll bet any number of Washington vinters of the second tier would go out of their way to keep them supplied with a nice food friendly wine.

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