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Tasting Wine: The business of the wine business
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SAN FRANCISCO (Map, News) - A few years ago, I had dinner in New York with one of my close friends from college who is now a corporate bankruptcy lawyer. He was an economics major and worked at the Federal Reserve Bank during summers in college and after we graduated. I had just gotten back from a trip to Spain and was complaining about the exchange rate, which at the time was about 1.33. Unfazed, he told me that the dollar had been overvalued for a long time and that it would continue to lose ground against the euro.
One of the biggest worries among wine buyers such as me is that the plummeting dollar is going to affect the nature of the wine lists we can offer customers. There have been some big price increases in wines from Europe, and when we tack on the restaurant mark-up, it is exponentially even higher for the wine-drinking public.
Côtes du Rhônes, which used to cost me about $12 a bottle, now costs about $14. That's $2, or a nearly 17 percent increase. If I stick to a straight 2.5 mark-up, instead of that bottle costing $30 on my wine list, it is now going to cost $35, 20 percent more for my diners.
Let's go to Chianti Classico Riservas, which used to cost about $20 a bottle wholesale and is now about $23, meaning that instead of charging $50 a bottle on my wine list, it would go for around $59. That is not just $5 more (it’s almost $10) — even if it remains a 20 percent increase. Double this and you will pay $20 more than you were paying six months ago for the same wine.
As a result of these increases, I’ve been making more conscious value judgments. The same Côtes du Rhône might cost me $14 a bottle, but should I buy a Rhône-style blend of equivalent value from California if it costs less or the same?
Nine times out of 10 the answer, for me, is no.
How about if I decided to buy wines from Argentina or New Zealand, where the dollar has not been as badly affected or affected at all? Chances are I’m still going to prefer the Côtes du Rhône more — not any ordinary Côtes du Rhône but one that I had been already purchasing at a lower price.
How about Chianti Classico Riserva? Will it hold its value at a higher price? That is more challenging but against a California sangiovese at the same price, it will.
What if we put it against a California cabernet sauvignon of the same price? It’s an apples-and-oranges comparison, but from a complexity point of view, I’d still bet on the Chianti.
Imported wines go through several layers of pricing. When a winery sets a price to an importer, the importer then tacks on its shipping cost and other expenses plus mark-up. Sometimes the importer also acts as a distributor, but even when so, there is another added margin, so that by the time the wine gets to a restaurant or retailer, it has already been marked up several times. Many European producers have tried to be patient and fair, giving importers breaks when they could, but as the euro has continued to rise, there is only so much these folks can do.
I know this may sound a little complicated and you would rather have opened up the paper and found wine recommendations than a heavy dose of reality. I just thought it was time to give you all a little explanation about what you might have already noticed and will continue to see in terms of wine pricing.
That said, I think most buyers will stand by their buying decisions, whatever they may be, based on quality for the money. Enjoy your weekend, and I promise next week’s column will be more fun.
Pamela S. Busch is the wine director and proprietor of CAV Wine Bar & Kitchen in San Francisco.
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nancy orr said:
Prosecco is made in Italy not Burgundy. Thanks
2 agree | 1 disagree
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Ron Walter said:
I agree that the 4/21 response to my comment shows restaurant wine pricing isn't simple and is something I hadn't considered. While your example demonstrates a retail pricing problem, I don't see it as a good parallel to a restaurant's wine pricing - no restaurant carries 500 different types of wine with a 2000% difference in minimum and maximum price (if anyone has an $8 cheapo a 2000% difference would have a top price of $16,000 - not even a bottle of 45 Lafite). Also, I think the problem could be simpler when there is a cross the board price change for a significant amount of the merchandise - as there is when the $ devalues against the Euro - the problem described in the column. That said, I don't have an answer as to how to price wine. Still, it's grating to hear pricing explained the way Ms. Bush has explained it - there should be a fairer way. If I'm reacting this way, my guess is that it's turning off more diners than just me.
4 agree | 4 disagree
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Ron Walter said:
I agree that the 4/21 response to my comment shows restaurant wine pricing isn't simple and is something I hadn't considered. While your example demonstrates a retail pricing problem, I don't see it as a good parallel to a restaurant's wine pricing - no restaurant carries 500 different types of wine with a 2000% difference in minimum and maximum price (if anyone has an $8 cheapo a 2000% difference would have a top price of $16,000 - not even a bottle of 45 Lafite). Also, I think the problem could be simpler when there is a cross the board price change for a significant amount of the merchandise - as there is when the $ devalues against the Euro - the problem described in the column. That said, I don't have an answer as to how to price wine. Still, it's grating to hear pricing explained the way Ms. Bush has explained it - there should be a fairer way. If I'm reacting this way, my guess is that it's turning off more diners than just me.
4 agree | 3 disagree
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Examiner Reader said:
Regarding Ron Walters' comments on wine mark-ups: while this wholesale-times-2.5 seems illogical in your example, a broader look at retailing might help clarify. Say I sell 500 individual items in the course of a day in my shop, and they cost (wholesale, to me) between $.25 and $50 each. Now, say I know from creating my quarterly budgets that I need a 30% gross profit to cover all my costs -- purchases, labor, overhead, capital improvements. How long would I last if I marked each item up $5, regardless of cost? And I don't know what calculation would arrive at that $5 anyway. No, markup by percent is the only sensible way...and some restaurateurs do use a combination of (lower)percentage, and fixed add-on, to give increasing relative value to buyers of higher priced bottles.
5 agree | 5 disagree
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Examiner Reader said:
i have tried Monte dei Ragni Ripasso and their Amarone, after 1/2 an hour it was still on the palate....just outstanding. a real gem if you can find it...
8 agree | 6 disagree
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Examiner Reader said:
The best Ripasso i have tasted is "Fratelli Vogadori", it's very good wine. Very strong and better than other more know Ripasso
12 agree | 7 disagree
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Ron Walter said:
Dear Ms. Bush I'm stunned by the logic in 'Tasting Wine: The business of the wine business'. Why must the correspondent (wine buyer) always multiply the wholesale cost * 2.5 to arrive at the client's cost? A simple example: the wholesale cost rises by $3 for a wine currently priced in the restaurant at $50; the new price could be $53. I'd like to understand how that has affected the restaurant's bottom line? This seems logic seems similar to a real estate agent demanding a 6% commission when selling two houses - one for $300,000 and the other $3,000,000 - you should demand much more in the latter case or ask for a lower commission. Is your restaurant doing something special for the client with their additional $7.50 markup in the previous example?
8 agree | 13 disagree
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Examiner Reader said:
One would think the author, in an effort to retain her credibility, would check the spelling of the late Joe Swan's son-in-law. All through this article, his name is spelled incorrectly. It should be "Berglund." The author has, at least, included three wines in keeping with the theme of the article: wines of the Joseph Swan winery. ((Last week's article featured wines from France's Rhone Valley and, curiously, one was from the Joseph Swan winery in Sonoma!)) Why the author would review the same wine in back-to-back articles is a mystery. A professor of journalism would cite misspellings as diminishing the credibility of an article. Ms. Busch does so by, as she did last week, spelling "Vacqueyras" incorrectly. Interesting, the price of the "mystery red" is different in this week's article in comparison with last week's!
97 agree | 78 disagree
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Examiner Reader said:
The article regarding Tawny Ports mentions a lovely wine from the house of Ferreira, but "Duque" is spelled incorrectly. At least she got Dow spelled correctly (although the brand name on the label is "Dow's."
132 agree | 86 disagree
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Examiner Reader said:
Pamela Busch is marvelously enthusiastic as a wine-taster, but she's a poor writer and terribly sloppy in checking her work. This week's column regarding Rhone reds asserts that Syrah is the only grape grown in the northern Rhone Valley. Two sentences later readers are told that Northern Rhone Syrahs sometimes have white grapes in them! She claims to be "sticking" to Southern Rhones for the article and one wine comes from California's Sonoma County. Readers are advised to buy a wine from the Gramenon estate called "La Segasse," but the actual wine is "La Sagesse." Ms. Busch refers to an appellation in the Southern Rhone, misspelling the name "Vacqueyras." These little errors should not be made by a professional journalist. A course in writing would certainly be helpful in polishing her skills. Paying more attention to the details would also be a good idea.
68 agree | 79 disagree
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Examiner Reader said:
Dear Readers, I left a message hear yesterday. It was not deragatory and was written in proper English regarding the topic of the above article. One can only assume since my opinion was not the same as the author's that my comment has been deleted. While I truly do hope it is a computer glich, I find myself lowering my expectations after this happened. Best of luck to all of you on this website.
192 agree | 158 disagree
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Examiner Reader said:
Why go to Austria, Germany, and Spain for Pinot Noir? We have kick butt Pinot in our own backyard! There are so many beautifully produced wines from the Santa Lucia Highlands, Santa Rita Hills or Russian River. If anything tell this writer to find me more hidden secrets like Testarossa, Seasmoke (ok not so secret), and P&H.
155 agree | 137 disagree
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sue yu said:
vin rose is nothing, it's more of dinner wine that's light. i'm not sure if it was ever really popular. when you drink wine, you want to taste the bouquet, and certainly get a big punch out of it. drinking without the punchies is not worth it.
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