Why is wine in pubs/restaurants so expensive?

TonyMMM

When I worked in the hotel/restaurant business ( although a very long time ago), the list price for most standard wines was around 3x or 4x the purchase price.... so a £5 (cost) bottle would be sold at between about £15/£20.

Higher cost, and the better quality, wines tended to get a lower mark up, usually closer to 2x,  so they were probably the better value option.

Grumpy_chap

wolvoman said:

You missed off the biggest cost of all: VAT

Mark up is usually around 2.5x
Let’s say a pub buys a bottle of wine wholesale for £9 and sells it for £24. They will have to hand over £4 to the government, leaving them with a gross margin of around 50% which is pretty low.

That's not quite right, though.  
Either compare cost and sales prices including VAT or compare cost and sales prices excluding VAT.

£9 purchase and £24 retail is £15 mark-up (62%)
OR £9-VAT = £7.50 purchase and £24-VAT = £20 retail making £12.50 mark-up but still 62%

wolvoman

Grumpy_chap said:

wolvoman said:

You missed off the biggest cost of all: VAT

Mark up is usually around 2.5x
Let’s say a pub buys a bottle of wine wholesale for £9 and sells it for £24. They will have to hand over £4 to the government, leaving them with a gross margin of around 50% which is pretty low.

That's not quite right, though.  
Either compare cost and sales prices including VAT or compare cost and sales prices excluding VAT.

£9 purchase and £24 retail is £15 mark-up (62%)
OR £9-VAT = £7.50 purchase and £24-VAT = £20 retail making £12.50 mark-up but still 62%

You have to compare costs including VAT, otherwise it's not realistic.
You're right that the business can reclaim the VAT from cost prices. So it's the VAT portion of the mark-up that needs to be factored in.

mullerman

That £40 bottle I thought about on the menu last night is £10 everywhere. I am willing to pay £20 to cover all the costs involved with delivery/storage/serving etc … but with a meal where all the ancillary costs are already covered … I’m not having that wine at £40!

Grumpy_chap

It is obviously an individual choice to select wine to accompany a meal or an alternative drink if that is preferred.
Preference can be on cost grounds.
I just wonder, though, whether the mark-up on alternative drinks might very well be higher than the mark-up on wine.  I suspect it is, based upon the prices at establishments near us.

sheramber

Brie said:

Because they can.  

I know that some places you need to look at what a bottle costs versus a glass.  I went into one place a few years back and a glass of wine was £4.50 and the bottle was on special for £5.  No brainer.  (& we had no brains after a few....)

There was a place I used to frequent years ago and far away (across the pond) who made a point that a bottle of wine was the local regulated price (government run alcohol distribution shops) plus $2.  It stopped people from loading up before going out and upped their take from people coming in to drink and have nibbles instead of a meal. Basically the $2 was "corkage".

But when you bought a glass out of that bottle maybe nobody else bought another one , so the rest of the bottle was wasted.

jon81uk

mullerman said:

That £40 bottle I thought about on the menu last night is £10 everywhere. I am willing to pay £20 to cover all the costs involved with delivery/storage/serving etc … but with a meal where all the ancillary costs are already covered … I’m not having that wine at £40!

Where is "everywhere"? Are you saying there are bars and restaurants selling it for £10? Or are you comparing supermarket prices?

I think the bigger issue in this whole discussion is why is alcohol so cheap in supermarkets?

LightFlare

People applaud minimum wage increase but then as a consumer wonder why prices rise…..

DullGreyGuy

mullerman said:

That £40 bottle I thought about on the menu last night is £10 everywhere. I am willing to pay £20 to cover all the costs involved with delivery/storage/serving etc … but with a meal where all the ancillary costs are already covered … I’m not having that wine at £40!

Not necessarily, some places the food may not even cover costs and the money is made on the drinks. In other places the reverse is true. 



The other one which @stuhse's list missed off was wastage, product that they buy which ultimately goes in the bin. The regulars in our local are very picky with their beer and if it's not fizzy enough or such they will send it back and it will be replaced FOC. As a consequence the first 2-3 pints from each line often ends up down the sink every day. Likewise when they do line cleaning there is product wasted. If a bottle is corked similarly thrown away. Rules in restaurants are stricter on how long things can be kept after purchasing/opening so things get thrown because something on the menu was less popular this week than last. 


Interestingly we have a natural wine restaurant and wine shop near us, any dregs left in bottles or bottles rejected as corked etc don't get thrown away but they use them to make wine vinegars thats then used in the cooking. They claim they are much more flavourful than commercial white/red wine vinegar and the impact of corking is lost in the acidification process. 

avenue12

We've stopped drinking wine in pubs/restaurants etc as we agree with the op! Usually have a bottle at Wetherspoons/Green King before we eat out.What annoys us is the mandatory 15/20% tip added onto the bill and the fact that it will be is hidden in tiny letters at the bottom of the menu, which they take away as soon as you have ordered! It's then embarrassing to refuse to pay it, which is obviously meant.
We had a great meal with friends which cost £250 and the bill came for £300. When my friend queried it, the waiter said it's a tip!!! It doesn't say on the menu who gets the tip, maybe the company?

My friend told them to take it off and gave the waiter who had been good a fiver to put in his pocket.

We never went there again.