Restaurant corporatisation leads to ‘Wineway Robbery’

The corporatisation of restaurants has led to an increase in wine prices, otherwise known as ‘Wineway Robbery’.

The phenomenon of 'Wineway Robbery' is increasingly evident as entities like Merrivale, Bentley, and The Speakeasy Group leverage bulk buying power for food and fit-outs and combine accounting and marketing functions to provide a business solution to the costs of running an independent restaurant.

Despite the operational efficiencies, this trend has inadvertently driven up wine prices.

Part of the problem is corporatisation has led to restaurant market expansion, which while giving customers more choice, decreases patronage in individual venues.

Thus to make up costs and generate revenue markups on wine lists continue to increase.

The practice isn’t new, but current overhead costs are driving markups even higher.

The extent of wine markups varies notably across regions. For instance, regional restaurants might markup wine by 20% to 50%, but in major cities like Sydney or Melbourne, the markup can reach a staggering 400%, making the restaurant price four times higher than in bottle shops.

This pricing strategy is influenced by several factors including staff shortages, minimum wage increases by Fair Work Australia, and rising rents and operational costs. These challenges push restaurants to adopt survival tactics, often resulting in significantly higher prices for wines. Restaurants typically charge what they believe their patrons will not scrutinise, like marking up a $10 wholesale bottle of wine to $45.

To maximise profitability in a sector known for thin margins, restaurants often upsell, with wine being a key area. Employing sommeliers or training staff to discuss a wine’s provenance helps in promoting premium wines, thus enhancing profit margins.

Despite traditionally accepted markups on cheaper wines, selling expensive wines at high premiums has been challenging. However, the high costs associated with restaurant operation have led to near 400% markups becoming common.
Wine markups for Pinot Noir at a Sydney restaurant (November 2023)

Source: rogermontgomery.com

Jonathan Jackson, 23^rd November 2023