David Clarke: On wine listing fees

By , 28 January 2015

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28

Money“The strong do what they can and the weak suffer as they must” wrote Thucydides, Athenian historian, philosopher and general, who lived between 460 and 395 BC. Welcome to the world of listing fees for restaurant wine lists.

Ever wondered why so many wine lists in South African restaurants have the same generic and uninteresting wines listed? It isn’t because of a lack of choice. According to Platter’s 2015 South African Wine Guide, there are more than 950 wine producers in South Africa producing 7,000 different wines. Why aren’t they represented in the nation’s wine lists? Because of the continual and unquestioning acquiescence of some wine companies, the practice of enforcing listing fees sadly results in many wine lists having a similar, banal feel to them.

It is not an uncommon practice in South Africa for restaurants to charge to stock their wines. A recent example presented to me was a request (actually an ultimatum) of R6 500 for an annual listing. For one wine. With no guarantee of subsequent orders.

Multiply this by 50, or even 100, wines on a list and revenue quickly mounts. These wines are then sold to (mostly) unsuspecting guests at normal restaurant prices. The subsidies are not passed on, in whole, or in part. I use the word “unsuspecting” as normal restaurant goers tend to assume that restaurants choose the wine they sell based on a combination of taste preference, suitability to the cuisine, value, service and personal relationships. It does not cross the minds of the vast majority of guests that some establishments’ wine lists are decided by whether or not producers can afford (and are inclined to “buy”) a spot.

Why is this a problem? Listing fees limit customer choice and create an obstacle to market for the majority of wine producers. The quality and diversity of the South African wine scene is at an all-time high – in  the over 350 years of production there has never been a more rewarding time to drink Cape wine. Restaurants can be (and many are) at the forefront of this shift towards wines of quality and uniqueness. And it is precisely this uniqueness, this South African-ness, impossible to replicate in other parts of the globe, that has captured the world’s attention.

Yet, a great many restaurateurs are profiting from maintaining the highly unsatisfactory status quo of offering wines that are (usually) manufactured in industrial quantities, and produced in such a way to maximise profits for the producer. Not the grape grower, not the workers. These techniques minimise the effect origin has on the product, therefore the only necessary ingredient in wine, the grapes, could come from anywhere – and the wines produced as a result often taste bland and worse. Thus marketing the Brand with a capital “B” and not the intrinsic product becomes the number one aim.

The absurdity of it all is that while the investment of energy, money and time is spent on increasing market visibility and devising plans to convince the public that the brand represents such qualities and virtues as a long ancestry, a timeless elegance, permanent class, unbounded quality, a superior location and so on; it is these exact elements (among others) that are removed, or at least compromised, in order to cut costs. I don’t want to drink those wines; I don’t want others to drink those wines.

That being said, not all wine producers who pay listing fees are making generic, soulless product; many feel they have no option but to pay. This puts increased financial pressure on the farm and diverts funds from other types of investment. This predatory practice also creates upward pressure on the price of wine, as producers need a higher margin to help subsidise the restaurateurs.

Let restaurants choose their lists on a combination of quality, value, taste, suitability and service. If restaurants are willing to sell off their wine lists for a price, one can only imagine the formula used to create the food menu and the criteria used to choose the ingredients and suppliers.

What’s the solution? Another quotation: “I am not worth purchasing, but such as I am, the King of Great Britain is not rich enough to do it” observed Joseph Reed, a lawyer, military officer and statesman of the Revolutionary Era in the United States and here lies the key.

If wine producers, collectively, agreed to not pay listing fees, the practice would cease to exist. Imagine what could be achieved if that capital was rather invested in the industry via training or mentorship programs.

Until all wine producers unite and become “the strong”, most producers shall remain “the weak” – and suffer as they must. And everyone, especially the unsuspecting restaurant goer, will continue to lose. But not the restaurant owner, they have the producer’s money, and they have the diner’s money. And they are playing you for fools.

  • David Clarke hails from Australia. A qualified sommelier, he now runs a wine agency called Ex Animo, Part of his job involves trying to sell wine to restaurants.

Comments

28 comment(s)

  • Mark McCarthy28 January 2015

    I could not agree more. David is spot on.

    This is a common practice amongst many restaurants. They should be named, shamed & boycotted by the wine industry!

  • Tania Zimmerman28 January 2015

    “They should be named, shamed & boycotted by the wine industry!”

    The Sa wine industry couldn’t organise a hose if they were all in room on fire. Look at the mess they’ve made of their price positioning in the UK.

  • Erich Zeelie28 January 2015

    A well written article David.

    Seeing that we all concur on the naming and shaming, perhaps we should put it into effect?

    A quote overheard from a prominent wine farmer a while back: “The last time the farmers stood together was on a boat making its way to Ceylon.” Unfortunately it is a sad truth that our industry is regarded as knife-fight where no rules apply and each participant is trying to slash the other’s throat. So much more can be achieved through co-operation and collaboration.

    To paraphrase the great Madiba, “alone we are weak, together we are strong”. That is the only way how we will be able to move our industry forward, with the people growing the grapes and their sundries actually being better beneficiaries.

    Amandla!

  • Tim James28 January 2015

    It’s very nasty, I agree (just as when shops sell good shelf space, or only stock certain brands). But where do those who believe in the beauty of the free market (not me) draw the line? It’s never a level playing field. Producers who can’t afford a distributor’s fees suffer compared with others – they don’t have well-connected and experienced people to, eg, take their wines around to restaurateurs, retailers and journalists to taste. Producers who can’t afford to advertise, or participate in trade shows, suffer. Should we say that all producers should agree not to do any of these things?

    David implies that it is the big brand owners (presumably Distell first and foremost), with dull wines that buy space on lists. But even if you accept that all the wines of such brandowners are dull, etc (which I don’t) there must also be a whole lot of others who are handing over money to appear on substantial winelists, if it’s a widespread practice. So the practice doesn’t necessarily reduce the range of wines on offer (except at places like the Spur) – it merely filters out some, not all, of the producers who choose not to pay the fee, or can’t afford to. I suppose it’s the little-known producers who get filtered out (and, incidentally, I presume that they too are trying to “maximise their profits”?). I can’t imagine that Rupert and Rothschild, Kanonkop, Mullineux and Sadie (as examples that most serious restaurateurs would want on their lists) are asked for listing fees.

    It’s all a pity. But it’s called competition – and, as usual in competitions, those with most money and power are likely to have the advantage. Limiting those advantages is a tricky business. But let’s try the way that everyone suggests but does nothing about – actually name the names of the restaurateurs and purchasers involved, don’t just say it would be a good idea to do so. Who demanded R6500 from you, David?

  • Kwispedoor28 January 2015

    If there’s nothing wrong with this practice, restaurants and producers should have no problem with it being public knowledge. But (like reverse osmosis machines) it’s all shrouded in secrecy…

  • Pieter de Waal28 January 2015

    Harry Haddon wrote a similar article almost five years ago: https://wineandi.wordpress.com/2010/03/11/cape-town-restaurants-are-starting-to-take-the-piss/

    If I recall correctly Harry went as far as compiling a list and publishing some names on his blog.

    Seeing the need to expose such behaviour, as well as restaurant and retailers who do not pay their bills even after having sold your wine months before at massive markups, I registered a domain http://www.swines.co.za (or if you’re into acronyms, the Society for Wine Industry Norms, Ethics and Standards) a number of years ago, but never got around to getting it going.

    I’ll be more than happy to donate the domain to anyone who feels passionate enough to set up a blog to expose unethical behaviour in the wine industry. Unfortunately it probably won’t have much effect, apart from informing the small producers who do not have budgets for listing fees where not to go and waste their marketing time.

  • Rob Payton28 January 2015

    David – The respect you show the restaurateurs by not naming them is not reciprocated in their treatment of the wine industry – I would add my voice to the ones that call for naming and shaming. If they feel charging for listing is a legitimate busines practice, they should have no problem with being named surely?

  • Angela lloyd28 January 2015

    How do you respond to those restaurateurs who give you an ultimatum or request a listing fee, David? And do they ever indicate they know it’s wrong to do it?

  • Amy Botes28 January 2015

    Name and shame! I run a restaurant and I have nothing to hide. We choose wine on merit and merit alone!!

  • Louis Ruinart28 January 2015

    Restaurants charging listing fees have received bad press today and I am not saying it is totally unwarranted.

    However, lets put this into perspective. The larger wine distributors in South Africa, just as soft drink, beer and cigarette companies carry a lot of weight in their respective fields and have serious budgets to entice restaurants into taking on the brands which they represent, and unfortunatley a precedent has been set – if you don’t wish to pay, someone else will.

    As I mentioned on Twitter earlier this morning “Listing fees” come in many disguises – huge rebates, continuous sponsorship deals, refits, signage, besides dirty cash!

    Is this an injustice to the small guy, yes unfortunately it is, but at the end of the day, business is about making money and we are as unlikely to resolve the issue of listing fees as we are of restaurants placing huge mark-ups on wine. Sadly it’s the shadier part of doing business – worldwide – and whilst principles do and should apply, they just don’t seem to show up on a companies P&L statement.

    There have been numerous calls today to name and shame the restaurants that ask / demand listing fees. David, maybe your follow up to this debate should be about 1. the incentives made to hotels and restaurants by the medium – large distrubution companies; 2. the personal incentives made to the F&B managers / sommeliers such as free stock, golf trips, weekend vacations etc.

    Restaurants are not the only bad guys here!

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