Michael Fridjhon: What happens to restaurant wine lists after Covid-19?

By , 20 April 2022

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Just over two years ago the country closed down in preparation for the Covid pandemic. This is not the place to debate whether the situation was well managed by the government. The most sympathetic take is that we were all flailing around – including the specialist academics whose predictions of potential mortalities turned out in some cases to be vastly over-estimated. It is possible to believe that many of the decisions around the lockdown were taken in good faith. And it’s impossible not to believe that key members of the government used the Disaster Management Act to drive their own rapacious and mendacious agendas.

What we do know is that some industries were much more severely affected than others – even before the National Coronavirus Command Council abused its untrammelled power to impose longer-than-necessary lockdowns and special, very limited, trading conditions. In this context hospitality and liquor retailing, as well as the related tourism sector, took some near fatal blows.

For some recovery has been very slow: high-end travel may be returning to the Western Cape and the safari destinations but the small mom-and-pop operators in the less fashionable provinces may never get back to the trading levels they enjoyed pre-Covid. Decades of hard work have simply been lost – with vehicles repossessed, office equipment sold in execution, and the valuable connections built up over years lost in the vortex of closures.

By comparison, the wine industry has bounced back rather well – with the possible exception of the grape growers who took a major hit when in 2021 many of the fruit processors sitting on large inventories carried forward from 2020 declined to take up their allocations. But those who had the equipment and capacity to transform grapes into wine and fill bottles bearing vaguely credible brand names are able to look at the “lost two years” more as a glitch than a catastrophe.

The same is probably not true of the on-consumption trade – even though many were able to pivot and sell take-aways. Sure, there were restaurateurs who claimed it wasn’t worth switching on their ovens and paying basic wages for the reduced income – but that was more of a choice than the tour operators had.

We like to think that Covid is behind us: we take comfort from the four-wave history of the Spanish flu, or the assumption that Omicron, because it is highly infectious and generally mild, will become the dominant variant and Covid will become endemic – like many other coronaviruses. Those who are still trading are looking forward, making plans, denying their worst fears from the depths of the lockdown era.

There is no more concrete evidence of this than the attitude of the restaurant chains (and some of the single store operators) to their wine lists. They are up to their old tricks, demanding outrageous listing fees (despite their grim under-performance of the past two years) marking up cheap wine to maximise margin while selling at the sub-R200 (or sub-R300) sweet spot. The reason that the wine lists of so many of the industrial food chains are so boring is that they care more about margin than what’s in the bottle, and they are happy to do business with anyone who will buy a place on the wine-list.

This is an old lament, and it will be with us for a long time to come unless the industry as a whole makes a concerted effort to put an end to it. Producers cannot stop on-con licensees from buying cheap wine and marking it up by 250% – but they can decide to put an end to the kick-backs, sweeteners and bribes-by-any-other-name which have long been the most important toys in the toolkits of the wine distributors.

This is a big ask, because people who never knew how to sell wine will have to learn something late in their careers. Many – but not all – restaurateurs will have to do something equally alien: they will have to learn for the first time how to taste wine and make a listing decision based on the contents of the bottle, not the vendor’s marketing budget.

No doubt some of the big wholesalers will proffer the lame excuse that any such concerted effort will fall foul of the competition authorities. They may be right but it is possible to argue that what the restaurants are doing is vastly more anti-competitive. I’m asking for producers to commit to selling their wines for the published prices, with disclosed volume discounts and nothing else – no listing fees, back-handers or cases of brandy discreetly dropped off by the rep at the time of the delivery.

I’m also asking wine-literate restaurant-goers to be vocal about the bad (and also the good) of wine lists. This is where social media is a powerful weapon: excoriate establishments with outrageous mark-ups, lament the lack of choice, use the weapons of Instagram, FaceBook and Twitter to spread the news. Name and shame those who are selling over-priced junk BUT (because the carrot sometimes works better than the goad) celebrate those who get it right. In the end, we get the wine-lists we deserve.

  • Michael Fridjhon has over thirty-five years’ experience in the liquor industry. He is the founder of Winewizard.co.za and holds various positions including Visiting Professor of Wine Business at the University of Cape Town; founder and director of WineX – the largest consumer wine show in the Southern Hemisphere and chairman of The Old Mutual Trophy Wine Show.

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  • Jeremy23 April 2022

    Have you perused the Hussar winelist at all? It’s on their website.

  • Mike21 April 2022

    Interesting that the Hussar Grill restaurants don’t charge corkage, keep the markup on a number of their wines to under 200%, serve a decent steak for under R200 and have been pleasing their patrons for many years! Something wrong with their business model?

    • Le Roi22 April 2022

      What wines do they list ? Coincidence that most are from one sales company or that there aren’t many new or interesting producers ? Or that the list is sponsored ? There is a reason they can afford to do without corkage and have only a 200 % markup, a reason I feel many producers won’t see their product printed on their lists. I love Hassar Grill, the food is delicious and reasonably priced but listing fees and sponsorships are definitely involved.

  • Jeremy21 April 2022

    Of course wine should help defray the cost of running a restaurant. It is one of the input costs like rental, raw produce etc. It is not something brought down to earth by angels with a different price structure.

    If one does not like dining in an establishment because prices of wine or beer or steak or whatever are not to one’s liking then dine elsewhere.

    • Michael Fridjhon21 April 2022

      Of course I agree that consumers should vote with their feet and with their wallets – and perhaps they are, because we can’t tell how many more diners-out there might be if a different wine pricing policy was applied.

      You’re wrong however to suggest it’s an input cost like rental: it’s part of the retail offering, like the food. However, the restaurateur adds value to the food component and is entitled to charge proportionately for the service rendered. I am suggesting that there is a minimal service cost input when it comes to wine and the mark-up should reflect this – otherwise the wine revenue is simply subsidises the food business

  • GillesP20 April 2022

    Whilst I am understanding the need for a reasonable mark up on wine lists, I find that the mediocrity of the offer is the dominant trend. Some places worst than others where actually nothing is drinkable by my standards. We are still extremely lucky to have corkage in some good restaurants and I am not hiding that I take advantage of it to bring special wines from my cellar collection. As a french man, it is still a privilege because this concept doesn’t exist in my home country. Of course I ensure to take special bottles that you would never see on most wine lists in this country.

  • Le Roi20 April 2022

    Hi Michael,

    While I agree with not marking up cheap sponsored wines in that degree, do you feel that 250 % markup is outrageous on specifically selected wines ?

    Having seen costs of running a restaurant with propper glassware and service standards in an expensive area it seems ever the more difficult to run a profitable restaurant with a specifically selected wine list without close/just below to that markup.

    I could understand a restaurant asking for listing fees or negotiated deals asking a lower markup but having a sommelier and all the previous mentioned standards, what would you feel is a fair markup ? This taking into account the varying rental costs in different areas, quality staff and specialist costs, there are so many variables at play ?

    • Kwispedoor20 April 2022

      Hi, Le Roi

      While you wait for Michael’s reply, I’d like to just say that fine dining is one thing, but what goes on generally in most South African restaurants, is utterly unacceptable and it also discourages a wine culture in restaurants.

      Very roughly, if a wine retails at about R100, the trade price for restaurants will often be around R75. A 250% profit on that would mean that patrons pay round about R190 for a bottle that they could buy themselves at R100. I don’t think too many restaurant customers would have a problem with paying that.

      However, when you have a dismal choice of wines, have to drink out of Irish coffee glasses and any semblance of basic wine service is absent, and the wine markups still exceed 250%, one can understand that some people simply stay at home, go elsewhere or insist on BYO. Unfortunately, this is the norm, much more than it is the exception.

    • Michael Fridjhon21 April 2022

      There are a two issues here: firstly, whether wine should subsidise the costs of running a restaurant and secondly, if so, what should be a fair contribution and what should consumers get for it.
      If all that a restaurateur does is sell a bottle bought on credit the day before, and serve it in a Paris goblet or equivalent, what do you think would be a fair mark-up for that service? If there’s a properly curated wine list, with quality wines properly served, we’re talking about a completely different experience and a completely different game.
      A cynically selected wine-list, listing fees, obscene mark-ups relative to the skill set involved in serving the wine – surely that’s worth less than the margin collected by an off-con retailer?
      Frankly I’m not interested in the establishment’s business model: no one asks a wine writer what his/her costs are when the pittance we are paid per word is proffered as “the industry norm.”

      • Le Roi21 April 2022

        Thanks for clarifying Michael,

        I do agree wholeheartedly with quality standards not being met that, that wouldn’t warrant a 250 % markup. And just as with wine writers you wouldn’t expect to pay the same to a young up-and-coming wine writer as you would for Jancis Robinson or yourself having years of proven quality writing.

        The only point I was actually getting down to is for patrons to pick their battle and take into account what is on offer and how it is presented before creating a tunnel vision analysis as you indicated to a degree when you said being vocal about the good and bad on offer, unfortunately people get stuck on numbers (250%) which is why I asked what would be a fair markup at a fine dining establishment as many variables are at play.

        I’m definitely not going to markup a Kanonkop Paul Sauer ’15 by only 250 % on the original purchase price for instance, and although an intense example there are factors at play regarding availability and sourcing.

        I really do appreciate the article you’ve written, just trying to break away from that exact number of markup obscenity.

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