Hostname: page-component-78c5997874-ndw9j Total loading time: 0 Render date: 2024-11-20T04:21:46.370Z Has data issue: false hasContentIssue false
  • English
  • Français

Factors Affecting Wine Price Mark-up in Restaurants

Published online by Cambridge University Press:  17 August 2018

Florine Livat  and
Hervé Remaud
Florine Livat*
Affiliation:
Kedge Business School, 680 cours de la Liberation, 33405 Talence Cedex, France and Bordeaux Wine Economics
Hervé Remaud
Affiliation:
Kedge Business School, 680 cours de la Liberation, 33405 Talence Cedex, France and Ehrenberg-Bass Institute for Marketing Science, University of South Australia GPO Box 2471 Adelaide, South Australia 5001, Australia; e-mail: [email protected].
*
e-mail: [email protected] (corresponding author).
Get access Rights & Permissions [Opens in a new window]

Abstract

The purpose of this study is to examine how restaurants determine the percentage of wine mark-up. Wine sales are a substantial contributor to restaurants’ profitability, therefore a better understanding of the factors affecting mark-up is critical for the industry. Here, the mark-up is expressed as a percentage over the cost and refers to a cost-plus pricing strategy. Sommeliers from around the world, the majority of whom were members of the International Sommelier Association, were approached to complete our Internet-based questionnaire administered between February 2014 and May 2014. Of the 800 who began the survey, 267 fully completed the questionnaire, generating 1,869 observations. We regressed the declared percentage mark-up against restaurant and wine list characteristics, including managerial practices and wine steward characteristics, and showed that if the restaurants apply a simple rule of thumb to set wine prices, focusing on every price segment, it appears that sommeliers do not have much impact on the percentage mark-up. (JEL Classifications: C23, D21)

Keywords

cost-plus pricingmark-upsommelierwine
Type
Articles
Information
Journal of Wine Economics , Volume 13 , Issue 2 , May 2018 , pp. 144 - 159
Copyright
Copyright © American Association of Wine Economists 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Amspacher, W. (2011). Wine price mark-up in California restaurants. Journal of Food Distribution Research, 42(1), 4–7.Google Scholar
Avlonitis, G. J., and Indounas, K. A. (2005). Pricing objectives and pricing methods in the services sector. Journal of Services Marketing, 19(1), 47–57.Google Scholar
Berenguer, G., Gil, I., and Ruiz, M.E. (2009). Do upscale restaurant owners use wine lists as a differentiation strategy? International Journal of Hospitality Management, 28(1), 86–95.Google Scholar
Billing, M., Öström, Å., and Lagerbielke, E. (2008). The importance of wine glasses for enhancing the meal experience from the perspectives of craft, design and science. Journal of Foodservice, 19(1), 69–73.Google Scholar
Cuozzo, S. (2015). Restaurants overprice wine because they know you have no idea. New York Post. Accessed June 23 from http://nypost.com/2015/06/23/the-real-reason-your-wine-costs-so-much-at-restaurants/.Google Scholar
Dewald, B. W. A. (2008). The role of the sommeliers and their influence on US restaurant wine sales. International Journal of Wine Business Research, 20(2), 111–123.Google Scholar
Dunn, S. P. (2002). A post-Keynesian approach to the theory of the firm. In Dow, Sheila C. and Hillard, John (eds.), Post-Keynesian Econometrics, Microeconomics and the Theory of the Firm, 60–80. Cheltenham: Edward Elgar Publishing.Google Scholar
Fabiani, S., Druant, M., Hernando, I., Kwapil, C., Landau, B., Loupias, C., and Stokman, A. C. (2005). The pricing behaviour of firms in the euro area: New survey evidence. European Central Bank, Working Paper No. 535, October. Available from https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp535.pdf?3fe960921919feb5484df89c7475211f.Google Scholar
Gil-Saura, I., Ruiz-Molina, M. E., and Berenguer-Contrí, G. (2008). Qualitative and quantitative engineering criteria of restaurant wine lists. Journal of Wine Research, 19(1), 19–31.Google Scholar
Granucci, P. R., Lynn Huffman, V., and Sue Couch, A. (1994). Effects of wine training on restaurant sales of wine. International Journal of Wine Marketing, 6(3), 11–19.Google Scholar
Hall, R. E., Blanchard, O. J., and Hubbard, R. G. (1986). Market structure and macroeconomic fluctuations. Brookings Papers on Economic Activity, 1986(2), 285–338.Google Scholar
Hall, S., Walsh, M., and Yates, A. (2000). Are UK companies’ prices sticky? Oxford Economic Papers, 52, 425–446.Google Scholar
Hwang, J., and Kunc, M. (2015). Business dynamics of on-premise wine trade: Cases from South Korea. International Journal of Wine Business Research, 27(3), 239–254.Google Scholar
Kimes, S. E. (2004). Restaurant revenue management: Implementation at Chevys Arrowhead. Cornell Hotel and Restaurant Administration Quarterly, 45(1), 52–67.Google Scholar
Lacey, S., Bruwer, J., and Li, E. (2009). The role of perceived risk in wine purchase decisions in restaurants. International Journal of Wine Business Research, 21(2), 99–117.Google Scholar
Manske, M., and Cordua, G. (2005). Understanding the sommelier effect. International Journal of Contemporary Hospitality Management, 17(7), 569–576.Google Scholar
Martin, S. (2001). Industrial Organization: A European Perspective. Oxford: Oxford University Press.Google Scholar
Motta, M. (2004). Competition Policy: Theory and Practise. Cambridge and New York : Cambridge University Press.Google Scholar
Organisation Internationale de la Vigne et du Vin. (2014). Definition of sommelier. RESOLUTION OIV-ECO 474-2014. Available from http://www.oiv.int/public/medias/1924/oiv-eco-474-2014-fr.pdf.Google Scholar
Papke, L. E., and Wooldridge, J. M. (2008). Panel data methods for fractional response variables with an application to test pass rates. Journal of Econometrics, 145(1), 121–133.Google Scholar
Ponikvar, N., and Tajnikar, M. (2012). The impact of foreign trade on mark-up size: Evidence from a dynamic panel model of Slovenian manufacturing firms. Eastern European Economics, 50(1), 46–64.Google Scholar
Preszler, T., and Schmit, T. M. (2009). Factors affecting wine purchase decisions and presence of New York wines in upscale New York City restaurants. Journal of Food Distribution Research, 40(3), 16–30.Google Scholar
Ruiz-Molina, M. E., Gil-Saura, I., and Berenguer-Contrí, G. (2010). Instruments for wine promotion in upscale restaurants. Journal of Foodservice Business Research, 13(2), 98–113.Google Scholar
Schmalensee, R. (1989). Inter-industry studies of structure and performance. In Schmalensee, R. and Willig, R. (eds.), Handbook of Industrial Organization, Vol. 2, 951–1009. Amsterdam: North Holland.Google Scholar
Sirieix, L., Remaud, H., Lockshin, L., Thach, L., and Lease, T. (2011). Determinants of restaurant's owners/managers selection of wines to be offered on the wine list. Journal of Retailing and Consumer Services, 18(6), 500–508.Google Scholar
Sutton, J. (2001). Technology and Market Structure, Theory and History. Cambridge, MA: MIT Press.Google Scholar
Terrier, L., and Jaquinet, A. L. (2016). Food-wine pairing suggestions as a risk reduction strategy: Reducing risk and increasing wine by the glass sales in the context of a Swiss restaurant. Psychological Reports, 119(1), 174–180.Google Scholar
Thompson, G. M. (2009). (Mythical) revenue benefits of reducing dining duration in restaurants. Cornell Hospitality Quarterly, 50(1), 96–112.Google Scholar
Thompson, G. M. (2010). Restaurant profitability management: The evolution of restaurant revenue management. Cornell Hospitality Quarterly, 51(3), 308–322.Google Scholar
Wagner, J. (2008). Exports and firm characteristics: First evidence from fractional probit panel estimates. University of Lüneburg Working Paper Series in Economics No. 97, August. Available from https://www.leuphana.de/fileadmin/user_upload/Forschungseinrichtungen/ifvwl/WorkingPapers/wp_97_Upload.pdf.Google Scholar
Wansink, B., Cordua, G., Blair, E., Payne, C., and Geiger, S. (2006). Wine promotions in restaurants: Do beverage sales contribute or cannibalize? Cornell Hotel and Restaurant Administration Quarterly, 47(4), 327–336.Google Scholar
Yang, S. S., and Lynn, M. (2009). Wine list characteristics associated with greater wine sales. Cornell Hospitality Report, 9(11), 6–14.Google Scholar