Factors Affecting Wine Price Mark-up in Restaurants

Abstract

AbstractThe 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)