Factors Affecting Wine Price Mark-up in Restaurants

Florine Livat · Hervé Remaud

14 citations0/0 files storedJournal of Wine Economics

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Wine Industry and Tourism Culinary Culture and Tourism Consumer Market Behavior and Pricing

Abstract

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)

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References

1989Handbook of Industrial Organization 2008Panel data methods for fractional response variables with an application to test pass rates 2004Competition Policy. Theory and Practice 2004Competition Policy 1987Inter-industry studies of structure and performance 1986Market Structure and Macroeconomic Fluctuations 2010The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence 2009The role of perceived risk in wine purchase decisions in restaurants

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