Wednesday, July 15, 2015

New York restaurant wine market, explained

Photo courtesy Ryan Fischer
New York city's wine market is arguably the best in the world, with an island full of wealthy people and no allegiance to any region or country. It's also insular and myopic and to outsiders can look like a bunch of people trying to answer the question, "How can I be more hip than you?"

I spent some time on a bus recently with Levi Dalton, Manhattan sommelier, Eater NY editor and host of the "I'll Drink to That" podcast. Levi shared with me some theories about the New York wine market that I, as an outsider, found fascinating, and which I haven't read in one place before, though he has discussed them on his podcast.

Levi cautioned me that other outsiders (I live in California, which is where New Yorkers come to complain about the bagels and pizza) have embarrassed themselves trying to write about the New York wine market, but I assured him that not only would I put this in my own words and in several cases go further than he did; I would tell readers that any mistakes in this post are his, not mine.

Economic issues, as always, are at the heart.

New York restaurant owners demand 3 times retail markup on bottles; otherwise sommeliers who act as wine buyers will lose their jobs. So finding a "bargain" on a New York wine list essentially only happens when a restaurant wants to clear out back stock, perhaps because of a chef change, or when the bargain itself (here are a few) is a way of establishing the restaurant's hipness, which is an important currency in New York. Otherwise, you're going to pay $75 for a $25 wine. 

Restaurants can't get away with this in California because people know what wines cost, and corkage is allowed, so if they try to sell $25 wines for $75, people will instead pay a $25 corkage fee to bring their own.

Most New York restaurants don't allow corkage, but they still don't want diners knowing how much they're screwing them. So they can't stock well-known wines. Instead, they have to find obscure bottles: the harder to find in retail stores, the better.

This is one reason natural wines are growing so fast in popularity in New York. There are others, of course: New Yorkers share with West Coasters an interest in how their food was farmed. Sommeliers always want wines on the fringe for a variety of reasons. But a huge point is that natural wines can be sold for a larger markup than most wines. They're often cheaper to produce than wines from the same regions, as they don't spend much time in expensive new oak, and are offered for sale earlier, reducing inventory cost. Moreover, most diners don't know what they cost and even if they did, they're willing to pay to feel virtuous.

A side point on natural wines in New York: Dalton believes they taste better there than elsewhere because they're just off a direct boat from Europe, whereas to get to the West Coast they take a much hotter boat trip through the Panama Canal. This makes intuitive sense for a product whose major selling point is that it's more of a perishable farm product than other wines. Naturally, if natural wines taste better, people will be more enthusiastic about them, and indeed the market for them in other U.S. cities is below tepid.

Another result of standard high markups is that wealthy New York diners determine a price level that they want to spend for wine, and it's actually easier to get them to splurge than to convince them to spend less. If, for example, they define themselves as the kind of person who drinks $150 wines at dinner, they don't want to be told that there's a more exciting wine at $80; they believe their  inherited wealth or success at capitalism has entitled them to "the good stuff." I don't think you see this much in California, but maybe I just don't drink in those circles.

A consequence of this is that top restaurants in New York have to fill price categories as much as they do regional or varietal categories: If a diner comes in wanting to spend $200, you better have something. In San Francisco many wine lists have a lot of wines between $40 and $75 and not much else. This wouldn't make much sense in New York.

New York sommeliers generally hate well-known brands for many reasons, including getting exposed on markup, preventing them from contributing their expertise to the meal, and simply not being hip. But can you imagine a wine lover turning her nose up at a vintage Champagne? If it's not grower Champagne, apparently New York sommeliers would only drink it in the dark while feeling ashamed.

There is an economic reason behind the competitive hipness as well, though: to be a successful sommelier in New York, you have to keep up with trends. Touting the cloudy pet-nat Pinotage Blanc you had last night is the equivalent of a peacock spreading its plumage: it's a display of prowess, future earning potential and thus reproductive desirability.

A lot of these core beliefs are foreign to me as a wine lover who lives in California: I want delicious wine, I'm happier to spend less, and I'll drink with relish a well-known brand if it's good. I think they're foreign to most American wine lovers as well. But now they make more sense.

New York plays a commanding role in our national media, and it's no exception for wine. Thinking about wine as a New York sommelier might explained a lot to me, and I thought it was worth sharing. If I have gotten anything wrong, I encourage you to complain to Levi Dalton. Or just fuggedaboutit.

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Andy said...

You are spot on about crazy mark ups. I just got back from a week in Garrison (1 hour upstate from NYC) and Chelsea eating at a number of locally hip restaurants.... wine mark ups were obscene (at least 3x, often 4 or 5 times...for instance I paid $105 for a $22 bottle of Siduri RRV Pinot because I wanted to make a point about well made Cali pinot compared to a similarly priced Burgundy and because it was without a doubt the BEST DEAL on the list). We did do some corkage, finding rates to be $25 to 50. Most of the lists were interesting and I drank some wines from France, Italy, Germany and the Finger Lakes that I never would have tried out here...good stuff for sure. The best thing however were the beers. Most places had great beer selections (local, regional and West Coast micro brews as well as some cool Belgians) and the prices were comparable to if not a bit cheaper than out here. If you are on a budget, I'd eat high end and drink great beer

Michael said...

when i saw the price of my wine in a new york restaurant, i really was shocked. i wanted to tell my new york friends not to buy it. (but then i didn't.)
michael christian,

Millissime said...

Just have to say I am a New Yorker who does not abide to the above mentioned principles: I love a good cheap wine, especially if it does not overpower my meal. A clean crisp white, a juicy light red, a nice rosé from the South of France (forget Champagne: mark ups on that one are out of this world, I keep that for home drinking and enjoyment). Natural or not, big brand or not, you can find value in New York City restaurants, you just have to know how to guide the not-so-evil sommelier in the right direction.

Unknown said...

On a related subject . . .

From The Wall Street Journal "Off Duty" Section
(July 25-26, 2015, Page Unknown):

"The Restaurant Reserve Wine List: Relic, Rip-off or Reward?;
Are those leather-bound tomes—the secondary, pricey reserve list that is the province of the chosen few—helpful, or just an excuse for outrageous markups?"


By Lettie Teague
"On Wine" Column

Unknown said...

Having worked in the kitchens of NYC for a decade and selling wine retail just over the Hudson in NJ one reason was not mentioned. In my opinion the most relevant, restaurants in the Tristate area (NJ, NY, CT) make most of their profits off wine, beer and liquor sales. Its not enough to make great food. High Rents, Taxes, Wages, Raw Materials all come into play. A license in NJ to sell wine could cost you 200k, thats just the license needed for a restaurant to sell. You can sell a plate of Coq au vin and clear $10, sell a bottle Beaujolais Brouilly with it for $80 and you just might pay the rent this month.