Consumer Corner: Is the second cheapest bottle of wine on the menu the worst value?

Pic: iStock

There’s a rumour that you should never order the second cheapest bottle of wine on the menu at a restaurant as it is usually the worst value. 

The rumour goes that restaurateurs know that people will be reluctant to order the cheapest bottle of wine, so they take advantage and believe people will likely go for the second cheapest. 

Any truth to this theory? To answer this question we look to the American Association of Wine Economists who have done the research for us.

The group of economists did a research paper on the theory and when they investigated it found that there was no truth to the rumour and that the second cheapest bottle of wine on a menu is not the worst value.

Professors David de Meza and Vikram Pathania picked 470 wine menus from 235 London restaurants. They ran the wines through price comparison websites to find the retail prices. 

They found there was more of a markup on the mid-range wines rather than on the cheaper wines on the menus.

Mr De Meza said in the paper: “Our study challenges the notion and finds that the percentage mark-up on the second cheapest wine is significantly below that on the third, fourth, and fifth cheapest wine and well below the peak markup, which tends to occur around the median wine on the menu.” 

They point out that margins are kept low on the cheaper end of the scale to encourage diners to drink more.

They did also find that the markup on wine in restaurants in general was around three times over shop prices. The red wines they looked at had an average price of £42 (€48.55) per bottle of red and £30 (€34.68) for white, with the most expensive being £7,630 (€8,821). 

They also found that buying wine by the glass was not massively bad value either.

Sue is a waitress in Tramore, Co Waterford, and said that as a waitress it doesn’t bother her if someone buys the most expensive or cheapest bottle of wine.

“Each to their own is what I’d say. When I get asked for a recommendation I base it on what goes with the dish they are drinking. I don’t care how much they want to spend, that’s up to them and it depends on what people can afford. I certainly do not take it personally,” she said.

When she eats out herself, Sue said that she is disgusted by some of the prices of wine she sees on restaurant menus.

“I see a lot of wines as part of my job and when I see a wine on a menu that I know would be a quarter of the price in a supermarket I find it very hard to pay the restaurant price. I just think restaurants make enough money on food, they don’t need to overcharge on their wines,” added Sue.

Mark Coan, founder of moneysherpa.ie said that the right bottle of wine for you, is the wine that you are going to enjoy the most.

He said: “So you have to consider your own likes and dislikes as well as what goes well with your meal. If the wines on offer are unfamiliar a handy hack is the Vivino app, which has ratings for practically any wine on earth. Anything rated 3.8 up usually represents good value."

We drink a lot of wine in Ireland, around 9 million cases a year in fact. And do you often wonder how you can get a bottle of wine so cheaply when you go on holidays to places like Spain and Portugal? It comes down to excise duties and VAT. 

In Ireland, we pay significant duties and VAT on wine, while other countries do not charge any duties.

The stats show that we pay the highest amount of excise duty on our wines among all the EU countries. 

Drinks Ireland said that 54% of the price of a €9 bottle of wine will go on VAT and excise and the Government rakes in around €385m from excise duties on wine a year. 

The report found too that wine is the second most popular alcoholic beverage in Ireland, after beer, with white wine just piping red.

John Lowe of the Moneydoctors.ie said that it’s basic but choosing a wine in a restaurant will just depend on how much you want to spend and how much you can afford.

Of course on the other side of the coin, you can consider making money on wine too and not just spend money on wine and look at investing.

“If you bought a case of 12 bottles of Pommerol Le Pin in 1982, which is a nice burgundy, it would have cost $400 at the time for those 12 bottles. If you had kept it for 40 years in a temperature-controlled room, today it is worth over €125,000.”

“And of course, the good thing about wine investment is that if it doesn't work out, you can always drink it,” said Mr Lowe.