Tuesday, February 12, 2013

Right of reply to Stephen Downes' "Cheeky drop, with bouquet a rip-off" published in 'The Sunday Age', February 8th, 2013

A note to the reader:
Before I embark on this 'right of reply', I've got to add that this is not the first time I have stood on my soapbox and stood up for the restaurant industry. On two occasions I have posted open letters to journalists from 'The Age' on my blog in regard to poorly written 'commentary' pieces on the state of the Melbourne restaurant scene. I understand that things are not perfect, or cheap for that matter, in restaurant land but neither is rent, wages or food costs.  So when experts deem they need to report on this, do it properly and report on all facets and not just the shock material.


As certainties go, the list below is pretty much a given:
  • water is wet
  • the sky is blue
  • sticks are sticky
  • Stephen Downes' food and wine commentary is redundant
On Sunday, 'The Sunday Age' published a piece by Stephen Downes entitled, "Cheeky drop, with bouquet a rip-off". This by-line was the prelude to an article in which a scathing Downes takes a very big stick - no doubt a sticky stick - to the Melbourne restaurant wine mark-up practice. To say that the piece was uninformed, disjointed and quite simply utter rubbish is a Captain Obvious comment if ever ther was one. Also, the negative barrage that Downes has received on twitter these past few days has been enormous. It has also been, in my opinion, a bit nasty. This piece is not meant to be nasty. It is all about being informative and delivering a thought out argument which is something the "Cheeky Drop" piece lacked in spades.

So, there I was in my kitchen drinking my coffee and reading this erroneous piece, and I was compelled to go back and read it again and again and again. In the end I just took out a pen and started taking notes. So, having no formal journalistic training, I will start from the top and work my way through the 19 paragraph story and apologise if I repeat myself or just re-hash the same argument. 

(One thing I will add is that I have formal training as a sommelier from France, wine making experience in France, and Australia, and a Bachelor of Viticultural Science. I have also worked in three of the restaurants mentioned by Downes in a wine role - not the Berwick eatery I must admit - and I am currently working part-time at one of Australia's premier small wine producers while working full time at an independent wine retailer.)

"Melbourne restaurants are charging diners three, four and even more than five times the retail price for a bottle of wine. Many sell little-known wines from small vineyards and exotic overseas wines to prevent price comparisons and to camouflage gouging."

Sorry, what a terrible way to start a story. Yes, Melbourne's restaurants do charge that amount. This is so they can pay bills, Stephen!!! Without going through P&L reports of every eatery in town, I would suggest that the average gross profit a restaurant achieves would be in the realm of 4% - 8%. Restaurants in Melbourne need to pay rent and I would imagine Ezard is paying at least $100K per annum. Below is a  list of out-goings an 'average' restaurant would encounter on a monthly basis:
  • rent/council rates
  • wages
  • insurance
  • food costs
  • beverages - includes wine, beer, spirits, etc
  • utilities - water, electricity, gas
  • maintenance
  • linen
  • crockery/cutlery
  • glassware (not cheap)
  • cleaning
  • marketing
  • and plenty more ....
This list I no doubt will reference again so let's just call it List 1.

The second sentence from the first paragraph reads like restaurants are deliberately trying to mislead the diner. I can almost see Downes getting frothy at the mouth a la Christopher Hitchins as he writes this sentence. Complete rubbish I'm afraid. The reason why restaurants choose to showcase smaller producers is to highlight the amazing choice that the customer has, especially from Victoria - terroir, something the big boys can only spell. These small producers quite often only make a small amount of wine which, in some cases, is barely enough to supply the two key restaurant and retail markets in Australia - Sydney and Melbourne - let alone the big chains like Dan's and Vintage Cellars. I am aware of one small producer from Victoria being approached by one of the aforementioned retail chains where they wanted all the wine produced and would pay generously. The wine maker politely refused only to be told (and I was there) "you will never, ever have your wine featured in our published magazine. EVER." This was met with the wine maker simply turning around and getting back on with the job. To this day his wines have, and will not, be sold to this chain.

The 'exotic' wines Stephen remarks about, well that's simple - high AUD equals cheap imports. You do not need a degree in business to work that out. If you honestly believe, Stephen, that restaurants employ this practice to camouflage gauging then a career writing on ports and tides awaits.

The second paragraph sits about as comfortable as a Carlton fan in the middle of 10,000 screaming Collingwood fans at the MCG. It doesn't make sense. But if we need to quantify it then it is an expense from List 1 that I have left out - IT and Social Media management.  Not cheap and very time consuming.

"At Ezard, a glass of By Farr 'Farrside' 2010 Pinot Noir costs $30, yet a whole bottle (about seven glasses) of the 2009 vintage sells for $68."

This is where research and a little wine knowledge would come in handy. Firstly, the standard pour for a glass is 150ml. If Stephen's figures are correct then By Farr produced a wine in a 1,050ml bottle = where can I get one of those???!!!! That's the wine knowledge, but really just common sense. The second point is research and if you were to have done any of this, Stephen, you would have learnt that 2009 was an incredibly disastrous year for wine grape growing in a lot SE Australia due to the intense heat conditions late January and February. Many growers and producers had their volume severely diminished due to fruit effectively burning on the vine. Now I'm a fan of By Farr wines for a few reasons. One is that they make super sexy wine and two is that I believe that Gary and his son Nick displayed a lot of integrity that vintage. Maybe the wine wasn't up to scratch. Maybe the wine was a true reflection of the vintage and it showed in the final product. A difference in price from vintage to vintage is not uncommon where severe weather affects the final harvest. And maybe Gary said to Teague that you can have the 2009 wine for x amount but all things being equal, the 2010 will go back to y amount. This is not uncommon also.

The 'Liquid Gold' table of wines is a remarkable feat in showing your audience you truly have no concept of managing/operating a restaurant. Excluding the first wine, the Matua Valley Sauvignon Blanc, the remaining prices shown as restaurant vs Dan Murphy’s do not seem like the restaurants are ‘gouging’ the customers. So, if you will allow me to explain the concept of ‘economies of scale’, this may take a while, for I also have a degree in economics.

Economies of Scale – a situation in which long-run average total costs decline as the output of a firm increases (also called increasing returns to scale). In layman's terms it's all about the more you have the more you buy, and the more you buy the more you can negotiate a sweeter deal for your outgoings aligned against your final sale price. (Taylor & Frost, Microeconomics; 2nd Ed, 2002). 

Economies of Scale, in this exercise, leads to Duopoly or Game Theory. 

Game Theory provides a framework for studying strategic behaviour in an oligopoly or duopoly. Games, including the prisoner's dilemma, describe the strategies firms can use when they have the options of charging a monopoly price or a lower price (Taylor & Frost, Microeconomics; 2nd Ed, 2002)

To cut to the chase, the stronger you are in the market, the stronger you are at the negociating table. Coles and Woolies buy by the pallet load, with two, three and sometimes ten pallets at a time. Ezard, Vue de monde and even EightyOne will buy by the case, with multiple case purchases of two or three when pouring by the glass. Independent retailers are in the same boat as the restaurants and can simply not compete against the Big 2. The Mt Langi 'Cliff Edge' 2009 Shiraz is a good example. Where I work the wine hits the shelf  at $30. We buy it by the case. The reason Dan Murphy's can sell it at $23 is they use the economies of scale practice, not because they are nice guys.

This brings me to the whole Dan's issue. Your whole, "Many sell little-known wines from small vineyards and exotic overseas wines to prevent price comparisons and to camouflage gouging." has exactly the same ramifications as restaurant's. Smaller independent retailers choose to stock these 'small vineyards' and 'exotic' wines to be different and to give the consumer something else to think of; a different flavour to the Penfolds , Casella's and Rosemounts of the wine industry. What is wrong with celebrating terroir and , as you would put it 'exotic' varieties such as Nero d'Avola, Montepulciano and Aglianico from regions like the Pyrenees, the Canberra District and Gippsland? Wine drinkers love this type of stuff.

The BYO issue. There are many restaurants out there doing it tough but at the same time they are offering BYO nights to encourage punters to bring a bottle in and have a great meal, thus hoping they will possibly venture in on the big dollar nights of Friday and Saturday. By simply writing, “Licensed restaurants generally dissuade customers who want to bring their own” is terrible and myopic. These same restaurants will also probably dissuade the same customers from urinating at the table and shouting obscenities across the restaurant. I simply dissuade your argument there Stephen.

In closing, Stephen, your piece on Sunday was terrible. That is not being vicious and by no means is it a personal attack on you; I do not know you Stephen. We have never met. I have never sold you a bottle of wine. I have never served you at a table.  But if I was to I would make sure your paper napkin was neatly stuffed under your chin. I am sorry that you have received nasty remarks, Stephen, and when you write crap like this you gotta expect some negative feedback


  1. When I read Downes' article at the time, the impression I got was that was that he was a man hoping to be noticed. He wouldn't be having a book to plug by any chance?

  2. Great article and well articulated. Maybe you should be writing for the spreadsheets.


  3. Paul

    If it is a book from him, then good luck to him.


    Thanks, but maybe you mean broadsheet. Cheers anyway.