The Economics of the Vegetarian Option

(Photo: Michael Hänsch)

Went to a one-star Michelin restaurant in Bonn last night.  One of the best meals I’ve ever eaten. Three of the four of us ordered the five-course prix fixe all-vegetarian menu.  As we left, I thanked the chef-owner — who responded “Despite it being vegetarian!”

He seemed slightly upset about serving this menu. Was it because his revenue from it was only €63 compared to €91 for a five-course regular menu (which had one meat and one fish course)?  Maybe. But I don’t believe the vegetarian menu used less labor, nor was there a €28 difference in materials cost. My guess is that he prices at mark-up over materials cost, thus making the veggie menu a relatively good deal for the customer—and a relatively bad deal for him. Another possibility is that he thinks vegetarians have lower incomes and higher demand elasticities, and he believes he is rationally price discriminating. (HT to MC)

(Related: why eating a vegan diet “is seven times more effective at reducing emissions than eating a local meat-based diet.”)

 


Enjay

What always surprises me is that given many of the consumers of vegetarian options are a captive audience (they can't choose the meat option) and the consumers of meat dishes have a choice (they can take the veggie dish) that the vulnerability of the vegetarian isn't taken advantage of in higher, not lower Mark-up. Why do you think this is?

dersk

Because they'd never get repeat business, I'd say. Generally, my (also veggie) wife and I only go out to veggie specialty places or cusines like Indian and Thai that have a good range. Traditional, continental style restaurants we avoid - even if they have a vegetarian specialty. They're usually not very good and ridiculously overpriced (although the Michelen starred restaurant here did give me one of the top two or three veggie meals of my life).

My wife and I have both been given the stinkeye in many European countries for asking if there's anything vegetarian on menus, as if it's morally suspect. So it may have been an emotional and not a financial reaction.

edel

You'd got it Dersk! In Europe we treasure our traditional meals so anything we consider "new" for many of us is simply of lesser accomplishment. Let that be vegetarian food, a new wine or a new experimental dish. Americans, they don´t make that discrimination between traditional and "new".

In my "regular" restaurants (I mean cheap and definitely no Michelin ones) I find vegetarian dishes specially expensive and sometimes even more expensive that expensive meat ones. I think is due to the very low volume they sell (economies of scale). I wonder so why the opposite happens in the high-end restaurants?!

Sean Murphy

Very interesting, because I often find that restaurants have mastered the art of pricing vegetarian options on par with those containing meat. The fact of the matter is that vegetarians have to eat; I would also venture to say that they tend to be well-educated and have relatively inelastic demand and high willingness to pay for food (especially once they are seated at a restaurant with their loved ones and/or friends). The restauranteur in your article practiced what my organization refers to as "traditional thinking" rather than using a market-based pricing approach. Cost-plus pricing is so old school!

Adam

French Laundry prices the meat and the vegetarian prix fixe the same.

Eric M. Jones.

"He seemed slightly upset about serving this menu."

You need to read "Eat Me: The Food and Philosophy of Kenny Shopsin"...to get another possible reason why the chef wasn't happy. Shopsin, rumored to be the model for the "Soup Nazi", would have tossed you out of his restaurant.

And it wasn't the money....

Mike

Maybe he just likes meat better and feels that you're missing out on his full vision when you're only getting the vegetarian options.

In addition to prep costs, there's sourcing/transport/storage costs that are probably higher for meat.

Sarah

Sometimes I think that having to serve veg options is almost an assalt to many chefs' vision of the perfect meal, as the flavors and textures of meat are important to their artistry. I share my hometown with Michael Symon and his pork empire, and until recently, his veg option was called the "Why Bother" on the menu. As an omnivore-turned-veg, my experience is that ordering a veg item in a high-end restaurant is perceived as being akin to asking an artist to put away half his paint palette. But I (try) to turn it into a challenge for them, "Of course things taste delicious with a dash of pork fat, IT'S PORK FAT. Show me your true skill by not relying on such obvious ingredients." Maybe your chef charged less because he thought a meal without meat was a lesser quality meal.

Sbard

I'd agree with that. At many establishments, vegetarian options aren't seen as a core competency, but rather a sop to keep the token vegetarian from torpedoing a group's dining plans. The salads at McDonald's have one of the lowest margins of any item on the menu, but they keep them so that the vegetarians will have something to eat and don't keep their friends from going.

goldcd

That just sounds like Germany - one of the European countries that always seems eternally bemused that anybody would be a vegetarian (or for that matter on a non-drinker).
As a meat eater, it's never a problem for me - although I do remember a fun night out with a load of vegetarian co-workers, when the realized there was no vegetarian option at all on the menu. In the end large plates containing a collection of every garnish from every other dish on the menu appeared.

As a meat eater though, I rarely experience what a world of enforced vegetarianism feels like. Closest I ever got was a month in India, where after a week I was crawling the walls looking for anything with an actual dead animal in it. Meat eating over there (depending on region) puts you in the minority - you find yourself frantically trying to find the magical phrase 'non-veg' daubed somewhere indicating there is more than plant available.

Read more...

Andrew

Many chefs are in it for the cooking not the money. Some feel that vegetarian, or any dietary restriction, limits the food they are able to show off (how many vegetarian-only restaurants have a Michelin star?). Or, may be the comment was interpreted wrong and the chef was highlighting how good the food was "despite it being vegetarian."

Diane Rhodes

I've always been bemused by people who seem very gung-ho to save the environment, but don't necessarily see the advantages of a full, or even part-time, vegetarian diet. It's sad to hear that the proprietor would feel less happy with diners choosing something more environmentally friendly due to his profit margin, but I'm very encouraged that such a choice was offered, and that the meal seems to have been first class.

Jeff

One reason he might be upset is that he thinks the vegetarian menu isn't as good as the regular one and doesn't show off his talents as well since he is restricted in the ingredients, independent of the profit.

Joel Upchurch

I notice that the other Freaknomics article you are referencing is quoting another paper which is quoting another article which is basically pulling the number out of thin air and doesn't show how they calculate it.

http://www.pnas.org/content/early/2010/09/27/1004659107.full.pdf+html

This is an example about how statistics are more authoritative the further you get from the source.

This Scientific American article indicates that a pound of chicken has 1/13 the GHG emissions of a pound of beef.

http://www.scientificamerican.com/media/gallery/B8850198-F130-62EC-F2A7324DE64FECCA_2.jpg

JC

There is one caveat to vegetarian instead of vegan food. Animal protein, particularly cow milk protein, binds with all the healing antioxidants in plant foods and renders them USELESS to our body! It's so easy and healthier to be vegan!

Why would someone choose to be vegan? To help end world hunger for one! Here are two uplifting videos to help everyone understand why so many people are making this life affirming choice: http://www.youtube.com/watch?v=fKr4HZ7ukSE and http://www.veganvideo.org

Anonymous

I think you underestimate the difference in the material cost of producing meat. For example, there is a factor of ~10x for the amount of food you need to put into an animal over the amount of food you get out. So you are in some sense paying for 10 times as much food when you are eating meat. I'd posit to guess that in most cases, the vegetarian meal is in fact cheaper to produce, but is marked up to be closer to on par with the non-vegetarian meals.

ken

Is it possible his comment ( “Despite it being vegetarian!”) was an expression of pride in making a good meal for people who had limited options? Good food is hard to make and serve. Not every dish that goes out is finished to perfection. Since you only chose from a limited portion of the menu, the odds of complete success were lower.
I think he was tired and his words were an sarcastic expression of happiness.

Curtis

You open up an interesting question - one where most all of us may have insights:

Just how do restaurants set prices? My impression, as a diner, is that they often do as you suggested, and "mark up" the ingredients. But what portion of the total cost is ingredients? Half? Wouldn't it make more sense to charge a fixed price per plate, plus any significant cost differential?

Sbard

Cost of Good Sold (COGS) for food at a restaurant tends to be 28-35% with fine dining establishments on the higher end.

Bob

Pretty useless article. Author is clueless about economics or meal choices. He just tried to be cheap at an expensive place based on menu prices and was pleasantly surprised with vegetarian meals. From beginning of civilization, vegetarian meals required more effort to produce, than barbarians killing for meals. Cooking has different economics. It takes more energy to cook meat than vegetables. Its restaurant choice how they want to price....