The recession and 9/11 have had a stifling effect on
restaurant wine sales, but not on the enthusiasm of those who judged RH’s 13th Best Wine List in America Competition. This year’s entries were lively and exciting, they say. So, here are our winners along with some advice on selling wine during tough times and suggestions for value wines that will heat up your wine lists.
This year marked the Beverage Testing Institute’s second time judging Restaurant Hospitality’s annual Best Wine List in America Competition, but, oh, what a difference a year makes. Last year we summed up the findings with an in-depth look at the state of the American wine list and an extensive list of positive and negative trends. This year, in the aftermath of September 11th and an on-going recession, it’s impossible to ignore the elephant in the room. Many of you are struggling to hold serve, and the days of customers buying $100 bottles of wine is over, at least for the forseeable future. One point is clear, however; ignoring the potential of your wine program in tough times is a big mistake.
That conclusion became clear after reviewing the hundreds of wine lists submitted for the competition. Restaurant operators were asked to supply sales figures and percentages. The fact that jumped out right away was just how important a wine program is to today’s restaurants. Most restaurants derived 20% to 40% of their total f&b sales from their wine programs, with some topping 50%. Given the fact that profit margins on most wine programs are well over 50%, we are left with a stark reality.
The vast majority of these restaurants are deriving most of their profit from their wine programs. With so much at stake in today’s economic climate, and as such a vital profit source, the importance of a restaurant’s wine program can simply not be under-emphasized.
In order to be successful, however, the savvy restaurateur must take stock of the changing landscape. Steve Anderson, president of the National Restaurant Association, reports that restaurant wine sales have dropped anywhere from 10% to 60%. Danielle Corning of the Smith & Wollensky Restaurant Group puts it succinctly when she says, "People just aren’t spending the money anymore. The $100-and-up price point has slowed significantly. We’re seeing a lot more people trading down."
The consumption trends in restaurants bear comparison with what is happening on the retail front. Retailers from Washington State to New York are actually reporting increased sales since September 11th. What does this mean? Your customers haven’t stopped drinking wine or lost an interest in wine. They are just drinking it at home. Additionally, many have traded down a notch. Super-premium wine sales are continuing to soften across the board. What this obviously translates to is a desire for value. Patrons will be less willing to absorb extreme mark-ups and will avoid restaurants that don’t recognize the current market conditions and adjust to them.
If people are still drinking wine then, how do you get them back into your restaurant and out of the wine shops? The answer may be found in your own wine program. Here are five ways to bolster your wine programs during rough times.
1 Smaller but Smarter. Even before the events of last September, the giant wine list with 50 Chardonnays and 50 Bordeauxs–many at similar price points–was going the way of the dinosaur. How many guests really want to spend half an hour wading through a massive wine list? For years I have advised sommeliers to keep it simple. A list with as few as 50 extremely well-chosen wines is more than enough to cover all the bases. And for those who want to go the extra mile, I would advise no more than a 100-wine selection.
Simply make sure that you are choosing the best examples in any given style at any given price point. A thoughtful wine list tells your guests that you’re knowledgable and careful about your selections. Remember, money doesn’t always buy taste. Even if you can afford the inventory associated with a massive list, it doesn’t mean the list will be better.
If you have a number of wines that rarely sell, or if you just have too much inventory, bite the bullet and have a fire sale. Thin the list out by advertising a half price promotion. People can’t resist sales and your local AIWF chapter or wine school would probably put the word out for you. Contact them. This tactic can provide cash flow and move traffic through the door. What’s more, you could be left with a list that is more effective than the one you started with. Inventory is just that; turn it into income and don’t feel like you have to replace it.
2 Free Wine. Everyone likes the word free. It makes people stop and take notice. It’s like catnip for the masses. Cite in New York has had a free wine promotion twice a year for several years and it has been a phenomenal success. For a fixed price, patrons get a meal and free pours from a set of wines that changes on a daily basis. The wines don’t have to be expensive as long as they are good.
Run the numbers. If you can do a prix fixe lunch for $19.99 or $29.99, and a dinner for $29.99 or $39.99, you can probably fit the wine into your food costs. If the average guest drinks half a bottle and you can find solid wines to pour at $5 to $10 a bottle, it will cost no more than $2.50 to $5 per cover. If that’s the price to pay to get traffic through the door, generate good will and widen your customer base, it’s well worth paying. Fortunately, there’s a raft of solid wine choices in that price range this year. [For a list of suggestions, see The Chicago Value Wine Challenge sidebar on the next page.]
3 The Special Event. This is the old stand-by of restaurant wine marketing techniques, the winemaker’s dinner. Wineries–particularly California wineries–are worried about the drop-off in on-premise consumption. Many of them would jump at the opportunity to host dinners featuring a range of their wines paired to a special menu. In the current climate, they may even be willing to contribute the wine free of charge or split the costs.
Before you yawn at this thought, consider this: These dinners have a proven track record of success around the country and are often sold out. Simply pick a night that is traditionally weak for business and try to schedule it as a rotating monthly event, then advertise the year’s calendar. Again, try getting the word out through the local wine community. The results should surprise you. After all, wouldn’t you love to turn one of your weakest nights into a house full of premium covers once a month?
4 Provide Value. This should be a no-brainer. As discussed earlier, sales trends show that while wine consumption is holding, many consumers are trading down a notch. This means that they are looking for value and less willing to make selections at super-premium price points or suffer onerous mark-ups. Think about dollars instead of percentages. If you hold onto your mark-ups but experience a 50% drop in volume, you are worse off than if you were to drop prices and keep the volume going.
This is a long-standing issue that restaurateurs know all too well. The vast majority of restaurants have gotten away from a straight three-times mark-up across an entire list, choosing to take a greater percentage at the bottom of the list and with glass pours while tapering the mark-ups at the upper end. Many chain restaurants and hotel outlets, where pricing is often dictated by percentage-driven, out-of-touch f&b’s, are clearly behind the curve. If a diner perceives that they are being ripped off, they will either go to the bottom of the list, drink something else, and/or not come back.
I have seen arguments on both sides of the equation, but the numbers don’t lie. Tapering mark-ups at the top of the list, or over $50 say, provides the impetus for many guests to move up on the list and gives the diner a sense of value. If your mark up is two times on a $50 bottle and three times on a $10 bottle, your percentages will be worse on the $100 offering but you will bank an extra $30 in profit per bottle. You also may increase total sales and encourage repeat diners.
Recognize the fact that on certain staples, such as Opus One or Dom Perignon, diners know how much the wine costs, and look to these selections as benchmarks on list pricing. This year we saw DP listed anywhere between $100 and $300 per bottle. By dropping prices on some of these benchmarks, you may increase sales. Get away from pure percentages and start looking at real dollars.
5 Supply, Demand and Cooperation. In tough times, people can go in one of two ways: Fracture and fall apart or join together for the common good. Clearly, this nation has chosen the latter course since September. The restaurant business should be no different. Continue to foster a sense of community spirit and instead of focusing on your neighbors as competitors who may steal a larger piece of a decreasing pie, try banding together to increase the size of the pie and each share.
When it comes to wine, perhaps you could join forces with your neighbors to purchase house pours at higher volumes, thereby lowering costs. Wholesalers report that there is far more dealing out there as volumes in certain sectors have slowed. Also, California, Australia and Chile are in the midst of an oversupply problem. After years of wine shortages, there is now a surplus and this problem is only compounded by what has happened in the on-premise sector. The upshot of this is that the market is now working in your favor. Put bluntly, Mondavi’s stock price is falling with lagging sales. In order to generate volume they and many like them will be receptive to house pour promotions and the like. Buying as a group simply sweetens the deal for both parties.
Beyond purchases, perhaps you could combine efforts to host special wine dinners or promote special discounts. A promotion with an emphasis on value, perhaps even using some of the tactics outlined above, will be more effective if presented by a group of restaurants in one region than it would be if you were to go it alone.
In the end, however, it’s impossible to get away from the value equation. No number of commercials with President Bush or Rudy Giuliani will make people dine out again if they think they can’t afford it. Learn a lesson from the airlines. They have fewer and fewer empty seats these days, due in large part to discounted fares and other promotions. They may still be losing money, but they are generating cash flow and keeping the planes running. Things will get back to normal soon enough, but just make sure you keep the engines running until that time comes.