Managing a wine program often seems romantic to people who've never done the job. "It must be so hard to taste wine!" they joke.
It ishard, as any wine director knows. Beyond the allure of selecting wine, it calls upon a wide range of skills including defining the philosophy, designing the list, pricing, managing profit and cash flow, operating the cellar, training the staff, and of course delivering an outstanding customer experience day in and day out.
All of this is vital. Wine programs are a significant source of profitability for many restaurants. Especially the with high cost pressures in California, having a solid wine program can make the difference to restaurant health.
As I worked my way up from server at Spago to wine director at The London Gordon Ramsey, I learned some fantastic tips about how to find more profitability in a wine program. In this series of emails, I wanted to share a few of my favorite tips--in case they can help accelerate your success.
Today we'll focus on margin.
When it comes to margin, it's useful to start with a formula for list and BTG selections. Then, prices should be reviewed and possibly adjusted on each wine, to ensure they communicate and deliver value for the guest as well as profit for the restaurant.
One effective adjustment is marking up your well-known wines a little less than your average. Why? If people recognize some of these well-known wines and realize they are relatively affordable, they will feel more comfortable selecting from your list. On the flip side, you can make more on "discovery" wines that offer fantastic quality for a fraction of the cost.
For example, at Gary Danko, we wanted guests to see Veuve Cliquot yellow label at a great price, so we marked it up less than usual. On the list for a few dollars less than Veuve, we had a fantastic grower Champagne. This grower Champagne was better quality, from a better appellation, and cost us a fraction of the Veuve. It was easy for us to recommend the grower Champagne over the Veuve because it was a win-win-win: the guest would get a better wine, they would save money, and we would get an incredible margin.
Another tip about margin: you can build in a buffer to your margin by assuming that the cost of a case of wine is spread over 11 bottles instead of 12. Why? Because every so often, you'll need to give a bottle to a VIP, such as a reporter or friend of the owner's. Or maybe you need to open a bottle for a staff training every now and again.
This was a huge advantage for us at The Wynn Las Vegas, where VIP comps happened quite frequently, and staff trainings were a huge priority. If you don't want it to eat into the cost, using 11 bottles instead of 12 as your cost basis is a good buffer.
And if you end up not needing to comp any bottles, voila, you have 8% extra cost savings. As any Cornell graduate will attest, it's smart to keep your savings to make your program stronger. This simple change will increase the health of your program overnight.
These are just a few tips in hopes of saving you a little time in reaching your goals. And may you have a little extra time for fun during an incredibly busy summer season. Cheers to finding your balance!
Sincerely and with respect,
Yes Josh, Happy to hear a disagreement and welcome it. Though if you’d please be so kind to share why? Best, G
I'm not sure that the level of trust runs so cleanly and correspondingly with the level of expense of a restaurant. I've seen plenty of untrustworthy behavior in high end restaurants from management and staff alike, and I've seen incredibly dedicated, professional, and trustworthy behavior by staff and management in more casual places. All the same, your point about trust being the major factor in allowing who gets to make these comp decisions hits the mark. Ideally it is someone with an understanding of the restaurant finances on some level and who can connect the dots between the numbers at the end of the month and their actions on the floor during the month.
If you think about your proposal to spread the cost of your case of wine over 11 instead of 12 bottles per case, doesn't that just mean that in the end you are marking everything up a little bit more with this formula? Raising prices would definitely mean more profitability, and it kind of seems like a no-brainer when I think of it that way. My point above was that if word gets out that one bottle out of every case that gets delivered is "up for grabs," then there could be trouble.
Where I currently work, they want to know exactly where the comps are going. They allocate these comps to different budget segments (marketing, waste, guest recovery) so that they can keep an eye on where the problems may be. Also, sometimes the expense is picked up by the hotel and sometimes by the restaurant, even though at the end of the day (or the spreadsheet) we are one entity. If your restaurant is part of a larger operation (hotel, casino, resort) the ownership may want to keep account of different components separately. I've never worked in a casino before, but it seems pretty obvious that their main revenue source is gambling, which will easily make up for the cost of that twelfth bottle in the case.
I agree Josh, it's a good way to leave some dollars on the floor. Price gouge the well known wines so you can sell the lesser known wines. People will feel more comfortable when they see the well-known wines, not when they are well priced. Why would I bother with something I don't know when I can get the famous wines for cheaper than usual.
I think we should be careful about generalizing on our guests' buying habits or what motivates them. The context is very important. A high volume restaurant in a Casino or a small neighborhood bistro or a fine dining destination restaurant in a major city are all different settings with different guest profiles. The best indicator on buying patterns is probably found in the sales data of your individual restaurant (be careful that you have a big enough sample set), and you can adopt your pricing strategy from that.
I think this depends on your boss. Where I've worked if you were able to account for exactly where your money was going that would be better than a blanket accounting for an 11 bottle cost. My boss was actually annoyed with me when he found that my cost was significantly lower than the other restaurants in our group. His reasoning was that he set the cost goal for a reason, he knew the local market well and knew what our guests wanted. If my cost was a little higher because of comps or a run on expensive bottles with lower margins he was fine, alternatively he was happy when I had a lower cost because I took advantage of great deals on high margin glass pours, as long as I could show him where every dollar went. I think the 11 btl strategy might be great for some markets or situations though.
Thanks for the tips and discussion!
I would like to know what you think about 6 bottle and 3 bottle cases and how you factor those in?
I'm not sure I agree with this. When I went to a sushi restaurant and saw Kim Crawford SB for $13/glass (in NC), it really put me off buying wine from their BTG list. And this was long before I was a wine buyer. I was just a customer.
In this context I think people are thinking less of Sauv Blanc BTG and more of Silver Oak BTB
Sure, but it's the same thing. If I saw Silver Oak Alexander BTB for $200, I'd be equally as put off by the restaurant's wine pricing.
Whereas if I saw Silver Oak Alexander for $120 or under, then I would feel more confident that the entire wine list is priced fairly, and would feel better about choosing a more obscure wine that I'm not familiar with, should a server recommend it.
I was just speaking from an experience where that actually happened.
I think that's fair
So what do you do once you're put off by the pricing? Do you choose to drink something else than wine?
Everything is relative to the market in which you work in. There are many guests who dine out in NYC that would think that $200 for Silver Oak is good value. There are many brands in which this applies to. Am I saying it makes sense? No, just observations I've seen in 8 or so months in a wine program in which we sell a ton of California Cabernet.
Perhaps - it would depend on the restaurant's food and whether I really wanted wine with it or not. But if it was food that begged for wine, and unless it was the BEST restaurant in Raleigh, I probably wouldn't go back. We have many other great places to choose from (not that I get to go out all that much anyway) with fair pricing, based on the market.
Great information and discussion. Thanks for sharing!