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The Caterer

The operators making profits from wine sales

27 January 2009
The operators making profits from wine sales

Improve your wines-by-the-glass Wine consultant Vintellect estimates that by improving the range of wines-by-the-glass on your list your business could increase revenue by at least 20%. So don't be complacent about what you are offering in smaller measures.

Will Beckett, one half of the Underdog Consultancy, cites a restaurant client with a 200-bin list that offered only three wines by the glass - "and two of those were Chardonnay". He found that by extending the range on offer and introducing half-bottle carafes the restaurant was able to increase the average per-head spend on wine by £9.

Historically, cheaper wines were sold by the glass. In these more austere times in the country's business areas, however, a customer might have only one or two glasses at lunch, so he is likely to go for something good. At lunchtimes, particularly, people will have a glass of wine if there is a good choice and two glass sizes, where otherwise they might not. A couple having a bottle of red might well have a glass of white first, which is an extra sale. At lunchtimes, glass sales make up 25% of wet sales."

Charlie Young, owner of the Vinoteca bar in London's Smithfield, shows how by-the-glass should actually be seen as a list in itself. Vinoteca's wine list pricing structure relies on a sliding-scale cash margin on all wines over £6 duty paid on delivery (DPD) per bottle cost price. This means that the bar's gross profit percentage (GP%) drops as the price for each bottle rises but, on the other hand, customers are encouraged to spend more.

However, previously, owners Young and Brett Woonton would also take the hit on GP% for wines served by the glass where the DPD-per-bottle cost was £6 or more.

Last year the pair changed the system, costing all wines by the glass at 70% GP. "We continued to charge between £3 per glass and £8.50 per glass, and to offer the diversity between those two price points, but made sure we used wines that were sourced at a good price so that the perception was still that the wines by the glass were great value," says Young.

"Because of the volumes of wines by the glass, this initiative increased our overall drinks GP by 2% without, in fact, decreasing the spend per head. In profit terms, on a week where £10,000 excluding VAT turnover was achieved on drinks sales, this increased the overall profit by £200. This gross profit rise equates to £10,000 per year."

There's no ideal number or range for a by-the-glass list. Choose as many as you can manage, but don't be lazy. Have a mix of familiar names for customer comfort, and unfamiliar to offer better value, and keep it fresh by rotating selections.

Offer a choice of Champagnes, and don't be afraid to use a high-quality New World sparkler if entry-level Champagne isn't good enough. Always list both a New World and Burgundy Chardonnay and a fruity and fragrant Riesling and, if there's space, add one that's bone-dry.

As for Sauvignon Blanc, try to have an exuberant New World Sauvignon Blanc, one from the Loire that's crisp, plus a zesty Bordeaux and a textural Italian. Sauvignon Blanc remains extremely popular, so opt for a few. Then try to have an unusual, but great value, native Italian grape, such as Falanghina or Arneis.

List a New World Syrah blend and Rhone or Languedoc Syrah, too an unblended Cabernet Sauvignon from Chile, plus one that's blended, from Australia or Argentina. Pinot Noir is a must for the more discerning customers - a plump Chile, Oregon or New Zealand - and a well-priced Burgundy will do the trick. Rioja is always popular, but don't buy cheap and consider Garnacha from Calatayud. Have a Chianti for safety and something unknown from Italy for adventure. Finally, it might sound strange, but try dry sherry. It offers fantastic value and is versatile as an aperitif and with food.

Upsell

Whether you have a sommelier or waiters who serve both food and wine, you need to make sure they are both on the ball. Conventional upselling is all about grinding as much cash out of the customer as you can, but a more sophisticated approach is to see customer satisfaction as the key. If you can tempt them to order a glass of dessert wine with dessert or cheese, then they should enjoy their experience more, while at the same time you are increasing spend per head.

"Never upsell on price upsell on quality," insists Roger Jones, of the Harrow at Little Bedwyn, near Marlborough, Wiltshire. "It may be a cheaper bottle, but whatever the punter spends he has to leave the restaurant happy." It's hard to put a concrete value on customer satisfaction or positive word of mouth and repeat business, but it certainly exists as one of the most important influences on any outfit.

White-tablecloth restaurants employ sommeliers, who need the knowledge and time to increase both sales and customer satisfaction, but not everyone sees their value. Peter Horton, who operates as a freelance consultant to the drinks list at John Torode's meat-based Smiths of Smithfield restaurant in London, claims never to have been aware of a sommelier improving wine profits. "Obviously, a well-trained sommelier will sell, but a lot preach or daunt a customer, which can be off-putting," he says. And they are too focused on selling "top-end wines or, if they are French, wines from the region where they come from".

Train properly

Training is one of those things that everyone says they believe in, but we should sometimes take a step back and question our assumptions. For people often pay lip service to the idea of training without examining whether the kind of training we do has real value. Many query the point of training in an industry with high staff turnover. Even those who do it rarely seem to measure its effects.

Suppliers offer ad hoc training, and sales reps can be poor trainers, merely running through the virtues of the wines they sell - but you can direct them and ask them to present their wines in the context of your list. Horton was delighted with the sales of Gosset Champagne at the Top Floor at Smiths restaurant following a staff session. Before the training period only six bottles in nine months had been sold. After a well timed pre-Christmas session from the supplier, with a staff incentive in place, 72 bottles were shifted in December.

Christine Parkinson, who, working for Alan Yau across his group of restaurants, has created a reputation as a savvy buyer only outstripped by her reputation for innovative and effective training, is in no doubt about the value of training - but done with staff confidence in mind. "We have found several benefits from our wine training programme: better co-operation between sommeliers and other service staff customers who are willing to be more adventurous in their wine choices. Our wine sales rise in both volume and value with every major training course we run. We can also see the sales mix changing, as people become more confident selling a wider range of wines."

Target those promotions

Most restaurants remain pathetically supine when it comes to wine promotions. Tent cards on tabletops work for some people, but if they are not for you, then work with suppliers and consider what is best to do. Jones believes it is good to "grab any promotions that suppliers are offering, but don't let it take away from your main wine sales".

Horton ran an Australian promotion last summer. He promoted the regionality of Aussie wines initially to create interest, saying that some grape varieties are better suited to different areas. All wines were offered by the glass so that customers could try them - there is still a reluctance by the public to spend more than £50 on Australian wines. "We found that once people had tried a glass of a wine they very often opted for a bottle," says Horton. "Also, there was a staff incentive of a trip to Australia - something that always helps. Incentivise the staff and wines will sell." Horton saw the promotion as a great success, with wine sales rising by 20% over the period.

Buy better

"Taking costs out of the business" is this recession's new piece of jargon. It might be worth benchmarking current listings, especially of key movers among your wines, but it is short-sighted to merely replace wines with cheaper variants.

See if you can buy better. If you are able to accept larger deliveries, you might gain a discount. Simply reducing the number of suppliers is not necessarily the answer. Beckett cites one client's list which was "a monster sole-supplier list crammed full of similar wines. Glancing through it, you could envisage the rep trying to shoehorn as much of their stock in as possible".

Beckett adds: "A sole-supplier list is fine for a pub or low-spend-per-head dining operation, but at a £100-per-head restaurant it's just plain lazy. We split the list between five suppliers and achieved a good balance between styles, price points and regions." If you have lots of suppliers, consider reducing the number so that your business becomes worth more to the ones you retain.

Use your cellar

Jones is unusual in that he not only buys and cellars stock, but he has learnt through experience to keep a careful eye on prices. "One of the main ways we have increased profit is to revalue our stock on a regular basis," he says.

For a mid-size rural restaurant operator, Jones keeps a large holding, about £400,000-worth cost price. Some of these wines have been sitting in the cellar for nearly 10 years and have increased significantly in value.

Jones marks up new wines by 300%, but older wines are more like 600%, yet by comparison with most retail levels they look cheap. Recently, Jones raised Penfolds Grange by £100 a bottle, because the prices were cheaper than those in Berry Bros or direct from the Grange restaurant in Adelaide.

But Jones has also been caught out. "We had shipped some single-vintage Pedro Ximenez 1910 direct from Spain at a very reasonable price and were happily using it in the stockpot when we missed the announcement that Parker had given it 99 out of 100. The value went up to £100 a bottle overnight, but we carried on selling it at £24 a bottle for a week."

So, check the listings, is our advice.

Price properly

As wines rise in price, reduce the GP. Many operators slap on a fixed percentage margin and wonder why they don't sell their more expensive wines. The reason is simple: these wines are poor value. Faced with a client's wine list that sold only wine at low prices, Beckett noticed: "They had a blanket percentage mark-up applied to all the wines. It's better to think about cash rather than percentage profit when thinking about more expensive wine: you can bank money, but you can't bank a percentage. So, we reduced the price of the more expensive wines, giving customers better value for money, which they recognised and, accordingly, spent more."

Making tap work

Losing valuable mark-up on bottled water is an inevitable consequence of the current economic climate. Diners feel that they're spending enough on liquids, so are understandably reluctant to pay another £5 for a bottle of still or sparkling. Traditionally seen as a complement to the mark-ups on wine, the new mood is a quandary indeed for many operators faced with falling sales.

In London the Evening Standard continues to criticise restaurants that won't offer the tap-water alternative. Every week a review by Fay Maschler or her replacement comments on the approach to tap water, awarding marks out of five for the policy at each restaurant and its implementation.

Our advice is to create goodwill rather than worrying about that extra 1-2% on profit. Provide tap for those who want it - and if you're worried about the way your carafes look, then check out Thames Water's new carafe (pictured) by London designer Neil Barron, which it is launching in the spring.

Presenting it in a tall, elegant, container gets around the current feeling that tap water is somehow something to be ashamed of - on both the customer and server side of the equation.

Using tap water is more environmentally friendly, with some estimates suggesting that each litre of bottled water produces 300 times more carbon emissions than the same volume of tap water.

Ultimately, a gracious approach to tap water will make the customer happy - and that'll give you the chance to sell more wine.

How to increase profits

â- Maximise customer satisfaction by meeting and beating their expectations.

â- Develop a training programme covering product knowledge, service and selling techniques, using a combination of free (supplier) and paid expertise.

â- Use promotional techniques that suit your business, enhance the customer experience and increase your sales.

â- Buy better, by managing and nurturing supplier relationships.

â- Manage stock levels and stock values carefully.

Wine+

One of the UK's major wine shows is taking place on 3-4 February at Olympia in London and has up to 70 of the industry's top suppliers exhibiting as well as a range of discussions and workshops to help operators sell more wine. The "recession" word turns up frequently, as is inevitable in these times, with the pick of the business clinics on offer being a panel on staff training that includes Richard Bigg, of Camino bar in King's Cross, London, and Christine Parkinson, wine buyer for Alan Yau's restaurants, at noon on Tuesday 3 February.

Peter McCombie gives a workshop on customer service on Wednesday 4 February at noon, and then, at 1pm, a panel that includes Underdog's Will Beckett, and Neil Bruce, wine category director of Waverley TBS, discuss the role of suppliers in the current recession and how the relationship might have altered with their customers.

In the Tasting Theatre, the more wine-orientated clinic, there's basic advice for those of you setting up a list at 11.30am on Wednesday - "Pairing 101: Building on the Basics".

Wine+ is open from 11am to 7pm on Tuesday and 11am to 6pm on Wednesday. Register online at www.wineplus.co.uk.

Then, from all the operators listed here, we've picked our very own "wine star", the person we feel has done the most in the past year selling wine. So head along to the clinic at 1pm on Tuesday to find out who it is and hear about our very own hero's secrets on selling the best bottles of wine.

By Peter McCombie

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