$ vs. % - The Secret to a Profitable Wine Program

Consulting can sometimes be defined as "getting paid to be ignored." Of all the pieces of advice I have earnestly given that seems to be the most ignored, it is that percentages are not money. Nowhere is this more true than in that most ubiquitous of institutions, the wine list.

Restauranteurs have been known to succumb to greed when it comes to marking up wine. It is possible to find a wine that sells for three times retail on lists of some of the worst offenders. That is a six time markup! Rationalizations include the cost of buying, cleaning and replacing stemware, but ultimately it is a case of taking advantage of a captive audience. Ironically, it is greed that keeps these restaurants from making as much money as they should.

Wine drinkers tend to be a savvy and well researched bunch. They know exactly how much their favorite wines cost. When they look at a wine list, it is not uncommon for them to check for their favorites, and calculate the markup. If it is high, they will opt for a lower priced bottle searching for the least painful compromise. If the markup is low, they opt for a better bottle, taking advantage of a perceived bargain. More importantly, if they think the wine is a bargain, they will order a second or third bottle without hesitation.

Consider this Fictional Example:

Ch. Yumi sells in most stores around $100 a bottle. A bottle of Gudinuff Estate sells for $15. Restaurant Marcupp marks up their wines three times retail, so they get $299 for Ch. Yumi and $49 for Gudinuff. In a week they sell 10 bottles of Ch. Yumi and 100 bottles of Gudinuff. They have a net profit of $5650 (remember the store marks up the wines 100%).

Restaurant Maycsmoni listened to my advice that they paid thousands of dollars for, and have implemented an unusual wine list strategy. They price all of their wines the same as any wine store would, a standard 100% markup. Then they add an invisible corkage fee of $25 to each and every wine. That makes the Gudinuff Estate still sell for less than some at $40, and they sell the Ch. Yumi for the unheard of restaurant price of $125. Wine lovers flock to take advantage of this and similar bargains on the list. At the end of the week they have sold 10 bottles of Gudinuff and 150 of the Ch. Yumi. For a profit of $11,575.

"You can't spend %s"

While the circumstances of this scenario is fictional and admittedly hyperbolic, the potential benefits are not. Too many managers and owners get caught up in the percentages. Accounting lines like cost of goods sold are a whole lot less important than profitability. Ask the Waltons.

Huge amounts of money have been spent to analyze what makes people spend their hard earned pay, and the answer, as I write this on Black Friday, is perceived value. If you want to sell more wine -and if you don't quit the business - then stop acting like a profiteer. Treat your customers honestly, and reap the rewards. So endeth my $1000 worth of free advice.