Have you ever wondered why a glass of wine at a restaurant can cost twice as much as it does in a store? The answer is more complex than it seems and lies in the delicate dance between quality, price, and profitability.
Managing wine profit margins in restaurants is an art that has evolved over the years. Since the 1970s, when Kevin Zraly, at the legendary Windows on the World in New York, implemented a tiered margin system to stimulate the sales of higher-quality wines, much has changed.
The evolution of margins
In the past, profit margins on wines were set more straightforwardly. However, increased competition, more sophisticated consumers, and a greater variety of wines available have forced restaurants to rethink their strategies.
Today, variable costs such as purchasing wine, storage, and service represent a significant portion of a restaurant’s expenses. Additionally, customer expectations have changed: they seek high-quality wines at reasonable prices and a personalized experience.
Kevin Zraly’s model: An updated classic
Zraly’s model, which involved setting higher margins for lower-priced wines and lower margins for higher-quality wines, remains relevant today. However, it must be adapted to the new market realities.
Restaurants must find a balance between profitability and customer satisfaction. This involves:
- Careful Selection of Wines: The wine list should reflect the restaurant’s identity and offer a variety of options for all tastes and budgets.
- Cost Management: It is essential to control the costs of purchasing, storing, and serving wine to ensure appropriate profit margins.
- Marketing and Training: The sommelier plays a key role in promoting wines and educating customers.
- Adapting to Trends: Restaurants must stay aware of the latest market trends and adjust their offerings accordingly.
The challenge of margins today
Today, restaurants face several challenges: rising costs, increased competition, and higher customer expectations, among others. However, the future of managing wine profit margins is full of opportunities. New technologies, such as cellar management apps and loyalty programs, can help restaurants optimize their operations and enhance the customer experience.
Additionally, trends towards sustainability and the production of organic and biodynamic wines offer new opportunities to differentiate and attract a more conscious audience.
A practical case: Casa Donoso Bourbon Barrel Aged
To illustrate how to apply these concepts in practice, consider Casa Donoso Bourbon Barrel Aged. This wine, with its complex flavor profile and aging, offers excellent value for money.
By including this wine on the menu, a restaurant could attract a broader audience, as it is a popular and versatile variety that can pair with a wide range of dishes. It can also be an appealing option for customers seeking quality wine at a better price.
Managing wine profit margins is an art that requires balance, knowledge, and adaptation. By understanding the factors that influence pricing and carefully selecting wines, restaurants can offer an unforgettable dining experience and ensure the sustainability of their business.
ACTIONABLE Tips & Tricks: To close deals with new importers or restaurants, key elements include: having Cheat Sheets ready, a good distributor with restaurant connections, the distributor’s price list, showcasing success stories from other restaurants (a good technique is to keep wine lists from other restaurants), and, most importantly, having samples available (start with the highest quality wine to position yourself in terms of quality).
Source: https://randycaparoso.substack.com/p/managing-restaurant-wine-markups
