I was just reading this on Facebook from an industry magazine and was disappointed in how basic the ideas were. Check it out here: Sommelier Business Article.
Importance of a Diverse Beverage Inventory
There is much more than price-point management and basic food pairing needed for a Somm to successfully manage a dining restaurant’s inventory. Here are a few other ideas to consider:
There should be a low, medium and premium price option for each major category. Train staff to upsell wines.
Inventory a few recognizable labels in each major category, but the majority of the wine should not be found at local stores – train staff to upsell these wines.
Know the local alcoholic beverage procurement laws. If possible, work with distributors, brokers/importers and winery direct to build a diverse selection at the right price-points.
If the menu is even minimally diverse, there is so much more than a wine’s geographic origin to consider:
Weight – lighter wines can be more versatile with food.
Fruity wines should be included as an aperitif and to pair with sweeter dishes.
Complex/Savory wines for specific flavor pairings.
Tannic wines to pair with red meats and red sauces.
Acidic wines to pair with dishes having cream sauces.
Can the chef build a dessert menu to pair with Ports and Sauternes?
Train staff to sell digestifs.
Financial Success
Experiment with variable margin strategies. Perhaps:
Reduce margin on bottles over $75 USD to improve cash-flow.
Lower prices on a few accessible mid-price labels to help your staff upsell.
A diverse cellar is useless, if the staff is not trained with a sales strategy. Remember gross profit is a mix of pricing AND total beverage revenue. Have a goal – if beverage (beer, wine, cocktails) is not contributing to at least a third of a restaurant’s revenue and half the profits, the business is not likely to succeed.
Whether you are a wine steward, sommelier, or the restaurant manager/owner… managing beverage is complex. Without training of staff and an overall beverage strategy, a successful and profitable restaurant will be difficult to achieve.
Borrowed this graphic from a restaurant software site. Hope they don’t mind.
Non-chain restaurants are often family affairs and frequently – even with the best food – are the least profitable, poorest run category of business in the U.S. Why should you care? The strategic profitability of a restaurant can be a key indicator of the quality of the dining experience, not just the success of ownership. As a consumer, if you look for these ideas in action, you will find your favorite spots without much effort.
What to Look For (restaurant owners are you listening?)
Does the restaurant/bar have a beverage specialty: craft cocktails, fine whiskies, different styles of beer, quality/value wine list? If you don’t enjoy alcoholic beverages, you can stop reading now. If you do, stick with me here…
If beverage sales is not at least 1/3 of a sit-down restaurant’s sales, you can bet they won’t be in business long. In training for restaurant financial management, 50% of revenue is the recommendation. If there is one thing I am sure of, the best loyalty builder is a successful beverage program. Where I see the serious consumer passion coming from is – their preferred beverage category: whisky, wine, beer, and/or craft cocktails. Yes, the investment can be sizable, but can a restaurant afford not to?
A Successful Beverage Program
It is irrelevant which category(ies) are chosen, the clientele will eventually find the restaurant, with a minimum of invested marketing dollars.
Onwership/Management
Training, Training, Training… employees who find their passion in the category should be identified and have them lead staff. ALL servers should be trained to have some familiarity with the beverage specialty of the house. Encourage passionate clients with knowledge of the category and have staff funnel them back to the lead. Inventory choices have to be smart for this category of clientele. Find both brands/labels popularly known AND uncommon brands consumers can explore. Inventory should be strategic, with a good/better/best approach and there should be at least a few value items in each quality category. Local alcohol distribution laws should be investigated and multiple sources should be used, if possible: winery/brewery direct, distributor, auctions, overstock re-sellers and local producers. Each state usually has more than one type of alcohol resale license. Most – except the 100% liquor license (bar) – are more reasonable in cost. Licensing options may open purchasing to more channels, provide more buying power and selection. Unfortunately in my state for example, by law, restaurants & bars have very few choices.
Consumers
Take a minute to look for these services and specialty inventories. Ask about their availability. Notice the difference, when you find it. Praise the positive and provide constructive feedback on the negative. It is in your best interest. In some ways, your involvement can be a key to the success of your favorite spot. AND… most importantly, vote with your dollars. Try to limit your entertainment budget to the businesses that provide this kind of experience. My wife and I do.
Food Menu
Main course food is a very low-profit sales category for sit-down restaurants. Without volume, focusing on this is not a winning business model. As a consumer, who wants to join the herd? From the food category – starters, appetizers, sides and desserts can drive profits AND seriously enrich the customer food experience. Look for super yummy looking and creative menu items here. It is evidence of a well-run restaurant, a smart chef and the beginning of a great dining experience. A chef has much more lee-way to be really creative with these items, without breaking the bank on cost and can add experimental flavors that might not be acceptable to a portion of their clientele. On the staff side, owners need to find foodies for servers and have the chef train them to recommend flavors and pairings, not just dishes. Servers need to upsell the appetizers, sides and desserts. If you have ever had a server suggest specific menu items due to the flavors… it can really add to the dining experience, especially if you enjoy pairing food flavors with beverages.
Have you ordered a glass of wine while out and find it tastes a little strange? Did you send it back and request a glass from a new bottle? Or maybe, ordered a bottle, only to find it didn’t taste as it should? Now, you know why wine enthusiasts smell the cork upon opening a bottle… The first situation above is quite common, the latter is rare, but it does happen. I will mention the most common wine faults here, but the primary focus will be:
How to handle the decision to send the wine back.
The appropriate conversation to engage the server when sending wine back.
Quick Review of Common Wine Faults
These are the most common:
Oxidization
Overexposure of wine to air/oxygen. Oxidized wines lose brightness in both color and flavor. Red wine turns brownish-orange and can have a vinegar and/or caramelized (sometimes buttery) flavor. This is very common when you are served wine by the glass. Sometimes, a glass can be poured after days of storing an open bottle.
Heat Damage
This occurs when wines are exposed to temps over 80 F for prolonged periods, or over 90 F for shorter periods. Cooked wines develop a jammy, sweet character that can taste like stewed fruit. This can be very common in places like Arizona, where I live. Wine must be stored under 70 F and away from light to remain in good condition after a few months. In places like AZ, this means storage in coolers during the Summer months. Some on-premise businesses turn their wine inventory quickly enough that room temp storage can be acceptable, but keep an eye out to determine if you plan to return.
When bottles experience high heat, the corks often leak, so you get a double hit from Oxidization AND Heat. This problem can sometimes be identified by inspecting the cork for wine stain to the very top.
Cork Taint or TCA
This was more common in years past. Technology has made it less so, but it still happens. TCA can have a taste/aroma similar to wet dog/newspaper. There are some that say 1/10 bottles with real cork closures will experience this. In my experience, it has been closer to 1/20 bottles.
Sulfur Fault
This results from improperly handling the addition of sulfites to wine. Sulfites are a natural byproduct of fermentation, but it is very common for winemakers to add sulfites as a preservative. When this is not handled correctly, it can cause burnt matchstick, rotten egg, or garlic flavors/odors. Biodynamic wines do not permit the addition of sulfites, if you are looking for sulfite-free wine.
Secondary Fermentation
This occurs when a small amount of residual sugar reactivates the yeast and adds carbonation to the wine. Some wine varieties are made purposely in this “frizzante” style, like Moscato d’Asti, but think of a Cabernet Sauvignon with bubbles…
Microbial Fault
This occurs when the winery and production areas are not kept clean. Certain of these faults can be part of the wine style, such as Brettanomyces. This adds that barnyard aroma to some wines and can become an acquired taste. There are additional “off” flavors and odors caused by other microbes too.
How to Handle the Decision
If you have identified any of these faults (or others), keep in mind, at most bars and restaurants they are serviced by distributors who will always take back winery faulted bottles. In the case of heat and oxidization, it is totally preventable and the management on-premise needs to know about the inventory storage problem. This issue is the primary reason mark-ups are so high for wine service. There are 4-5 6 oz. pours in a bottle. Some businesses try to recoup their entire profit in one glass purchased, others two. Either way, they are covered. Don’t accept odd tasting wine. If you can identify the fault, share it with the server. Let them know there is a solid reason for the return and they will have the information needed to deal with their supplier.
There is another discussion on the topic of returning wine, which I will address briefly. When the consumer doesn’t enjoy the wine selected… as the buyer, it is your job to engage the server and help them to understand what wine characteristics you enjoy. Although, sometimes the server does not have enough experience to assist, or they have not been trained to identify flavors/aromas in wine. This is the area where the decision has to be what you are comfortable with. Most restaurants and bars, will replace wines you don’t like, if you share your comments. At some establishments, this can turn into an argument and affect your service, so think twice about how you handle this scenario specifically.
How to Discuss the Return Request
Be confident in your identification of odd flavors/aromas and explain what you are experiencing. Share any clear evidence with the server, such as: the cork stained to the top for heat, or the horrible odor on the cork for TCA. I experience Oxidization Fault very frequently. I would say 1/5th to 1/3rd of all wine I order by the glass is oxidized and I almost always send it back. The restaurants/bars know when the bottle has been open too long. Any management worth their salt will mark their by-the-glass inventory with the date opened.
Where does the Responsibility Lie?
All small production wineries should be willing to replace bottles with faults caused by their production. The same applies to distributors and restaurants/bars for faults caused by their handling and storage. Be comfortable that there is always a mistake along the way that causes these issues and it is not your responsibility to suffer through dealing with it. Wine is a luxury item and producers, suppliers and servers should treat their service like it is a premium product.
Meal: Arugula salad with Burrata cheese and red Beets, Pepper crusted Prime Filet medium rare with mash potatoes, green beans and fried onion strings. The shared desert was profiteroles layered with vanilla ice cream and topped with chocolate sauce.
Wine Pairing: Stags’ Leap 2017 Petit Sirah Napa Valley – Score: 94/100. Wine paired well with Dish: Yes.
Stag’s Leap 2017 Cabernet Sauvignon Napa Valley – Score: 91/100. Wine paired well with Dish: Yes.
My wife grew up in Cape May on the Jersey Shore and her family has owned a beach house there for a couple of generations. She visits for a week, or two, in the Summer every year and I usually join her. We always make sure to arrange our reservation for Tisha’s and it is always the culinary highlight of the trip.
Restaurant Menu and Ambiance
The menu rotates every week with as much local in-season produce as possible. The choices are typically American style seafood and meats, with a few other items such as pasta dishes. My wife and I have been visiting Tisha’s for near 20 years now and have never had a mediocre dish. Although, I would suggest the seafood and meats, over the other dishes. The veggies are always in-season and fresh. There is good reason why Jersey is called the Garden State!
The ambiance includes indoor and patio dining with a small, upscale white tablecloth feel. Reservation availability is limited in the Summer. The servers are always friendly and attentive, but the premises can get very busy. Patience is needed for both the kitchen and servers in the Summer – to enjoy the experience. The restaurant staff requires your entire order upon arrival and paces the service for you. It seems a little odd for fine dining, but I have never had a bad experience.
The Food
The salad had great flavors and textures. The Arugula was peppery, the Burrata cheese was creamy and fresh and the beets were fresh and sweet… tasted almost like fruit. Nine times out of ten, the beef is out of this world and this was one of those nights. The Filet is on the menu with a bleu cheese flavored butter sauce, but my wife and I prefer the beef without it. The medium-rare steak was a touch towards the medium side, but the beef was melt-in-your-mouth tender and very tasty. The sides were fresh and accompanied the beef well. The desert was very tasty, not too sweet and the pastry was light and airy, but not quite fresh enough to be perfect.
The Wine
My wife and I enjoy Stags’ Leap wines. Please note, this is NOT Stag’s Leap. If you weren’t aware, the two wineries settled a law suit years ago by agreeing to move the apostrophe. Christophe Paubert (Stags’ Leap winemaker) is French trained and produces wonderfully balanced wines. In contrast, the other Stag’s Leap produces the more typical Napa fruit-tannin bombs.
The Petit Sirah is not a typical U.S. product for this variety. This had a typical fruit driven profile, but was much lighter, structured and balanced. Red and blue fruits were on the nose and palate. The wine was dry with medium tannin, medium+ acidity and a nice long finish. The texture was a bit silky with fine-grained tannin. As a comparison, this was nothing like the very common Michael David Petit Sirah. The wine actually paired well with the Burrata cheese and beets in the salad.
The Cab had a huge fruit-bomb nose, but the palate was not quite as concentrated. Still more fruity than I would prefer, with plum and blackberry on the attack. A rather simple taste profile, but with good balance and excellent structure. The wine was dry with medium tannins, medium+ acidity and a long fruity finish. This cab had the signature Stags’ Leap fine grained tannin. It paired very well with the Filet we had for the main course.
Rating Charts Used in this Review
(Common industry comparative data used with detailed scoring templates)
Wine
97 – 100
Exceptional
92 – 96
Excellent
89 – 91
Enjoyable
85 – 88
Passable
80 – 84
Barely Acceptable
74 – 79
Choke it Down
50 – 73
Flawed
Restaurant / Food
97 – 100
Exceptional
3 Star Equivalent
92 – 96
Excellent
2 Star Equivalent
88 – 91
Enjoyable
1 Star Equivalent
82 – 87
Passable
Diner Quality
77 – 81
Barely Acceptable
Poor Diner Quality
72 – 76
Dump
Dive
50 – 71
Should Close
Nuf Said
Does not include fast food, or take-out restaurants. Sit down only.
$
$20 and under
$$
$20 to $30
$$$
$30 – $50
$$$$
$50 and over
The dollar signs represent cost of a two-course dinner/pp, taxes and a 15% tip (no drinks or dessert).
Silicon Valley Bank has been producing state of the beverage industry reports for years. I try to make sure I read the formal report every year, but they also write a blog for the wine industry that I check-in on occasionally. The data can deliver insights that bring an interesting perspective to market trends.
Data is Predicting Changes
The U.S. wine industry has been on a steam roller building big gains in revenue and beverage market share drawing in new consumers from younger generations of social drinkers. The recent data is showing significant slowing of that growth, even in areas that have been hot in the past, such as: Napa Cabernet Sauvignon, Super Premium Wines, Direct-to-Consumer Sales and On-Premises (restaurant) Consumption. Unfortunately, the growth in the number of small growers and producers is not slowing to match pace. Many of these producers are being drawn to the lifestyle, not the business opportunity and the industry is reaching a tipping point for several reasons.
TRENDS
Restaurant Wine Sales is Slowing
Distribution is their own worst enemy here. In an effort to control local beverage markets, they are actually causing irreparable harm to their dealer’s ability to respond to market trends. Destructive strategies, such as:
Withholding well-known brands of beer and spirits, if specific high-profit wines being promoted are not purchased.
Extending credit limits, or terms to obtain leverage on buying decisions.
A successful restaurant wine inventory should have wines covering well-known lower priced labels, lesser-known value in the middle range and highly scored, high priced wine that garner recognition. This approach tends to satisfy a much wider range of consumer, offer a selection all can explore/enjoy/afford and provide up-sell opportunities for the staff when the occasion calls for it. Instead, distributors in many states are preventing this type of responsive approach. Read the piece at this link for additional info:Â Â Restaurant Wine Sales
Fruit/Wine Supply Exceeding Demand
Wine travel in Europe teaches you one thing: don’t be afraid to order cheap table wine with a meal there. Even table wine in Europe can be very good. The growing over-supply issue may change the landscape in the U.S. For many years now, the $10-15/btl retail price has delivered poor quality in the U.S. I am hoping this market trend will bring more, better quality fruit and wine to the market at reduced prices, instead of vineyards dropping the excess fruit to rot in the fields. See information on this at this link:Â Â Wine Supply
Premium Wine Sales are Flat
The continued growth in this category is coming primarily from price increases, not the volume of wine. Interestingly enough, consumption of premium craft beer has also weakened. This is very likely being caused by an aging Boomer generation drinking less wine, without Millennials filling the gap. The younger generation seems to be moving towards exploration and looking for value, rather than committing to older high-priced labels. See information on this at this link: Premium Wine Sales
Direct-to-Consumer Beverage Sales Continues to Grow
As long as State legislatures and the Supreme Court continue to keep their hands off this segment of wine/beer/spirits distribution… this will likely be the savior of the small producer… for those that get it right. With the extensive consolidation in the beverage distribution industry in the last few years, there is just not enough room on the shelf for the growing number of labels, especially for smaller producers without a sizable marketing budget. The continuing growth in the number of small producers will force an understanding of how to connect and maintain a relationship with a clientele, or fail. Wineries must continue to move towards improving the wine experience for potential customers, rather than provide a traditional tasting room as the only engagement. This is the only segment left in the wine industry that offers a solid business opportunity, but selling out each vintage will increasingly become a challenge, without the bulk purchasing distribution can offer. The trick will be how to build the DtC channel for each producer. With most small wineries being about the farming, or the winemaking… there will need to be a newly developed understanding of marketing and customer engagement. It will be a matter of survival. See information on this at this link: Small Winery Sales
Changes are Coming
The U.S. wine industry is likely to look quite different five years from now. There is a good chance, with the Millennial penchant for exploring new wines, that imported wine sales will grow faster than domestic in the future. This pressure may actually force the U.S. wine industry to get better at producing quality in that $10-15/btl range that typically does not exist today. An outcome I am looking forward to…
So many restaurant owners ignore the potential of their beverage service. Yes, it requires an investment, but I have run the numbers many times… and it is just too difficult to hit the necessary gross profit margin without at least a 30% revenue and 40% profit contribution from beverage. Business plans become tortured, when based on food alone. I don’t care how good the product is. U.S. business statistics show, only one out of seven new restaurant start-ups last past the first five years.
Attitude and Passion
To run a beverage program at a fine dining restaurant requires an infectious passion and an ability to be a wine ambassador to draw your clientele into wine culture to succeed. The fine dining experience is all about superior service, telling stories and relating to the customer, all with an eye on education – not only regarding wine/beer/spirits, but also appropriate food pairings too. This seems to overwhelm many owners, but the result is worth the effort and may even be the key to long-term survival.
Business Planning in the Restaurant Trade
So often businesses lose sight of the financial viability of their annual budget and business plan (if they have one). I think, especially so in the restaurant trade. As a business owner, the tendency is to focus on a comfort zone and day-to-day operations, while overlooking whether the right plan is in place to achieve success. Having owned businesses and managed organizations in the past, even those with highly motivated employees, it is easy to lose track of the need for financial planning, marketing and experimenting with ways to enhance customer loyalty. Beverage is one of those keys to success.
Douglas Levin - Trained, Certified Advanced Sommelier and Wine Writer
Cool Climate Wine 