Lyle Fass – Word on the Street - 3-12-09; Wine Lists

[artn]

You make your case well, FIF, but I still question whether you (or your Wine Director) are actually maximizing profits. You've only scaled back price-points without addressing relative value and the perceived inequity of restaurant pricing. In other words, consumers can still pick up that $10 wholesale wine that you're charging $40 for on your wine list at their local wine shop for $15; and, unlike food, they don't see that you've added that much value by just pouring it into a glass). And as you admit as well, you as a consumer are not in the market for $75+ wines when eating out; but WOULD you consider a $55 bottle over a $45 bottle if you knew it was marked up 2 times instead of 3-4? If you were out with friends, would you buy two good $35 bottles instead of one $55 bottle? With this economy, restaurant owners may well feel that they're stuck essentially moving all the price points down (and seeking out "bargains" with unfamiliar labels) while trying to sustain the 300-400% margins in order presumably to generate more revenue. But I still think that my argument is valid, even with the scaled-down wine list scenario, because I believe you can generate more sales with actually more NET profit by accepting lower margins, assuming that the "law" of supply and demand is correct, which suggests that even penny-pinchers will be inclined to buy more. It's obviously not possible to make profits at the same levels as it was when the economy was booming, but you may be shooting yourself in the foot by simply offering less expensive wines at the same "exorbitant" mark-ups. And ideally everyone may learn that in the next cycle, when people's wallets have fattened up a bit, there's a better and more profitable way for restaurants to sell wine at all price points.

[Lyle Fass]

As a penny pincher I will drink two bottles of cheaper wine..say $40 than one "good" one at $60. Especially if they are priced realistically.

[focusisfragile]

Re: Lyle
Our guests are certainly drinking less wines at the $85 and up price point! I feel like this is due to two factors:

1-The economy sucks! While our neighborhood is anomalous as it is OLD San Francisco money, people are still shelling out less cash.

2-We moved our "$60 and Under" pages to the front of their respective White and Red sections of the list, while before they were at the end of each section and not mentioned on the Table of Contacts, which while I wish I could say was an honest oversight was most likely due to dastardly Sommelier omission, but hey, these things happen No more reading thru 28 pages of reds from around the world to find the list of solely cheaper wines. So, while every wine on the $60 page was also listed in its respective section (i.e. St. Joseph or California Cabernet), you still had to look thru all of those pages. With the $60 pages at the forefront, a lot of people don't even bother to look at all of the other great wines, many of which are $70 or $80 but from great small producers! I feel the current system is actually a disservice to the guest as it limits their exposure to some great stuff, and I also feel it hurts our (and MY!) bottom line because it makes it so damned easy to choose that Susana Balbo Malbec (the current bane of my existence)!

Care to guess at the reason for moving those $60 pages? YELP! I don't know if that cruddy homonculous of self-important wannabe gourmand blather is big in New York, but here in Northern Cali we're all victim to it. Three or four posts by people claiming we have no selections under $70 or $100 (Hogwash! literally hundreds of wines less than $100) and the owners get jittery. Which is understandable, as word of mouth and PR are of course essential to business.

To be honest, I'm conflicted on the whole thing. Of course I want to sell bigger bottles, I gotta keep myself in Tecate somehow (!), but I also really love selling great wines to people, but I can only sling so much Ladoix and Fixin! On the other hand, I want the business to be succesful, and I understand that we all must take a hit right now, and perhaps the good PR and goodwill gained from the immediate, easy access to these wines has an intangible worth that exceeds the drop in average bottle cost sales right now.
On the same thread, I was thinking about this topic all night as I opened bottle after bottle of Cheverny...It would be an interesting experiment to move those pages back to the rear of their sections and see what happens. My guess is an increase in average bottle cost, but I wonder if it would result in less bottles sold, lower gross sales and perhaps a resumption of online grumbling about prices. I'll let you know if I'm able to enact this, as it would be quite interesting...

To address the second half of your question, people are generally pretty adventurous when I recommend ANY bottle they perceive as a value. So while the $100 Hoffstatter Lagrein is a real tuff sell right now, the $45 Chinon blanc goes over quite well (tho for the life of me I can't friggin move the cheap and yummy Torrette. C'mon people, Val d'Aoste wines are lovely!).
This is a much bigger issue on Fridays and Saturdays, which are our BIG Bridge and Tunnel (or I guess I should say Bridge and Bridge, ha!) nights. So tonight, us two somms had to really grind it out, while a Tuesday night would generate similar sales, but in more expensive, Old World wines, in contrast to tonights New World lovefest. The best bottle of the night was an 04 Ramonet Les Ruchottes, which was just smashing. I'm in love with 04 White Burgundy. The 1990 Chateau Margaux corkage was nice, after about 2 hours in the decanter. Having finally gathered a reasonable sample size, I feel justified in saying that Chateau Margaux is my least favorite of the First Growths (although sometimes Mouton holds this position). I guess this is a topic for another time (and another website, as I don't think the big boys of the Left Bank exactly qualify as Garagistes!!!).
Cheers!

[focusisfragile]

Re:artn
I'm with you man, I think you make some valid points. One issue that I'm not entirely sold on is the concept that people will consume extra bottles based on price. With other goods, sure, I think it makes total sense, but alcohol is a special exception. I feel like most people have an idea as to how much wine they want to consume in an evening (after all, most other consumer goods do NOT have an intoxicating effect, although i've had a girlfriend or two who might argue otherwise), and how much they want to spend, and they work within those limits. Or maybe that's just me. This flies in the face of Lyle's previous comment I guess, and I wonder which approach has greater pull with the dining crowd in general. Can you conceive of some way to determine this? Perhaps an executable experiment, rather than a thought experiment? Might be fun, informative and helpful.

One roadblock to lower wine prices is the way budgets are written and bonuses are awarded. In most houses, cost of goods runs the show, which is of course directly linked to margin. Budgets that were written sometime in 2008, for 2009, are obviously unattainable to hit as far as monthly sales are concerned, but we're still expected to adhere to cost of goods projections. Also, I think most bosses are loathe to accept the risk in aiming for higher net profits through higher volume and its concomitant increase in cost of goods. Perhaps the goodwill gained from widespread public recognition of lower prices, combined with higher volume of sales, would translate successfully into more seats filled and eventually greater net profits. But we seat two turns pretty much every night. To be honest, the deeper one goes into the topic, the more questions one seems to face.

[Lyle Fass]

Hey Focus is Fragile,

More great points and insight into what drives a restaurant wine list besides selection.

I can totally agree with you on the Susanna Balbo Malbec, which has been the bane of my existence in at least two stores I have worked at. All that slathered vanilla oak and deep berry flavors with a nice alcoholic kick. What's not to love?

Good that you put the under $60 stuff on the front pages. Yelp is nothing out here really. More Eater and Bruni. Maybe add another section for the 60-100 wines entitled something clever for spending a bit more money?

[artn]

You're right, FIF, it's a little more complicated and unproven than I suggest. So far, my best evidence is Lyle's words:

"This would be a no-brainer to try, and cheap enough to try another bottle (or two)!"

TWO bottles (which makes THREE total)--did you hear that?! But I'm certainly willing to conduct more experiments.

[Lyle Fass]

Artn,

I am often adventurous when choosing wine in a restaurant, especially if it is very cheap, as I have a never-ending thirst (no pun intended) for knowledge of all things wine. If it is by an importer I know, Franc de Pied or Pie Franco, or from a region where much crap does not get imported (Irouleguy, Madiran, Reuilly), etc. I'll take a gamble and try it out. If it sucks, chalk it up to education. Also I have some duckets left to try it all agin.

[artn]

I'm with you, brother. I've had some great Madirans and Reuillys, and the first one was in a restaurant. Speaking of thirst for adventure, knowledge, education, and French wine, have you, or anyone else, read Robert Camuto's book, "Corkscrewed: Adventures in the New French Wine Country"? Well worth it for all of the above!

[Lyle Fass]

I'l check out that book. Sounds great.

[guitarguy]

I have a couple of nearly firm and fast rules for restaurant wine.

1. If the restaurant will allow me to bring in wine for no more than $25 corkage, better even at $10 or $15, it deserves my patronage. I will eat better, generating more food profit for these establishments.
2. I always tip as though I had bought the bottle at the restaurant. I also offer the manager and server a taste of the wine. Both will remember you and over time, you may find an occasional "omission" of your corkage fee on your bill. This has happened mostly when the owner was the manager and they usually get a full glass of my wine when I bring it, if they want it.
3. I would never bring a common wine and never something the establishment already has. TACKY.
4. I often buy off the list, maybe bring wine one time, buy off the list the next, to support the restauranteur.
5. At any rate, I will not pay more than twice retail for a wine, assuming I have a good idea of the retail price of what I am buying. I am sure I have paid more, but at the time, I did not know any better. Restaurants limiting mark-ups to about that earn my patronage.