May 24, 2011 § Leave a comment
As this recession continues, the on-premise channel continues to struggle. A number of restaurant chains were forced to file for Chapter 11 (see our subsequent post) and overall revenues and profits have declined, especially in the fine-dining segment. In the face of these economic challenges, you would expect on-premise operators to be using every resource possible to maximize profits. While restaurants are launching food trucks, offering GroupOn discounts and investing heavily in social media, there is one important revenue stream they appear to be neglecting: their wine lists.
In compiling wine list data from over 160 national and regional restaurant chains for our upcoming Wine List Report Card Study, we discovered that the overwhelming majority of restaurants are not employing the features and tactics proven to increase wine sales. Using research provided by Constellation’s Wine Genome Project and that conducted by Cornell’s Center for Hospitality Research and combined research by Cornell University and Southern Wine & Spirits we reviewed sample lists of these chains and compiled a list of the ten most common mistakes (and by mistakes we mean omissions or features that hurt wine list profitability).
1. Not placing a current, complete wine list on the restaurant website. This means a current list complete with prices. About 2/3 of restaurants in our chain survey had some form of wine list information on their sites but just over 50% listed prices. According to Constellation’s Project Genome, Image Seekers, who represent 20% of wine consumers and 24% of sales, typically examine wine lists online prior to visiting a restaurant. With consumers now able to easily access restaurant websites on mobile devices, it no longer makes sense to withhold information from potential customers
2. Not placing wine selections on the food menu. Placing wines on the food menu is one of four tactics tested that boost wine revenue , but less than 40% of restaurants chains in our survey employ this tactic.
3. Not offering wines by the half-glass or taste (2 oz.). Less than 20% of restaurants in our survey utilize this proven profit builder, yet according to Cornell’s Hospitality Research offering 2 oz. tastes of 5 wines increased their sales 47%.
4. Not offering well-known, respected brands in key categories. Listing wine brands with a well-known reputation for quality was another of the four tactics identified by Cornell’s Hospitality Research for improving wine sales. Additionally, Constellation’s Project Genome found that Enthusiasts and Traditionalists, accounting for 40% of wine purchases, tend to seek out such brands.
5. Not offering enough selections under $50/bottle. This is normally an issue with fine-dining accounts. According to a recent article in Wine Business, many fine-dining establishments never reduced their prices during the on-going recession. And Winemetrics’ own data shows no increase in from 2009 to 2010 in the under $50 BTB segment which comprised 29% of all wine BTB listing both years. Perhaps as on-premise operators realize that there has been a permanent change in the buying behavior of most wine consumers, we will see this value-oriented segment of wine lists increase in size.
6. Not offering (enough) reserve wines. Having a section dedicated to reserve wines on the list is another proven tactic to increasing wine sales, according to Cornell’s research. In Winemetrics’ survey of over 160 national and regional chains, less than 6 percent of lists provided a section for reserve or special wines. (this does not include the presence of a separate reserve list that normally must be requested by the customer and as a result one that is rarely seen by most restaurant clientele).
7. Excessive margins on wines popular in the off-premise channel. Carrying well-known brands presents a dilemma for restaurateurs. On one hand, a large segment of wine consumers want to see brands on wine lists that they recognize but excessive discounting of these wines by retail chains and online vendors limit what restaurants can charge for many popular brands. Customers are accustomed to paying 2-3 times the retail price for a wine, but may form an overall negative opinion of a restaurant if they perceive they are being overcharged for their favorite brand.
8. Using $ signs on your wine list. Another finding from Cornell’s research, the presence of dollar signs actually depresses wine sales. Nearly all chain restaurants are cognizant of this but we occasionally find some independents using these sales reducing notations.
9. Having a below average number of selections on the wine list . Cornell’s research indicates larger lists produce greater revenue, and this works up to 150 items. Winemetrics’ survey of over 70 casual dining chains finds that the average number of wine listed by-the-bottle is 29 and the average by-the-glass is 23. To be competitive casual-dining restaurants should meet or exceed these averages.
10. Failing to add wine recommendations (including wine/food pairings) to wine lists. Wine recommendations, whether they be wine and food pairings or recommended offering on a table tent, increase overall wine sales significantly. The caveat here is not to offer too many, no more than 5, in order not to confuse the customer. Wine sales actually declined when five wine and food pairings were offered. In our latest survey, very few accounts offered wine recommendations of any kind on their lists.