On-Premise Wine Strategy: Field of Dreams or Moneyball?

February 27, 2013 § 1 Comment

On-Premise Wine Strategy:  Field of Dreams or Moneyball?

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“If you build it (they) will come”. Probably everyone reading this newsletter recognizes that quote from the 1989 classic movie “Field of Dreams”.  This baseball fantasy movie’s premise is that fans will miraculously find a magical ballpark in the middle of an Iowa cornfield by word of mouth (or a spiritual connection).  That seems analogous to the wine program management of some chain restaurants I have observed.   The restaurant creates a wine list (possibly winning an award from a leading wine magazine) and the result is wine-loving customers beating a path to the door. While I may be exaggerating expectations, Winemetrics research indicates that most chains are leaving much of their revenue to chance. Most chain restaurants do not include key features that can raise wine revenue.  Actually, running a profitable wine program is less about Field of Dreams and much more like Moneyball (for those unfamiliar with the book or the movie based on it, a brief explanation follows).

(The following is from Wikipedia)” The central premise of the book and movie, Moneyball , is that the collected wisdom of baseball insiders over the past century is subjective and often flawed. Statistics such as stolen bases, runs batted in, and batting average , typically used to gauge players, are relics of a 19th century view of the game and the statistics that were available at the time. Rigorous statistical analysis had demonstrated that on-base percentage is better indicator of offensive success. This observation often flew in the face of conventional baseball wisdom and the beliefs of many baseball scouts and executives. “

Most beverage directors and sommeliers have mindsets similar to those of baseball insiders, they use subjective, often flawed, criteria for selecting and pricing wines for their lists. Fine dining lists often eschew popular, mainstream products that have wide consumer appeal on the grounds that it doesn’t meet a certain level of exclusivity and reflects poorly on the sommelier’s vision. Conversely, casual dining chains often include only inexpensive, mainstream brands, neglecting to add ‘trade-up’ wines for their more knowledgeable customers. Logic would dictate that to improve wine sales per customer, a balanced approach regarding mainstream and esoteric brands and varieties should be employed.  As Moneyball illustrates, the major goal of a baseball team is winning and the players’ on-base percentage (i.e. runs) is the one parameter that has the very highest correlation with victory.  The primary goal of a wine list is to maximize wine revenues

The major goal of a wine program is making money (at least that is what most restaurant owners want). Yes, it has to complement the food and be appropriate for the demographics of its customers, but those can all be achieved without sacrificing revenue. The on-base percentage equivalent for wine lists should be average wine revenue per customer.

AWRC = Price total wine sales – Cost total wine sales

Total # Customers

Essentially, this formula provides average revenue per customer (AWRC) that your wine list generates, and it is the most vital statistic for a wine list program. Everything else is extraneous. If your AWRC is high, then your list has opportunities for both the affluent wine aficionado and the average glass of Merlot drinker. It has size options that adapt to the dining regime of the customer e.g. small plates/wine tastes or flights or big parties and large format bottles) If the AWRC is low then your wine program is not addressing your customers needs. All the 90+ ratings, the obscure, exclusive small-case lots that sell a few bottles a year, the Wine Spectator Awards, the acronyms behind your sommelier’s name etc. don’t mean anything unless they maximize the AWRC.  Logic dictates that if an establishment’s wine list offers nothing appealing to an average wine drinker, they will often simply turn to beer or cocktails or maybe just nurse a cheap glass of wine throughout dinner. (While I am personally very adventurous while dining alone or with my wife, when dining with friends who are not, I am not willing to take a chance)

I should mention that to the restaurant’s management, it is not wine sales that are important, it is beverage sales, which provide the highest margin of profit for the house. In general, the ownership doesn’t care whether those revenues come from spirits, beer, wine or non-alcoholic beverages. However it should matter to those of us in the wine profession. As I have mentioned in a previous blog, cocktails and craft beer are competing aggressively for wine’s share of beverage revenues. So we in the wine profession have to ask ourselves: Is it worth alienating a portion of wine-drinking customers for the purpose of having a ‘pure vision’ of a wine program (i.e offering wines that even the fairly knowledgeable wine consumer will not recognize).

Let’s do some simple math based on 2 drinks per person. For the average craft beer, that would be $6 (times 2) = $12, for the average cocktail $8 (x2) = $16 and for the average bottle of wine ($44), split among 2 people (2, 6-ounce glasses) = $22.

There are proven methods that will increase wine revenue such as half-glasses/tastes, wine entries on the food menu, menu-based wine recommendations (based on research done by Cornell University’s Hospitality Research Center) and, of course, having well-trained, attentive servers who can provide lucid, concise explanations of individual wines. Unfortunately, according to Winemetrics most recent survey a minority

After completing my most recent tour of in major markets across the country, I was struck by how little progress there has been in chain wine programs in the over 30 years I have been in the wine business.  Yes, wine lists have gotten larger and there are now more offerings by the glass and a few new varieties have become popular. But wine’s progress in the past decade on-premise appears downright anemic next to the strides cocktail and craft beer have made during the same period.  This point was driven home during my visits to a number of casual dining chains whose beer and cocktail lists individually rival the size of their wine selections.

The bottom line is that restaurateurs will follow the easy money. Wine by-the-glass programs are expensive to maintain, given the training and old inventory rotation costs.  Cocktail and beer programs are inherently less costly and can be varied on a very frequent basis.  It is up to the wine suppliers to protect their turf on-premise; the first thing they need to do is take an analytical approach to their on-premise presence. More on this later.

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