Wine’s Crisis On-Premise and How to Resolve It – Part 2

September 12, 2016 § Leave a comment

On-premise wine selections are moving toward uniformity and mediocrity at the same time cocktail and beer lists skew toward variety and innovation.  Here are 5 steps that restaurants can employ  to rectifying this situation and possibly  reversing wine’s continuing decline. Part 3 of this series will deal with wine suppliers and distributors role and how they must step up to resolve this.

  1. Offer a selection of High-Recognition, Emerging and Discovery brands
    In casual chains, Winemetrics encounters a plethora of wines frequently found on the endcaps of retail chains. This would lead me to believe that chain wine buyers are basing their wine selections on the leading brands in retail stores. Can that be possible? While a certain portion of the population may be brand loyal in all occasions, aren’t restaurateurs aware that consumers dine out for variety? Even smaller wine lists can have one or two selections that are not well known but represent superb values. Of course, selling such wines requires some server education, see #5.
  2. Offer value on your wine list
    That doesn’t mean discounts across the board; many chains charge a little more for their by-the-glass selections but offer a steep discount on bottles. Others offer benchmark wines at modest markups. What you don’t want to do is price the wines with a huge retail presence at an excessive mark-up.  Nothing says ‘rip-off’ more than charging +3x standard retail for a bottle everyone know the retail price of. Special Note: If you are a fine dining establishment, don’t offer me the same wine as those I might find in a casual chain (with the accompanying excessive markup). Recently I have found identical wines by-the-glass (BTG) on the lists of fine dining steakhouse chains as those on casual dining chains.  When I see this, I immediately assume that the fine dining establishment doesn’t care about its BTG business and wants to push its customers to purchase an over-priced bottle or is simply to lazy to care about its BTG selection. Again, as a wine consumer I find this insulting and never return to such establishments.
  3.  Publish your wine list online and keep it current
    Nothing upsets me more than a restaurant whose website lauds its awarding winning wine list and brilliant sommelier only to neglect to provide a wine list (with prices) on its website. And nothing is more insulting to a consumer who plans to purchase significant wines with his or her meal only to open a wine list and find them all egregiously overpriced.  I never return to such establishments and I’m certain many other wine aficionados are of the same mind. If you’re going to rip me off, at least have the decency of letting me know in advance so I can make a reservation elsewhere. On the other hand, if you have a great wine program with reasonable prices (are you listening Legal Sea Foods?) then mention it on your website. Looking at many chains’ websites, you wouldn’t even know they even offered wine – unbelievable!
  4. Ask my opinion about my dining (and drinking) experience at your restaurant but provide an incentive
    Nearly every restaurant provides a survey form with the check these days. Most ask about the food quality and service but few ever request input on the beverage program (the most profitable segment of their business!). I generally ignore these as no compensation offered in return for my input. However most consumers would be willing to provide extensive information on their dining experience, preferences and even demographic information if offered an incentive such as a free appetizer or half-price glass of wine on their next visit. Unfortunately, I have yet to see such an offer on any survey in the hundreds of chains I have visited.
  5. Innovation + Education – One won’t work without the other
    A few years ago I was dining out in an upscale casual chain that had a small but excellent list with a number of great values. They also offered flights of any 3 BTG wines for a reasonable price. The only problem was that the server did not know the restaurant offered flights, even though it was prominently printed on the menu (This was one of the savvy chains that actually had the food selections and wine list on the same menu!) Apparently, the server had never been trained on this feature despite his many months of employment and did not know there were special tasting glasses for the flight, so my 2 oz. pours were delivered in the bottoms of 3 balloon glasses.  Sadly, this restaurant chain no longer offers flights nor its interesting and well-priced wine selection. The best wine program in the world won’t work unless some investment in education is made. Predictably, I have not been back to this establishment.

    In Wine Crisis On-Premise and How to Resolve It – Part 3, the final installment on this subject, we examine how wine suppliers, in their pursuit of profits and on-premise hegemony, have been complicit in the decline of their product in the restaurant dining arena.

Wine’s Crisis On-Premise and How to Resolve It – Part 1

August 15, 2016 § 3 Comments

Winemetrics is halfway through its 2016 on-premise wine list surveys, and to be frank, there is very little good news to report. Wine lists are not only decreasing in size but also in variety. Selections are increasingly based on brands controlled by the top 10 suppliers. Since the start of 2015 we have seen many iconic independent wineries ‘absorbed’ by the largest suppliers. Benziger, B.R. Cohn, J. Winery, Orin Swift, Patz & Hall, Siduri, Talbott, The Prisoner to name just the ones that come to mind.  But this decline of wine on-premise is just half of the bad news for wine. The meteoric, unstoppable rise of craft beer and craft cocktails may spell the end of wine on-premise as we know it. The key, and most damning piece of evidence is the admission (in confidence) from wine professionals themselves. When not at company functions or on the corporate  expense account, they are drinking beer and cocktails, simply because there is more variety, flavor and value in the average beer and cocktail list. This is especially true in casual restaurants where the same wine products appear with monotonous regularity. For the record, I am not a proponent of the ‘small is beautiful’ school of wine marketing. Major national brands are extremely important to a segment of wine consumers that seek the comfort of a consistent, well-known producer. However, when these brands or their line extensions dominate wine lists to the exclusion of any innovative or more esoteric products, it is at that point that any wine consumer with a slightly more adventurous palate closes the wine list and orders a beer.  And, I confess, that’s what I do now.

If you believe my observations aren’t supported by facts please click on the link below to Lewis Perdue’s Wine Industry Insights where he features a recent Gallup survey.

From Winemetrics’ observations of hundreds of chains and independent restaurants, it does not appear that the wine industry is taking this threat seriously. As a 35 year veteran of this industry, I have seen trends, brands and fads come and go. I remember vividly a distributor presentation by a wine cooler executive in the 1980’s who extrapolated his brand’s 2 year growth curve a decade into the future, promising his audience of a massive windfall in profits. According to the executive, this was ‘guaranteed’.  It didn’t quite work out that way – has anyone seen a wine cooler recently?

Of course, we cannot lay the blame solely on the wine industry, as the restaurant industry is also complicit in this process. Possibly persuaded by off-premise sales figures and incentives of the larger suppliers, restaurateurs have yielded too much control of their wine lists to big corporate interests. In Part 2, I’ll discuss steps restaurants can take to not only invigorate interest in the wine segment, but actually take ownership of innovation for their wine selections.

 

 

 

Growler USA – Setting High Standards in Beverage Management

July 13, 2016 § Leave a comment

Our readers may have taken note of a recent FSR article on Growler USA, a beer-centric chain boasting 100 tap lines and dedicated to serving  craft beverages (including beer, cider, mead and, yes, some wine). According to the article, the chain has plans to expand from 3 to 35 units by the end of 2017. We should note that this concept has precedence with World of Beers, which started with one location in Tampa, Fl in 2007 and is planning to grow to over 100 units by the end of this year. Additionally there are numerous growing regional chains offering a dozen or more drafts and many more craft brews by the bottle. The ones we have surveyed have partnered extensively with local and regional craft brewers and provide vital opportunities for endorsement and consumer trial.

So what compels me to draw your attention to Growler USA? First, they have an unparalleled commitment to serving a superb product, equivalent to a craft brewery tasting room. Second, they are seriously dedicated to providing consumer education, with all of their bartenders qualifying as Cicerone Certified Beer Servers. Third, they are devoted to supporting local, innovative craft beverage producers. Finally, and this is key, every Growler USA location provides a continuously updated list online of all their 100-plus selections with prices, something offered by virtually none of the hundreds of chains and independents that Winemetrics currently surveys. This means that a consumer can be pretty certain that what is on the website is available on tap. I know this is a relatively simple process from a technical standpoint, yet when it comes to craft beer selections, most chain websites merely state, “Ask your server about our selection of craft beers” or words to that effect.  Apparently, informing potential customers about what is being served and at what price, by location, is too much work for the average chain IT department. In fact, there are an increasing number of chains that provide no beverage information on their websites and even fail to provide prices on their printed menus! (More on that issue in a future post).

Congratulations to Growler USA; I hope it prospers and reserves some of its taps for innovative, regional wine producers.

 

(Note: Winemetrics has no relationship whatsoever with Growler USA or anyone associated with the company)

Craft Beer vs. Wine: Innovation vs. Stagnation

July 13, 2016 § Leave a comment

While wine lists across the board are decreasing in size and variety, beer list trajectories are  in the opposite direction, expanding in both size and diversity in even the most casual chain restaurants. Moreover, there has been a quantum leap in beer-oriented chains at all levels of the chain spectrum from national chains such as Yard House and World of Beers, now 70+ units strong, to regional chains such as Eureka  and Plan B.  These chains have certainly been helped by the explosive interest in craft beer,  which has seen growth in both the mundane e.g. Pumpkin Ale, to the esoteric e.g  Gose and Brett-fermented ales.  So why hasn’t the wine industry begun introducing exciting and buzz-worthy products to keep pace with their beer brethren?

The answer lies largely in the attitudes prevailing among the thought leaders in each industry. With few exceptions, the wine industry has doggedly remained loyal to the European concept of wine, that wine is a product of terroir and tradition, e.g. the fixation that the best wines are representative of a specific variety and place. Estate-grown wines of approved varieties or blends that follow traditional production methods are held in the highest esteem by an increasingly narrow group of gatekeepers in both wine production and wine media circles.  Had the beer industry followed the same path, the majority of producers would still be following the Rheinheitsgebot, which dictates that beer consist only of malted barley, yeast, water and hops. And we would never have had the vast array of products that has vaulted the American beer industry from mediocrity to its current apex of innovation and growth.  Fortunately, American beer producers rightly found this European model too constraining and began experimenting with untraditional flavors, fermentation techniques and aging methods.  In a few short decades, American craft beers have become the global standard of beverage innovation. If you had suggested 30 years ago that American brewers would be opening facilities in Germany, the birthplace of modern brewing, you would have been laughed out of the bierstube. In the 1990s, hypothesizing that someday small American brewers might have a market value of over $1 billion (Lagunitas, Ballast Point) would have earned one a trip to a local asylum.  Yet it has come to pass.

What remains puzzling is that, despite craft beer’s incredibly successful example, which has been eating the wine industry’s lunch for the past decade, few wine producers have dared to defy the ossified old guard who continue to enforce the standard of European wine production.  Is it arrogance or merely ignorance that prompted the wine industry to relinquish an entire segment that it should rightfully own –  cider ( a low alcohol fruit wine), to the American beer producers?

Having been in the alcoholic beverage industry for over 3 decades I have a fairly good ideaof  how this saga will play out, unless drastic measures are implemented very soon.

The wine industry today is much like the U.S. auto industry of the 1970’s, which took the attitude that the public will buy what it tells them to purchase. We have all seen how successful that approach has been. Now Toyota is the world’s largest car company. Hopefully, the wine industry will come to its senses before it is too late.

Sterling: A Good Match for Treasury Wine Estates?

October 6, 2015 § Leave a comment

There is an industry rumor circulating that Treasury Wine Estates (TWE) is contemplating a purchase of the Sterling brand from Diageo.  Winemetrics, having done preliminary research on Sterling’s on-premise performance, is not certain this would be an appropriate fit for TWE.  Sterling used to be an on-premise powerhouse; five years ago Sterling was a leading restaurant brand, ranked 7th by-the-bottle (BTB) in Winemetrics 2009 On-Premise Wine Distribution Report. However, the following year Sterling had dropped to 16th BTB.  Since 2010, Sterling continued to lose distribution on-premise; in Winemetrics most recent 2014 survey, its BTB ranking fell to 50th place. Further analysis indicates that Sterling and Beringer, the flagship brand of TWE, have similar strengths, both with 29% of their on-premise distribution in Cabernet Sauvignon.

Perhaps a better choice for TWE would be one on Diageo’s Pinot Noir focused brands, such as Acacia or Chalone. On-premise distribution of Pinot Noir represents just 4% BTG and 5% BTB of TWE’s portfolio of brands. Meanwhile one third of TWE’s BTG and a quarter of its BTB distribution are devoted to White Zinfandel, a variety experiencing a slow decline on-premise.  Of course, on-premise distribution may not be a deciding factor in a wine brand purchase. However, the well-known brands, that have recently been sold at a premium,  (Meiomi is a perfect example) have had extensive restaurant distribution at the time of their purchase.

For more detailed analysis on the compatibility of Diageo’s brands with the Treasury Wine Estates portfolio. Please contact us at info@winemetrics.com.

Casual Chains Slash Wine Selections

April 7, 2014 § 1 Comment

According to Winemetrics preliminary 2014 wine list survey, 8 leading casual dining chains have reduced their wine selections, most  by double digits.  The following data indicates the steepest across the board decline we have ever witnessed in on-premise wine selections.  This may portend a trend by national accounts to shift emphasis from wine to the faster growing craft beer and cocktail segments of their beverage programs.

Winemetrics compared its mid-year 2013 wine list data with recently acquired data from identical chains this year.  Our findings indicate the following combined by-the-bottle and by-the-glass wine listings decreases by percentage.

Carrabba’s                       -6%

Longhorn Steakhouse      -22%

Olive Garden                   -28%

Outback Steakhouse        -18%

Red Lobster                      -6%

Romano’s                          -22%

Ruby Tuesday                   -17%

 

We will post more insights on this trend as our 2014 wine list update continues.

 

 

 

2013 On-Premise Wine Trends

October 3, 2013 § Leave a comment

Here are some highlights from Winemetrics’ recently published 2013 On-Premise Wine Distribution Report :

1. Wine lists are getting smaller. We reviewed 50 casual chain from 2013 and our previous survey and discovered that the average BTB (by-the-bottle) listings fell from an average of 30 listings to 28.

2. Hot varieties are stealing share from more established  varieties.  Moscato, Red Blends, Malbec and Prosecco all posted robust growth in 2013 but Cabernet Sauvignon, Sauvignon Blanc and Syrah/Shiraz lost share.

3. Argentina and Italy increased share; France, Australia, Chile and South Africa had double-digit share losses.

4. Italian Pinot Grigio/Gris grew at the expense of its U.S. producers of this popular variety.

5. While U.S. wines increased share by 2%,  Washington State accounts for much of this growth. Oregon wines lost share

For more information regarding wines on-premise visit http://www.winemetrics.com

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.

Introducing Winemetrics’ Trilogy™

November 7, 2012 § Leave a comment

As a reader of Winemetrics newsletter, you are probably aware of the three annual reports we publish: our On-Premise Wine Distribution Report dealing with brand and varietal performance on-premise, our Supplier Report ,which profiles the portfolio performance of Top 50 On-Premise Suppliers, and Winemetrics’ Chain Restaurant Report, which provides users with the ability to find distribution opportunities for their brands in 160 national and regional chains and restaurant groups.  While this is a vast amount of unique and very useful information, it requires an experienced analyst to optimize its utility for both the marketing and national account sales teams.  Further, from what I have learned anecdotally from various suppliers, most analysts are already overburdened with an ever-growing number of reporting tasks.

Over the past year, we at Winemetrics, have tested our own analyses with key suppliers and selected chains and both groups have resoundingly endorsed our insights. Based on this extremely positive reception, we are now offering a complete portfolio/brand performance and chain distribution analysis for our clients based on the content of our three reports. We are calling this new service Trilogy™. This will be available as a subscription service and will provide distinct advantages to our annual reports, which include:

1)     Trilogy™ subscribers will receive in-depth analysis of their portfolio and brand performance based on our entire database providing far more insights than are offered in our On-Premise Wine Distribution and Supplier Reports.

2)     Trilogy™ subscribers will receive biannual updates in April and December based on surveys of all casual and upscale casual chains in our database in January and September.

3)     Trilogy™ subscribers receive lists of target accounts based on distribution opportunities for specific brands/products discovered through our in-depth analysis of Winemetrics’ Chain Restaurant Report.

4)     Trilogy™ subscribers may pay less for this service than the combined cost of purchasing our three annual reports.

5)     Optional: Trilogy™ subscribers may create a specific chain sample, adding additional chains not currently included in Winemetrics’ survey. All reports and analysis would be based on this specific sample.

Please download and review our Trilogy™ presentation for more details here. To avoid revealing  details regarding current and potential client wine portfolios, we have used Ascentia’s portfolio data from 2010 to generate the content of this presentation.

Pricing for our Trilogy™ services is dependent upon the number of brands and products we are tracking for clients and the size of the account base selected.  To learn more about how to harness the crucial on-premise wine intelligence that Winemetrics offers, contact me at cgill@winemetrics.com or 203-243-7397.

Red Lobster Unveils Most Comprehensive Menu Transformation in Brand History (but not the Wine List)

October 24, 2012 § 1 Comment

This was headline of a recent restaurant newsletter I received (the parentheses are mine). The article mentioned the extensive menu changes, brand repositioning, the addition of a wood-fired grill and new Bar Harbor motif for Red Lobster’s renaissance. What was not mentioned were the changes in the wine list, so I examined the Red Lobster website to note the expected improvements.

Apparently the same level of investment devoted to Red Lobster’s renovations and repositioning was not allocated to the wine program.  Red Lobster’s newest wine list revision, already among the smallest in the Casual Seafood segment, according to Winemetrics 2011-12 Chain Restaurant Report, lost a listing and is now tied for last place with Flanigans, a Florida fish house, with 14 by-the-bottle (BTB) listings.  It should be noted that the beer selection is now larger than the wine list at Red Lobster.

There is an upside as two new varieties were added, Pinot Noir and Moscato and no existing varieties were eliminated,  increasing the list’s varietal diversity.  To make way for these additions however, Cavit Pinot Grigio, Columbia Crest Merlot and Excelsior Cabernet Sauvignon were cut from the roster.  The big winner in this change is Trinchero’s Sutter Home, which now has a Moscato listing to add to its Chardonnay, White Zinfandel and Merlot entries,  giving it a 29% and 27% share of the BTB and BTG listings, respectively.  Certainly you have to applaud Sutter Home’s salesmanship, but shouldn’t the leading Casual Seafood chain also be the leader in beverage programming?  This was a role that Olive Garden, it’s sister restaurant at Darden, played for a number of years until its competition caught up.  Based on research published by Cornell’s Hospitality Research Center, we know that larger wine lists generate more revenue (up to 150 listings!).  Wine promotions, such as tasting portions, wine recommendations and wine flights, when properly executed, all generate substantial increases in profit.  Yet such promotions are used by just a handful of casual chains.  It is disheartening to see one of the nation’s largest restaurant operators, once a champion of wine promotion,  moving in the wrong direction.  More on this in our next blog entry.

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