Tuesday, April 29, 2008

Triple plus half retail!

One afternoon a number of years ago, a local restaurateur came into my winery to order some wine from me. During the conversation, I asked if he had anymore of an older wine left in inventory. He said he wasn’t sure, since his cellar was so full that he had to develop another cellar in his basement to keep the inventory that was spilling out—then, he complained about slow wine sales.

I knew that this fellow charged too much for wine at his restaurant and so I asked if he ever considered lowering his prices. He looked at me as if I had just cursed his grandmother.

Here’s how the rest of the conversation went.
He, “If I lowered the price I’d lose money on each wine sale.”

Me, “But you just said that your wine sales are slow.”

He, “Yeah, the wine doesn’t sell as fast as I’d like it to sell, but that’s no excuse to give it away.”

Me, “You wouldn’t be giving it away. You’d be charging a little less so that you can sell the wine faster.”

He, “So what would be good about selling it faster at a lower price? Speed up my losses?”

Me, “First, you’d lower inventory carrying costs. Second, faster sales will likely increase wine sales over the course of the year, since the price will induce more people to buy more wine from you. In retail, the idea is called volume selling—you move more units and so in the end, you make less percentage per unit but more profit on overall sales.”

He, “That’s plain stupid. If I can’t get my full mark up, I’d never make a living.”

Me, “Right. I’ll see you in a few months to sell you another case of wine.”
These many years later, this fellow’s wine pricing remains disgusting. His formula is to price wine at triple plus one-half retail. For instance, he had a Vinho Verde on his list recently that retails for $7.00 a bottle. His price was $25.00 a bottle—he rounds up the half, of course.

Most restaurants aren’t as greedy as triple plus half—they usually go double plus half retail, which still is absurd, in my view.

I’ve heard the arguments from restaurateurs: they have glasses to clean and wine service to account for. But I don’t accept those excuses. Simply put, restaurants charge what consumers allow them to get away with charging. It will be interesting to see if this period of economic woe will have an effect on wine prices if restaurants start to sell less, but I doubt it.

To be sure, the price of wine in restaurants is a tired subject. I know, I’ve been talking about it for twenty-five years, much of that time trying to persuade restaurateurs when I sold them wine that they should consider reducing their prices. But like just about everyone else who complains to restaurants, I failed at persuading them.

Yet, every so often a smart restaurateur comes around and does what other restaurant people probably view as either stupid or insane—he or she prices wine a little better than the competition.

Recently, a wine bar called Terroir opened in Manhattan’s once grungy but now fashionable East Village neighborhood. The bar is owned in part by one of the city’s truly successful and innovative wine purveyors, Paul Greico.

At Terroir, Greico offers wines that are mostly under the radar, the ones that most critics and obsessive wine hobbyists don’t seem to care about but regular people who consume wine not as a hobby but as part of their daily routine do care about. When you search for and consume wine regularly, as opposed to collect wine or buy what you are told to buy, it pays to keep searching for new products and at new prices.

Greico’s wine prices are as under the radar in Manhattan as the wines, and I wish him all the best for his effort.

You can get a nice glimpse at his place by following the link below. The link will also give you a glimpse into what some wine geeks think about such matters. Pay special attention to the person who wanted to know if Terroir allows BYO.

I can think of three reasons to go to a wine bar and want to bring your own wine:

1. You are cheap.

2. You are uninterested in exploration.

3. You think that your wine cellar is the greatest thing since wine was invented.

If you fit any of the above, it’s probably best that you stay home and drink from your cellar. You probably neither will be nor have any fun at a wine bar.

Terroir

Copyright Thomas Pellechia
April 2008. All rights reserved.

5 comments:

Jason Feulner said...

I bought two glasses of Lamoreaux Landing's 2006 Gewurtztraminer tonight at a chain seafood restaurant in Fayetteville, NY (Bonefish Grill--strange place) for what it would have cost me to buy the entire bottle retail. The wine menu had few crisp, acidic whites to choose from, and it was the only local offering, so I didn't mind as much as usual. If they had marked the glass or bottle price down a few pegs, I would have purchased more, and I am fully in support of your retail theory.

Long time reader of the vinofictions domain: I never bothered to check out the blogger equivalent! It's great that I can leave comments.

Thomas Pellechia said...

Exactly, Jason.

My pricing scheme for restaurants used to be laughed at, but I am convinced it would move a lot more wine through the restaurant.

Essentially, it's retail plus some dollars rounded up.

Drink, Memory said...

I would eat out much more if I could afford the wine, so I agree.

Thank you so much for letting me know about Terroir. I am going asap!

Thomas Pellechia said...

You'll find some great wine discoveries. I sometimes wish I still lived in NYCity.

Brian said...

Great site!

I might add a "4." You really enjoy hearing the opinions of the proprietors, who are also eager to try new things, and you want to share a unique wine with them.

That's happened a couple of times at a new wine shop in San Francisco I love (Terroir SF)but my credit card hates.

Agree with you re: restaurant pricing. Why should wine drinkers be responsible for the entire profit margin of the establishment? I almost always do byo, because my cellar generally IS better than many restaurant cellars, anyway.