Wine Cost Control

At the heart of wine cost control, a bottle accountability system provides the information needed to properly evaluate results. Too much energy is replicated by top wine professionals. They frequently classify wines by region, color, grape, vintage, vintner, ratings, and other critical evaluation criteria. These are the essential elements required to select and categorize the wines.

Once you have chosen a base wine list and send it to food and beverage control, I’d allow a different view. The highest volume of wine sales is found in pouring wines and house wine by the bottle. These wines compete directly with beer and cocktails for profits. Wines sold by the glass should be consistently drinkable and profitable. If you buy a 1.5 liter bottle of wine for $12 and pour ten five-ounce glasses at $6 each, you’d expect a 20% cost percentage.

To the opposite side of the wine spectrum, we find low volume, top vintage boutique bottles purchased in limited quantity and priced to yield a decent dollar markup. Some of my successful clients simply double the price they pay for these bottles. This would imply a 50% cost of goods sold.

Should these two wine classes be mixed on your books?

The pouring wines will turn many times in one year and many of the premier wines won’t sell for over a year (sometimes never). Restaurants may store wine for favored clientele. Some restaurants will buy young wine at auction and let it age over many years. These wines do not belong in the same category as the pouring wines.

An article entitled “The Best Restaurants For Wine Lovers” is featured in the August 2007 issue of Wine Spectator magazine (with category lists of the 3,955 award winners). The award winners are also featured in the dining guide which is formated by country and region. You can find lots of winners in major American cities. New York has the most winners of any city with 196.

Some of the wines which may distinguish a Grand Award winner from an Award of Excellence winner are featured in an August 3, 2007 Wall Street Journal article “First Growths Make Their Debut” written by Dorothy Gaiter and John Brecher. The 2004 first-growth Bordeaux wines are the focus. They mention the significant drop in price for first growth wines in 2004 vs. 2003 (one of the finest vintage years).

I recommend four categories: pouring wines, popular bottle wines, premier wines, and investment wines. The popular bottles and pouring wines need to be priced to hit a good cost percentage. A $12 dollar bottle should be sold for at least $30 (40%). I recently enjoyed a well paired wine for $30 at my favorite restaurant. The next week, I found the bottle for $9 at the local wine shop (30%). If you help your customers with the pairings, you can charge more per bottle.

Don’t fall into the trap of required wine purchases. Let’s say you sell a phenomenal Cabernet Sauvignon for $200 per bottle. If the boutique vintner wants a minimum order of 5 cases per year at $1,200 per case, your cost is $100 per bottle (50%). At year end, you’ve sold only 1 case. The remaining 4 cases are in inventory at cost. Do you continue to purchase the annual minimum of 5 cases? Over time, this purchase activity will become perilous. Paying $6,000 to a supplier for wine which generates $2,400 in sales is a mistake.

Storage of high priced wine is a major issue. The security needs to be the primary focus. Two of my clients had vaults with doors similar to those seen in a bank. In addition to security costs, the storage needs to be climate controlled. If these vintage wines are moved too often or are kept at improper temperature and humidity levels, they will lose their value.

Creating a winning wine list to use as a sales tool is the job of specialists. Too often, I find my customers lamenting the spoilage of expensive vintage wines. These discoveries often occur when the beverage manager leaves the company. The successor manager goes to the cellar and identifies old legacy wines and clears them from the list. Better to move a slow mover for a huge discount than wait for really expensive vinegar.