jamie goode's wine blog: "You donít sell wine, you sell deals"

Friday, August 07, 2009

"You donít sell wine, you sell deals"

Doug Wregg of Les Caves de Pyrene recently wrote a provocative piece looking at the way deals are done in the off-trade. You can read it here.

Have you ever wondered why many restaurant/gastropub wine lists are just so appallingly bad? To paraphrase Geoffrey Boycott, when I look at the list plopped in front of me in an average establishment, my first thought is: 'my granny could do better than that with a stick of rhubarb.' And the people running these joints are supposed to be food and wine professionals.

Well, it seems that one of the reasons for this sort of poor performance is the deals that are struck that have nothing to do with the quality of the wine.
Here is an example of the shenanigans that go on when contacts are bid for. A group of three local pub restaurants is currently signed up to a single wine company Ė the usual penny-pinching discounted prices plus 3% retro as gravy. A fourth site is purchased and the contract comes up for renewal. The incumbent company offers a continuation of the existing generous arrangement, another very large company tenders £5,000 for the full contract of the four sites, and then one of their rivals, a specialist in spirits, minerals and beers trumps that with £7,000. After some haggling the second company reduces their offer to £5,500 whilst the original wine company stumps up £2,000 to keep the wine business in the form of an opening credit note. The contract, by the way, is for one year only.

Who suffers? The honest wine merchants whose business is squeezed by the wine bribery of others, the customer who is being sold a pup, and finally the consumers who have to drink the narrow selection of overmarked-up mediocrity. It is counter-intuitive to sacrifice quality and loyalty on the altar of short-term greed. The restaurants that take their customers for granted are making a big mistake.



At 8:30 AM, Anonymous Keith Prothero said...

yes Doug is right. I have been trying to get some decent wine in a place that I have some connection with but the package deal is more important to the owners.

At 8:46 AM, Anonymous andyincayman said...

V provocative but probably fair!

I would say (having read the whole article) that they blame this on "bean-counters". As an accountant (we usually given this derogatory term!) myself I would protest.

Personally I would blame the proprietors who after all set the vision of the place and instructs the team under him on how much he is willing to pay for wine etc. It is quite clear that chefs (often the proprietor) give little respect to wine in a lot of cases. This is clear from a very brief look at wine lists in many top restaurants with outrageous mark-ups and also on the media.

A good example of this is Saturday Kitchen. There is clearly a ceiling price on the wines the experts are allowed with no regard to the complexity or appropriateness of this with the food it is matched to.

Having said this, the public is also to blame. Chefs are unable to make a profit out of the food they make as the public would be unwilling to pay the prices needed to do this. Profit therefore has to be made elsewhere (wine and coffee).

At 9:24 AM, Blogger neil said...

Spot on & there's worse happening out there as well.
Maybe Doug should start a trade campaign against this kind of thing? I'd be up for that. But it would have to include the practice of selling wine at cost or below cost to secure further listings - it's just as bad a practice? Wine should cost what it costs, it's the only way to push up quality.
Time to clean up this stuffy old seedy industry... call on the Wregg-ed Crusader!!!

At 1:21 PM, Blogger Arvid Rosengren said...

It is indeed time to clean up. But that's up to the customers. And to be honest, if they would have wanted to do that, they would have done so years ago.

It's a tough situation. The restaurants that really do care more often have a bad (or in case of michelin-star class restaurants, negative) margins from food alone, so profits have to be made in beverages. That mediocre establishments are taking the same or even higher margins is a pity, since they also in most cases have margins on the food.

But really, good restaurants keep struggling and mediocre places keep thriving. It doesn't really pay off (economically at least) to strive for a high quality in the restaurant trade.

At 5:37 PM, Anonymous Ian S said...

Fair comment about it needing to be customer driven. In the past I've voted with my feet - as in the case of the restaurant that was my favourite for food, yet had markups 4 x retail for current vintage / widely available wine.

However that really doesn't have as much effect as saying to the owner why you're going elsewhere & what they'd need to do to tempt you back.

Mental note to do this in future!

At 10:35 PM, Anonymous Alex Lake said...

Dunno about the bribes, but a one-stop-shop is hard to argue against for restaurants that don't take wine too seriously (which is about 99% of them).

I don't mean to be an apologist for restaurants, but the same happens with everything else restaurants buy, such as meat, fish, etc, and most of them struggle to manage the admin and logistics (many restaurants have limited storage space) as it is.

I'm unlikely to be happy with most lists (even if sourced from multiple agents) and thus, with a few heroic exceptions, I'd rather pay corkage and take my own.

At 5:59 AM, Anonymous Anonymous said...

BTW, although I hate to say it, Doug's being a bit of a drama queen when he says "The restaurants that take their customers for granted are making a big mistake". While true in general, it doesn't meaningfully apply to wine for the vast majority of restaurants and their customers.

It might be interesting, albeit depressing, to do a survey of restaurant customers in this sector (which I'd say is pretty much any restaurant without Michelin style aspirations) and see how many of them feel the wine list is poor.

At 7:44 AM, Anonymous Anonymous said...

Hmm - a blog that now posts other people's blogs.

Is this the first post-modern blog, I wonder?

At 7:46 AM, Anonymous Doug said...

Does bribery go on? Effectively, yes, restaurants (of all types) solicit money for listings snd are now auctioning their lists to the highest bidder. What that has to be with quality I don't know.

Secondly, they are not passing the extra discounts on to their customers but using them to boost already inflated gross profit margins.

Thirdly, sommeliers (in certain cases) and wine buyers are constrained by artificial financial imperatives imposed on them; if they do not have the freedom to buy interesting wines and take even an occasional risk on price their motivation to sell quickly diminishes.

The higher the margins the less wine the customer is getting in their glass. Customers are increasingly staying at home and paying a bit more for a bottle of wine rather than being ripped off.

If I go to my one of my local gastropubs I know that their gross profit margin on wine is 75%. Most of the wines on their list were purchased by the merchant at between 2 and 3.5 euros and are subsequently marked up four times plus vat. The food is great, the list is a travesty. This is not an isolated example.

Restaurateurs are wont to ascribe the pressure of customer expectations for seeking the cheapest wines. This is the same mentality that preaches that you have to have Pinot Grigio on the list no matter how pisspoor the wine is. Marking up creatively is much more likely to keep customers interested; ultimately you bank the cash margin rather than the GP so why not give customers the opportunity to drink delicious wines?

Nor do the places with the highest margins inevitably succeed. Indeed quite the reverse. What they do is to invite comparison with those establishments that offer better value for money. The customers, as the Americans say, can do the math.

Wine merchants are also to blame for playing the game. Restaurants are looking for the best deals (whether or not they pass them on to their customers), but wine merchants do not have to indulge them by offering more and more for less and less. Soon we will have a culture where the wine merchant has to source wine regardless of quality just to maintain listings.

I am not condemning everyone. There are some passionate people in all sides of the wine trade, but I do worry about this drive to squeeze more and more money and freebies out of the merchants and growers to subsidise restaurant business. I would like to think that you have a unique product (or offering) that you will attract people; if you have a cheap inferior product then you will eventually antagonise your core audience.

At 11:54 AM, Anonymous Ian S said...

I suspect many aren't making super-profits on wine that go straight to super-profits for the restaurant. More likely (as I think you mentioned earlier), is the super-profits on wine and other drinks goes mostly to subsidise the food (which is their passion).

Does part of the blame here lie in the legislation, which requires restaurants to post food prices near the front door, yet no requirement for wine / other prices. Better to look cheap on the food, whilst hitting the customers on the wine once they're inside the restaurant?

... and yes profit margin as a flat £ amount per bottle (with just a small % element to cover corked bottles, opportunity cost etc.) makes sense and then makes a clear policy on corkage very easy.

WRT customers buying cheap, I certainly buy (on the whole) poorer wines in restaurants than I drink at home. I'll begrudgingly pay up to £20 for a £10 wine, but wouldn't pay £50 for a £25 wine. If it were £40, then we might have a deal.

Still, at least my cooking improves by choosing to dine and drink at home instead!

At 12:29 AM, Anonymous Top Wine Sublime said...

Very eye opening and another reason I favor byob (bring your own boos)restaurants.

At 7:18 AM, Anonymous Anonymous said...

Another reason I favour staying at home...

At 10:03 AM, Anonymous David said...

Doug, were you the holder of the three-site exclusive deal mentioned in your original blog post? Just for clarity, should we take it that Caves de Pyrene don't play this game and never seek either outright exclusity or a fixed proportion of listings or sales in return for discounts, retros, or fees? In other words, are you complaining about the game, or the fact that bigger players are better at it?

At 10:58 AM, Anonymous Anonymous said...

Sorry Doug you say
"Soon we will have a culture where the wine merchant has to source wine regardless of quality just to maintain listings."
You obviously havn't tasted 99.9% of house wines available. We are well & trully there!!! How else do merchants sell a wine for £3.18 when transport, duty & all other fixed costs account for about £2.25 of that?


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