Pricing for the educated consumer

Nation's Restaurant News, Jan 10, 1994 by Mort Hochstein

Restaurants traditionally have been the place where wines were introduced to customers and where their reputations were built. But that may be changing in this time of superstores, buying clubs and giant supermarkets. The price-oriented merchandising in those places is tempting to new buyers and may further the wine education of the consumer more easily than a restaurant would.

While jug wine volume has fallen, sales of cork-topped bottled are moving up as the customer shifts into better wines. In supermarkets, sales for the first eight months of the year were up 3 percent.

"More striking and encouraging," says Walter Klenz, president of Beringer, "is that wines selling between $7 and $12 a bottle are up 30 percent, and those selling for more than $12 a bottle are up better than 35 percent."

Klenz, who is also president of the Napa Valley Vintners Association, NVVA, argues that the growth of premium wine sales in supermarkets "demonstrates that fine wines are increasingly purchased as part of the normal shopping experience in the supermarket, not just for very special occasions."

Sales growth for wine in the supermarkets also points up a need for creative buying and pricing on the part of restaurants. Customers who've become familiar with a wine at $9 are not going to be paying $20 and more for the same bottle in a restaurant.

How do you profit from consumer familiarity with nationally advertised brands, take a markup that reflects your costs and earn a profit without antagonizing that patron who knows the retail and the discounted price? Not easily, but it can be done.

The first method is to explain that the supermarket and the private club have an advantage because they can buy in huge quantities and take advantage of the price discounts that come with large purchases. That argument should include the fact that the restaurant can offer older vintages and has to factor in the cost of storage. The second is to avoid excessive markups.

Jonathan McCabe at the Union League Club in Chicago, speaking for the private club segment, says: "Most of us have adjusted our prices to a reasonable markup, and our guests are delighted at the change in cost to them. We're selling Dom Perignon at $85, which is just $10 more than they're paying at the Price Club. "We've shifted to the idea of wine as a food rather than as a beverage, which is the way it is meant to be considered. Our food and beverage costs are up, but they've gone up along with increased volume. I'm happier selling two bottles of Napa Rige, which costs me $4.88 a bottle, at $12.50, rather than one bottle at $16. I'm still making almost $8 a bottle, and I'd rather get the second sale."

Another method is to seek out wines that don't have great exposure. Finding wines that aren't deep discounted in consumer outlets is not difficult. Brands such as Foxen, Alban, Edmunds St. John and Kistler and any number of imported labels, to name just a few, are seldom found on supermarket shelves.

Manager in wine-oriented operations take particular pleasure in finding promising new labels and good values. The rules of the game have changed now that wine lists are no longer written in stone.

"I used to make availability through the vintage one of my prerequisites," says Joey Diablo of the River Cafe in Brooklyn. "Now, with a computer and a laser printer, I can change my list overnight, so I concentrate on getting wines I want, and as long as I have some idea of how long they'll be available, I'm fine. It gives me a lot more flexibility, and searching out good values is what makes the game enjoyable."

The obvious move would be to seek out wines that don't have great exposure in supermarkets, while still profiting from the promotional advantages that come with well-known, nationally advertised brands. The unknowns far outnumber the brands most people will recognize.

Overall, restaurants should welcome the assistance such retail outlets provide in upgrading customer taste and making wine at the dining table a habit, not an exception. We still have a long way to go toward the European idea and should welcome anything that makes the goal more attainable.