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R&IEditorial Archives2004 — September 15 — Special Report

Uncorking Profits
Smart wine merchandising engages staff, fills seats and builds repeat business.

To understand operators’ growing interest in wine merchandising, consider two statistics: 4%, the average full-service restaurant’s pretax profit margin, according to the National Restaurant Association; and 100%, the traditional minimal markup on wine.

That desire to ride higher beverage sales in a bumpy economy also dovetails consumer interests: Total U.S. wine shipments were up 5% in 2003, reports the San Francisco-based Wine Institute. The result is that what once was promoted as an enhancement to dining has gained greater status. Wine nights with vintners, half-price incentives, multivarietal flights and by-the-glass promotions are as common as entrée specials and signature cocktails.

A champagne promotion on Thursday nights at Palette (top) resulted in a 20% increase in business. An Italian wine celebration is an annual event at Harry Caray’s Restaurant (above).

“These ideas are working,” says Debbie Zachareas, a San Francisco-based wine consultant and adjunct faculty member at The Culinary Institute of America at Greystone in St. Helena, Calif. “These ideas fill dining rooms on slow nights with people looking for values.”

Merchandising wine is a good strategy, although not fail-proof, she says. Don’t confuse cheap wine with good value, because most diners will not. With ample supplies from domestic vineyards as well as from France, Australia, Italy, Germany and South America, the raw materials for successful wine programs are abundant. What is required is wise matching of wine with menu and clientele. Price gouging and excessive up-sell pressures are tactics sure to backfire, Zachareas cautions. But ideas that benefit both owners and customers are worth pursuing.

Minimal Markups
Jimmy Bradley overhears positive comments from new customers about what they call his “little fish shack in the East Village with cheap wine.” The co-owner of Mermaid Inn in New York City sells bottles of wine for $15 above wholesale cost. Buying a bottle for $21 is not uncommon. Low overhead, a limited menu and high volume allow him to slash prices on 35 choices.

“Some restaurateurs find this operation too limiting or boring,” says Bradley, who also co-owns The Harrison and Red Cat, both in New York City. “It’s not for everyone.”

Bradley turns tables five to six times every evening. Customers don’t mind waiting in line because table turn is less than an hour. Average check is around $35.

Loyalty Factor
Promoting half bottles of wine is an idea that works for Lark Creek Restaurant Group, a San Francisco-based multiconcept operator whose operations include The Lark Creek Inn, Larkspur, Calif.; Arterra in San Diego; and Bradley Ogden at Caesars Palace, Las Vegas. About 15% of 800 selections in The Lark Creek Inn are half bottles, says Michael Dellar, co-founder.

“I’d rather sell two glasses of wine plus a half bottle than only one bottle per couple,” says Dellar. “The half bottles encourage people to be more adventurous. It extends the dining experience. Instead of one bottle, a couple orders a red and white.”

He uses a sliding scale for markups: Less-expensive wines get slightly higher profit margins. He says beverages constitute 30% of total sales—approximately $4.2 million in 2003—with wines alone accounting for 21% (versus 20% a year ago).

Keeping a manageable inventory is critical. “Get rid of the dogs,” Dellar advises. “That’s cash sitting in the cellar.”

Of The Inn’s frequent promotions, one has become an annual event. During June, prices on all 800 wine choices are reduced by half at brunch, lunch and dinner. “Customers choose by taste preference, not price. It gets them to try new things and order outside their budget,” Dellar says.

Lark Creek Restaurant Group partners Michael Dellar (l.) and Bradley Ogden make wines central to their concepts.

In designing the three dining rooms for Zola in Washington, D.C., Ralph Rosenberg applied ideas gleaned from what marketers know about impulse shopping. “Show the bottles,” says the director of operations for Star Restaurant Group LLC, Washington, D.C. (which also owns Spy City Cafe in the city).

At Zola, that led to creation of a wine island in each dining room, with wines and glasses displayed on an oval chest of drawers in the aisle. There’s room for 55 glasses, including flutes, along with 35 bottles of red wines, and an ice-packed stainless-steel tub for whites. The show-and-tell approach markets Zola’s inventory of unusual choices from Bulgaria, Austria, Romania, Chile and Australia. To enhance eye appeal in merchandising, bottles are poured into 27-ounce glassess, instead of the standard 14-ounce.

“People see the magnum of champagne in a tub of ice and want it, just like seeing candy at the check-out counter,’’ says Rosenberg.

Additionally, he believes that letting guests view wine bottles is more immediate, active and fun than simply reading a wine list. “People meander around the table and waiters bring wines to customers. Seeing the label on a Romanian Sauvignon Blanc gets customers asking questions,” he says. A sample helps the most indecisive guest.

Bubbles and Barbecue
When Palette in Washington, D.C., launched a Thursday-night promotion in April pairing bite-size pulled pork sandwiches (two for $2) and $5 champagne, the then-3-month old restaurant intended to promote its 60-seat lounge and the barbecue skills of its chef. The restaurant features live jazz from 5 p.m. to 11 p.m.

“We just wanted to get noticed,” says General Manager Corey Nyman. The combination turned the bar into an after-work destination. In a three-hour span, Palette serves an average 140 customers, with spillover business for the dining room. The promotion sells an average of 12 bottles of champagne and 40 sandwich orders each Thursday. In addition, it generated strong word of mouth and media attention, including a radio interview with the chef.

“Business on Thursdays increased 20% over the rest of the week,” Nyman says. For time-pressed guests who want more than mini-sandwiches, the dinner menu is available in the lounge, capturing customers willing to pay $27 for salmon or $36 for a veal chop. It also increased sales of wines by the glass.

A Month in Italy
Six years ago, Harry Caray’s Restaurant in Chicago created a weeklong Italian wine festival to celebrate the restaurant’s October anniversary. It became a customer favorite and was extended to one month, helping change the operation’s image from that of a shots-and-beer place to a wine restaurant, says Michelle Anderson, wine director for parent HC Restaurant Group.
The festival now includes guest speakers, virtual tours of Italy’s wineries and cultural destinations, tastings, regional menus and la carte specials. Three months of research, preparation and staff training precede the annual event. Wine sales during October 2003 totaled $80,000. This year she intends to reach $90,000.

To stir consumer interest, marketing begins with press releases to media in July, followed by group e-mails and electronic reservation reminders to customers in August and September.

“Staging a wine festival for less than a month is too labor-intensive. One week is not long enough to cover Italy’s regions,” says Anderson.

Maintaining an Image
Classics Restaurant, one of three operations in the InterContinental Hotel & Conference Center in Cleveland, gilds its image as a fine-dining destination with six to eight annual wine dinners. Each features a well-known wine and appearance by the winery’s owner.

The wine display at Zola spurs impulse buys.

The elegant dinners, usually drawing 20 to 30 guests at $150 to $250 per person, yield several marketing opportunities, according to Sommelier Manuel Nieves. They range from wine flights and by-the-glass promotions of a featured wine to a simplified version of a degustation menu.

“Business increases 10% to 15% immediately following any wine dinner,” he says. “People hear about a wine or entrée, and want to try it following the event. Offering one or two dishes from the wine dinner on a subsequent menu—or one of the featured wines—lets more customers appreciate the opportunity without attending the wine dinner.”

The restaurant’s financial investment for each dinner can run to $25,000, including stocking wines and hosting the winemaker. Attention by local media enhances the restaurant’s reputation. In fact, Nieves plans to duplicate the wine-dinner format in selected InterContinental Hotel Group locations next year.

Satisfying the wine customer with good value, new tastes or unusual promotions is an ongoing challenge for any operator. “To win repeat business give customers more than a good value,” says Zachareas. “That’s where service, an educated staff and a wine program tailored to the concept, menu, location and clientele comes in.”

Return Engagement
Inviting winery representatives to a restaurant for a tasting is common. Fulton’s Crab House in Lake Buena Vista, Fla., makes it a two-way relationship.

In June, Executive Chefs Frank Walason and Tony Perquito traveled to the Aquebogue, N.Y., home of one of the restaurant’s wine suppliers. There they created a special menu for a dinner celebrating both the restaurant and the vineyard’s wines. Entrées included Long Island blue crab cakes with Fulton’s lemon-mustard sauce, Maine lobster pot stickers with chardonnay-tomato fondue, and whole roasted Florida grouper with grilled Long Island corn relish.

Training Table
The finest wine inventory will collect dust unless operators get serving staff involved in the excitement of wine.

Lark Creek Restaurant Group, San Francisco, understands the importance of training its 200 servers. “If they’re not comfortable recommending a bottle, inventory sits,’’ explains Michael Dellar, co-founder of the group.

Hour-long seminars once a month are taught by John Hulihan, director of beverage and service. Sessions are voluntary and scheduled between lunch and dinner shifts. Locations rotate among the group’s restaurants. Tpics are announced in advance, and sessions always include a tasting and discussion. “Employees understand that they earn more if they sell wine,’’ he adds.

Each operation also holds a daily 10-minute preview of menus and wines between shifts. Servers review specials and wine-pairing suggestions. Wine lists, tailored to each restaurant, are easy-to-read and informative. “It gives just enough information to start a conversation. That’s where the server takes over,’’ Dellar adds.

At Palette in Washington, D.C., wine training includes informal tastings. Each employee over 21 years of age is entitled to three 1-ounce servings daily, says General Manager Corey Nyman. “It’s a small investment to get more guests buying wine,’’ he explains.

Ralph Rosenberg, director of operations for Star Restaurant Group LLC, Washington, D.C., spends three sessions, 21/2 hours each, with every employee. The menu is a teaching tool.

“I focus on basics such as flavors, tastes and what wines go with what dishes, and why,’’ says Rosenberg, a wine enthusiast. The operator’s wine lists—with single-sentence blurbs for each wine—are intentionally tongue-in-cheek. “It takes the pretense out of wine and makes it fun,’’ he says.

Servers are trained to be good listeners. They ask questions to get customers talking about personal preferences. If a guest requests a certain merlot that the restaurant does not have, for example, the server responds with, “We have something else I think you’d enjoy” instead of “No.” Then, one or two samples are brought to the table.

“Get the guest sipping first,’’ says Rosenberg. “That’s how you sell wine.’’

Global on a Budget
The menu at Seattle’s Dulces Latin Bistro (right) reflects owner Carlos Kainz’s Mexican heritage, but also incorporates dishes with Mediterranean backgrounds. The wine list is similarly multicultural, and huge. Its 36 pages contain nearly 1,300 choices representing the world’s vineyards.

For $8, diners can assemble flights of three 2-ounce wine selections, and 40 different ports are available by the glass.

To stimulate bottle sales, half the wines on the bistro’s list are priced below $50, and on Wednesdays all prices dip 25%.


Stem Sale
Upgrading stemware sends customers a message.

“Elegant glassware gives guests something special for spending more on certain wines,’’ says Michelle Anderson, director of wine at Chicago’s HC Restaurant Group. The company purchased 60 imported crystal stems, each costing $12 instead of the usual $2 per glass.

The goblet, larger than a typical wine glass, is ideal for certain wines and vintages. The wider mouth and bowl allow wine to breathe and showcase flavors and aromas. The 24.3-ounce glass turns heads. “Customers see it and wonder what wine is in that special glass,’’ says Anderson.

Servers are responsible for the washing, drying and inventory, and are charged for breakage.

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