Do healthy glass markups help or hinder?

From the chapter: Nuts and bolts

One of the advantages of Tastevin, one of the recent permutations of tablet wine lists, is the data that can be peeled off. In 2013 Labrador OmniMedia, the Santa Rosa-based company that has installed Tastevin in hundreds of restaurants across the country, released an analysis of more than 750,000 wine purchases in those restaurants over a 12-month period.

Dividing their findings by average restaurant entrée pricing, Labrador OmniMedia found that in restaurants where entrées averaged $10 to $30, 69% of total wine sales were by the glass. They also found that guests in these restaurants preferred red wines (particularly Cabernet Sauvignon, Pinot Noir and Malbec).

By contrast, in restaurants where average entrée prices were between $31 and $60, fully 80% of wine sales were by the glass, and Chardonnay was the top varietal wine by the glass (while Cabernet Sauvignon was the leader in bottle sales).

Regardless of when this data was accumulated, what does it imply? First, that the percentage of glass to overall wine sales—at least in restaurants using Tastevin (which included a number of Ruth’s Chris Steak Houses, and restaurants operated by Kimpton, Hyatt, Ritz-Carlton and JW Marriott)—had risen higher than many wine professionals in the on-premise industry would care to admit. Second, that excess wine markups, the age-old restaurant bugaboo, continue to prompt guests to economize by ordering wines by the glass rather than bottle.

The restaurant industry's standard, knee-jerk response, of course, is to increase glass prices in order to lower bottle prices, and hopefully entice guests to go for bottles rather than glasses. This is also a great way to keep overall wine costs in line. But does this work, or have we just been punishing guests for indulging in glasses or for having the temerity to not order wines by the bottle, which restaurateurs would much prefer?

Or, as a Mr. Spock might ask: Is it even logical to keep raising prices in the area where the majority of your own customers are now shopping?

To get an idea of where some of some of the nation's top multi-unit wine managers were at in terms of glass merchandising and markups, I asked a few them to share their thoughts shortly after the Tastevin findings were released. Naturally the responses varied according to circumstances and to how much each manager wished to reveal about their programs.

First, Sean Beck of Back Street Café, Hugo’s and Trevisio in Houston, TX didn’t mind sharing: “On all three of our wine lists, we shoot for an average overall markup of 2.3 to 2.5 times”—that is, a very reasonable (i.e., below industry standards) 40% to 43.5% costs. However, according to Beck, “glass pours range from 2.5 to 3 times”—veering more towards traditional 33.3% restaurant markups. Why? “The extra markup on glasses helps us cover cost of waste—wines thrown out after being open for longer than two days—and the cost of guest samplings. We also want to encourage guests to order bottles, which tend to be more adventurous than typical wines by the glass. On the whole, though, none of our markups could be described as extreme.”

Andrew Chapman, a General Manager at the multi-unit Elway’s Colorado Steakhouses, preferred to talk in terms of overall costs; saying: “We apply different markups at each location because each store has its own financial model with different hard costs associated to them. Seasonality, for instance, is a major factor at our Vail restaurant, effecting our markups across the board.” The differences? Says Chapman, “At Elway’s in Vail we run an overall wine markup of 33%. It’s 37% at our Cherry Creek (in Denver) location, and a little higher at Elway’s Ritz-Carlton (in Denver’s downtown LoDo District).”

Peter Mastrogiovanni, who was running the wine program for New York’s EMM Group (Abe & Arthur’s, SL, Catch, Lexington Brass, The Chandelier Room, Tenjune, The Estate, and Four Hundred) at the time, applied a traditional approach to markups to an imaginative selection process: “There is no set formula among the restaurants, although I tend to play in the area of one glass sale price equals the cost of the bottle”—which would translate to just over 25% costs on 6 oz. pours, or closer to 20% on 5 oz. pours.

Mastrogiovanni deviated from this when it came to adventurous luxury offerings, which could run high: “For example, my $12 glass of New Zealand Sauvignon Blanc allows me to be more generous and flexible with my $25-$30 glass options.” Those options? “Cool Burgundies out of magnums such as Antonin Guyon's Chambolle-Musigny Les Cras, Cakebread Cabernet Sauvignon, or an '87 Duckhorn Cabernet Sauvignon out of a 5-liter for less than $30.”

Like guests at EMM Group restaurants, guests at Elway’s were "not shy about spending money,” according Chapman, “but they know when they are being over-charged. That’s why it is important for even high-end restaurants to present an image of overall value to the consumer.”

Then there was Chuck Furuya MS, who oversaw wine programs at Hawaii’s DK Restaurants (Sansei, Hiroshi Eurasian Tapas, Vino, and d.k. Steak House) that became known for extremely low wine markups (exceeding Beck’s in Texas). Furuya didn’t want to be quoted on specifics, but was willing to share this philosophy: “We pride ourselves on our wine service and unbelievably priced bottles, but a restaurant’s glass program is probably the most important part of the wine program—it tells guests how much a wine director cares and thinks about their wine experience.”

Sean Beck added, “I believe that at the end of the day, a restaurant group has to price all its products fairly—food, beer, spirits and wine.” Furuya put the prioritization of "fair and reasonable" pricing another way: “If a restaurant is not vegan friendly, they will not attract vegans. If they are not kid-friendly, they won’t get the families. In our case, if we are not wine-friendly, we will not get the wine lovers.” And for a Master Sommelier, of course, it's all about wine, and wine sales.