{"id":33603,"date":"2006-07-03T15:55:19","date_gmt":"2006-07-03T07:55:19","guid":{"rendered":"http:\/\/www.chinahospitalitynews.com\/2006\/07\/03\/wine-of-the-month-bank-dollars-not-percentages\/"},"modified":"2006-07-03T15:55:19","modified_gmt":"2006-07-03T07:55:19","slug":"wine-of-the-month-bank-dollars-not-percentages","status":"publish","type":"post","link":"https:\/\/www.chinahospitalitynews.com\/cn\/2006\/07\/03\/33603\/","title":{"rendered":"Wine Of The Month: Bank Dollars, Not Percentages"},"content":{"rendered":"

\"DenisBy Denis Horgan<\/em>
\nSeveral years ago, the area vice president of a major international hotel chain sought my advice with respect to problems at one of his company's major resort hotels. The hotel had been receiving a large number of complaints about the price of wine at its F&B outlets; the complaints were along the lines of, \"We prefer wine, but we drank beer with our meal because of the outrageous prices you charge for wine. We won't be back!\"<\/p>\n

I was not surprised to discover that the hotel was using the standard \"multiple markup on cost basis\" that is adopted by so many restaurants and international hotel chains. Based on my experience, high and unreasonable markups result in customers choosing the lowest priced wines on the list – or choosing beer and then voting with their feet.<\/p>\n

I suggested that instead of operating on a standard markup, the hotel should consider simply adding a set dollar amount to the landed unit cost. The markup would be calculated by dividing gross profit from wine sales by the number of bottles sold \u2013 simply the average gross profit per bottle.<\/p>\n

I was not surprised that this suggestion was rejected as \"not in compliance with company policy.\" So I went with another tack: perhaps the hotel should run a \"Wine of the Month\" list that was based on the unit-cost-plus principle and make a judgment based on results. I put together a list of Leeuwin Estate wines and included some background on Leeuwin plus tasting notes for each of the wines.<\/p>\n

The results were spectacular: in the first month, wine sales exceeded the total for the entire previous year, and the \"Wine of the Month\" was adopted as a regular feature in the hotel's F&B outlets. Wine sales continued to climb as word spread about the reasonable wine prices at the hotel.<\/p>\n

Another interesting result from using the unit-cost-plus method is that less expensive wines tend to disappear from the list over time. This is because when the standard dollar per bottle margin is added to the cost of cheaper wines, they appear more expensive to customers, who know the usual retail price of these wines. They perceive that the more expensive wines on the list provide better relative value, and \"order up\" instead of \"ordering down.\"<\/p>\n

The percentage of profit your restaurant makes on less expensive wines may be higher, but the actual dollar amount per bottle is lower than that which can be made from selling higher-priced wines at a standard per-bottle markup. If the average profit per bottle is falling in your outlet, it is an excellent indicator that the price structure of your wine list needs attention.<\/p>\n

I have seen the unit-cost-plus approach work its magic at many other restaurants. Owners or managers complain that their wine sales are abysmal, and it is clear that it is because customers perceive the wine list to be too expensive. Customers are not fools \u2013 they know the price of different wines in the retail market and react when they see excessive markups in restaurants.<\/p>\n

It always surprises me that restaurateurs can quote with precision the percentage return they get on wine sales, but can very seldom say how many dollars of profit they make on a bottle of wine sold. My daddy always taught me that you bank dollars – not percentages.<\/p>\n

\n

By Denis Horgan<\/strong><\/font>
\nDenis Horgan is Chairman of Leeuwin Estate (www.leeuwinestate.com.au<\/a>). Leeuwin Estate is represented exclusively in China by ASC Fine Wines (www.asc-wines.com<\/a>).<\/font><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

By Denis Horgan Several years ago, the area vice president of a major international hotel chain sought my advice with respect to problems at one of his company's major resort hotels. The hotel had been receiving a large number of complaints about the price of wine at its F&B outlets; the complaints were along the […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12723],"tags":[],"class_list":["post-33603","post","type-post","status-publish","format-standard","hentry","category-english"],"_links":{"self":[{"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/posts\/33603","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/comments?post=33603"}],"version-history":[{"count":0,"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/posts\/33603\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/media?parent=33603"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/categories?post=33603"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.chinahospitalitynews.com\/cn\/wp-json\/wp\/v2\/tags?post=33603"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}