It’s not just the quality of our grapes and wines that sets the California wine industry apart from the rest of the country (and world). Success in this market takes innovation – Ernest and Julio Gallo, for example, pioneered TV advertising and brand management. Bronco Wine CEO Fred Franzia (Ernest’s nephew) took things to a whole other level with Los Angeles-based grocer Trader Joe’s infamous Two-Buck Chuck, a brand of Cali wine selling for only $1.99.
Restaurant wine pricing has traditionally been astronomical, with $10 bottles selling for $30 or more in a restaurant. With alcohol driving profits for many restaurants, what’s the best pricing strategy to optimize wine sales?
- Lower Prices
The math here is simple – if everyone around you is selling wine for 200 percent markups, you can easily undercut the competition while still raking in high profits. We’re no longer living in an analog society where wine knowledge is restricted to the wealthy. Everyone has access to wine, and everyone from Buzzfeed to Food & Wine Magazine curates lists of cheap wines that taste great.
By undercutting your competition, you’ll draw more wine connoisseurs who will frequent your business for the affordable Wine Wednesdays and other gatherings. Wine is a social event, and with enough volume, lower margins will drive much more long-term profit.
- Bundle Add-ons
Wine is perceived as an add-on, but so is bacon. That doesn’t mean both can’t stand on their own and support add-ons. In fact, I’d argue the bacon sells the burger, something San Francisco sommelier Allegra Angelo understood when she opened her Bottlecoat pop-up. She offers her customers $9-$14 bottles of wine while they enjoy a mani-pedi and snacks.
Understanding wine pairings and building a menu from the wine list gives you a different perspective to attack pricing strategy from. With wine as your base, you can drive higher revenues for items like bread, cheese, fruit, and other appetizers you may have otherwise ignored.
- Stay Authentic
It can be tempting to sell bootleg or counterfeit wines, and there are so many ways to do it. Few people in a restaurant environment will take the time it takes to do a proper forensic test on the QR Code, registration number, bottle thickness, and other telltale signs of a counterfeit bottle. Expert wine detectives like Philip Moulin do what they can, but it’s up to us as an industry to set higher standards of ethics.
Honesty and transparency helps a lot in business; solid fundamentals are the only way to attract Millennials to your brand. Authenticity means everything these days, and it’s not something you can cut corners to achieve. When you stand behind your products, so will the community around you.
Pricing is a bit more complicated than basic supply and demand. Wine prices in both retail and restaurant environments have been historically high, but that trend is changing. Younger generations know how to research and use the Internet to find the best values of quality wine. Focus your brick-and-mortar efforts on creating a destination experience.