Latest / Restaurant Business with Fexingo: Food Service, Hospitality, and Independent Operators / How Restaurant Wine Lists Are Becoming More Profitable
Transcript
- Lucas: So Luna, I was reading the latest issue of a trade magazine over the weekend, and one number jumped out at me. The average wine markup in independent restaurants has dropped from the traditional three times cost to about two and a half times cost over the last five years. And you'd think that would squeeze margins, right? Luna: That's the assumption, yeah. Lower markup means less money per bottle. But you're implying that's not what's happening. Lucas: Exactly. In fact, for a lot of operators, wine margins are actually going up. And the reason is counterintuitive. When you drop the markup, you sell a lot more wine. And you also shift the mix toward higher-margin items like by-the-glass pours and house wines. Luna: So the old 'three times cost' rule is dead, and the new math is about volume and mix. Can you give me a concrete example? Lucas: Sure. Take a typical bistro. They buy a Bordeaux for twenty bucks wholesale. Old rule: price it at sixty. New approach: price it at fifty, maybe even forty-five. They're making ten to fifteen dollars less per bottle, but they sell three times as many bottles because the price feels fair to the guest. Luna: And those guests are also more likely to order a second bottle or upgrade from the glass pour. It's a classic volume play. Lucas: Right. But there's another layer. The real profit driver is the by-the-glass program. A glass of wine that costs the restaurant four dollars can be sold for twelve or fourteen. That's a seventy percent gross margin, way higher than any bottle sale. Luna: And you can't pour a glass from a bottle that's been open too long, so there's a waste factor. But a well-designed glass list moves inventory fast. Lucas: That's where the 'premium house pour' comes in. Instead of offering one cheap house red and one cheap house white, some operators are now pouring a slightly better wine as the house pour and charging a bit more for it. The guest perceives more value, and the restaurant still clears a healthy margin. Luna: So it's not just about cutting the markup across the board. It's about being strategic about where you take the margin hit and where you make it up. Lucas: Exactly. And the other big shift is the length of the wine list. The old model was a fifty-page binder with hundreds of labels. The new model is a curated list of maybe twenty to thirty wines. Luna: Shorter list, less inventory, less money tied up in the cellar. And it's easier for the staff to learn and sell. Lucas: And it reduces choice overload, which actually increases sales. A guest is more likely to pick a wine from a focused list than to get overwhelmed and just order a beer. Luna: That's a really good point. The psychology of choice is huge in hospitality. I've seen studies that say too many options can cause decision paralysis. Lucas: Yeah, and so smart operators are using a 'hero wine' strategy. They pick one white and one red that they really believe in, put them at the top of the list, and train the staff to suggest them. Those two wines can account for a huge chunk of by-the-glass sales. Luna: And the staff training piece is critical. I remember talking to a sommelier who said the best-selling wine is the one the server can describe in one sentence. Lucas: Right, like 'this is a zesty Italian white with a hint of green apple' — that's all you need. And that's why a lot of independents are moving away from varietal labels and toward story-driven descriptions. Luna: I've also noticed that natural wine is becoming a bigger part of the conversation. Does that play into the margin story? Lucas: It does, but not always in the way people expect. Natural wines are often more expensive to source and can be more fragile in storage, but they command a premium on the list. A bottle that costs the restaurant eighteen dollars might go for fifty-five or sixty because it's perceived as artisanal and exclusive. Luna: So the markup on natural wine can actually be higher, because the customer is buying the story, not just the liquid. Lucas: Exactly. And that's why you're seeing small producers and unique imports featured prominently on curated lists. It differentiates the restaurant and justifies a higher price point. Luna: But doesn't that put pressure on the restaurant to actually deliver a great experience? If you're charging sixty dollars for a bottle of natural wine, the guest expects it to be special. Lucas: Absolutely. And that's where service comes in. A knowledgeable server who can explain why this particular wine is worth the price — that's what turns a one-time guest into a regular. Luna: So what's the bottom line for an independent operator listening right now? If they're still using the old three-times markup, should they just slash prices tomorrow? Lucas: Not necessarily. The key is to understand your own guest base and your cost structure. A fine-dining spot with a deep cellar might still use a three-times markup on rare bottles, because the scarcity justifies it. But for a neighborhood bistro, a more accessible markup is probably going to move more wine and build loyalty. Luna: So it's not a one-size-fits-all. It's about finding the sweet spot between price and volume that works for your specific concept. Lucas: Right. And one more thing: don't forget the by-the-glass pour size. Some operators are moving to a five-ounce pour instead of six, and pricing it the same. That's a subtle way to increase margin without the guest noticing the difference. Luna: That's a classic hospitality trick, and it works if the glassware and the service are done right. Nobody complains about a slightly smaller pour if it's from a great bottle and served with confidence. Lucas: Exactly. And that's where the data comes in. A lot of modern point of sale systems can track which wines are selling, how much is being wasted, and what the actual pour cost is. With that information, you can adjust your list and your pricing in real time. Luna: So it's a blend of art and science. The art is curating a list that tells a story. The science is using the numbers to make sure that story is profitable. Lucas: And that's a nice segue to something I want to mention. If today's conversation actually gave you a useful framework for thinking about your own wine program, the way we keep these shows ad-free is through listener support. If you've ever gotten a practical idea from this podcast that moved your work forward, you can buy us a coffee at buy me a coffee dot com slash fexingo. It's a small way to keep the conversation going. Luna: Yeah, and it genuinely makes a difference. Every bit of support helps us keep digging into these topics. Lucas: So back to the data angle. I was talking to a restaurant owner in Chicago last month, and he told me that after he switched to a curated list and adjusted his by-the-glass pours, his wine sales went up twenty-two percent in a quarter, and his pour cost actually went down. Luna: That's a great real-world example. And it shows that the strategy isn't just theoretical. It works in the field. Lucas: And the best part is, it's not something that requires a huge investment. You don't need to renovate your bar or hire a sommelier. You just need to be willing to rethink your wine list and your pricing strategy. Luna: So for an independent operator who's been doing the same thing for years, what's the first step they should take tomorrow morning? Lucas: Pull your sales data and identify your top five selling wines. Look at what you're actually making on each one. Then pick one wine that you think is underperforming and try a small price reduction — maybe ten percent — and see what happens to sales over the next month. Luna: That's a low-risk experiment. And if it works, you can expand it to other wines on the list. Lucas: Exactly. The key is to start small and measure. And remember, the goal isn't to give away profit — it's to optimize the balance between price and volume so that you're making more money overall. Luna: I think that's a great takeaway. Wine can be a real profit center if you're smart about it. Lucas: Yeah, and in a world where food costs keep climbing, having a beverage program that actually contributes to the bottom line is more important than ever.