Restaurant Wine’s New Revenue Stream

A desperate pandemic measure has helped many restaurants stay afloat and opened a new way to sell wine.

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| Being able to sell drinks to passers-by during the pandemic was a lifeline for many restaurants.

During the great restaurant shutdown of 2020, smart operators looked to innovative ways to earn more money and stay in contact with their customer base. Many of them started selling wine to go, both by the glass and the bottle (BTG and BTB). It not only let them keep tabs on loyal customers, but it also helped them make new ones.

Stopping by your neighborhood haunt for a glass of wine on the street and a quick catchup was as much of a lifesaver for wine-loving consumers in lockdown as it was for restaurant owners. It is a profit stream that many in the hospitality business made good use of and most of them hope it will stay part of the long-term, bottom-line picture.

“When you’re a restaurant and the government tells you to close your doors, it’s all about survival and adaptation,” shares Rob McMillan, the founder and executive vice president of the Napa-based Silicon Valley Bank Wine Division. He notes that while all kinds of options were long offered for food pick-up and delivery, “if a customer wanted an alcoholic beverage with dinner, they had to go somewhere else to get that [prior to the wine to-go sales frenzy that ensured during the pandemic]”.

According to the August 2021, mid-year State of the Restaurant Industry Update from the Chicago-based National Restaurant Association (NRA): “When the pandemic temporarily shuttered dining rooms in 2020, more than 35 states issued emergency orders allowing to-go sales of cocktails and other alcoholic beverages – an important lifeline for struggling restaurants. At its pandemic high point, 39 states permitted cocktails-to-go in some way.”

According to the Distilled Spirits Council of the United States (DISCUS), 15 states have permanently allowed sales of cocktails to go, while 25 allowed the sales as a temporary measure. DISCUS did not respond to multiple requests about if the same states permitted sales of wine to go. The state-by-state rules vary widely but it is highly likely that wine sales were permitted in those states.

“In states where alcohol-to-go is legal, 89 percent of operators who can serve alcohol are selling it. The high-margin drinks are boosting the bottom line for many operators,” according to the NRA report.

The opportunity to sell wines in various size formats to go has been a boon for so many operators over the challenging past two years. The extra sales tool has been welcomed. “Especially after wine dinners and tastings. Our customers enjoy the ability to take a little of the event home,” shares to Marc Borel, the beverage director of the Rainbow Lodge Restaurant, a seafood and wild game restaurant in Houston. He adds that his restaurant will continue to do so for as long as they can.

Marketing the product

Restaurant wine collections had a tangible value for mostly closed operators over the past years. “Restaurants were sitting on wine inventory. Opening restaurants up to the direct sale of bottles of wine converted a non-earning asset to cash. That was one more path to getting through the lockdowns,” points out McMillan.

Most restaurants set up to-go windows on the street to catch the attention of passers-by. “We made displays in the windows on tables inside the restaurant and did transactions on the street until we set up our online ordering,” shared Leslie Newsam, the co-owner the Antler Room restaurant in Kansas City.

Some also marketed wines to go with their delivery and pick-up orders. Matthew Pridgen, the wine director and general manager of the Underbelly Hospitality, a group that has several restaurant concepts in Houston, adds that the group’s entire cellar was up for sale. He concludes that it “was great to able to connect with some of our regulars and discuss wine and put together mixed cases for them during the pandemic”.

Different margins

One of the big benefits of selling wine to go was that profits were higher on it than via traditional sales models: as no expensive – and breakable – stemware was needed. With wine BTB sales profit margins were even higher as there was “no labor involved”, according to Laurie Thomas, the executive director of the San Francisco-based Golden Gate Restaurant Association, which has more than 800 members.

These margins were evident for restaurants even as they offered significant discounts on bottles sold to go. “We discounted the bottles slightly, if taken unopen, to go,” confirms Borel.

Sadly, the GGRA’s Thomas notes that these sales are no longer permitted by law in California. Despite that setback she hopes that past years’ investment in the practice will create, and broaden, restaurants’ customer base.

Some restaurants choose to discount their wines to go even more drastically, at the Antler Room, Newsam sold the wines at retail prices (or less). She adds that in 2020 to the wine to-go sales accounted for close to 30 percent of sales in the beginning, while now it might only be 1 percent.

Borel saw similar figures in Texas, as the percentage of wine sales as a source of total revenue for restaurants that were open – or at half-mast – during the pandemic also grew. During the pandemic wine BTG sales to go accounted for easily 30 percent of total wine sales at his Houston restaurant, according Borel.

Slimmed down lists

Some restaurants used wine sales BTB as a way to edit down their library and big bottle selection. Most restaurants I have interviewed over the past two years have said that the pandemic gave them an excuse to trim down BTG and BTB offerings to be more streamlined with wine service when they reopened.

“It was at first an attempt to clean out and make money and ended up being an opportunity to decrease the wine list size,” says Newsam. She adds that she has “reduced the size of the list as well as the overall average prices of bottles have gone down. There are definitely fewer older wines as I sold so many of them off during those months.” She now jokes that “everything is for sale”.

New consumers and horizons

No doubt I was one of many who were happy to find libations to go on the streets of San Francisco over the course of the pandemic. Clearly some busy bars, with younger clientele, picked up plenty of new customers.

The more established locations thought that much of the wine-sales to go was sold to regular customers. “Most of our customers were already dine-in customers,” confirmed Borel.

The ability to purchase wine to go also created a new – somewhat tenuous – sense of normalcy for customers. “Drinks to go helped customers regain some semblance of their normal lives and support their favorite restaurants that were facing [and continue to face] incredible challenges,” notes Andrew Rigie, the executive director of the NYC Hospitality Alliance, a non-profit association that represents more than 800 New York City on-premise establishments.

Restaurants that have seen what these sales have done for their bottom line in the past, are keen to continue with them. Newsam says she honestly never thought of selling wine to go before the shutdown but now thinks that restaurants can better complete with alcohol delivery services like Drizly, “with better options”.

What is more, “restaurants have shown they can deliver a complete dining service that includes alcohol and even with complaints from all the usual corners, did so without evidence of any negative social impact”, concludes McMillan.

“Some argue that delivery of alcohol at home is even more likely to reduce drunk driving,” he sums up.

So more than one positive thing came out of the restaurant world during the pandemic after all.

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