The bottom line: Tips from the off-trade

0
Drinks: Drinks
Other: Business

Get the commercial side of your wine offering right, and you could save your business thousands of pounds every year. Angela Mount tells you how to max your merchants


Running a restaurant or bar is a busy business; just like off-trade retailing (which I did in my previous life), pressure is high and time is short. No surprise, perhaps, that it’s temptingly easy to look at the quick fix, or turn to a supplier who can support and do some of the work for you.

The pressures and responsibilities of running an independent restaurant, and managing the list within an on-trade buying group, are very different, however. The big on-trade groups such as Mitchells & Butlers and Whitbread, and regional pub groups such as St Austell and Robinsons, have highly trained buyers at the helm, to wield buying power and adopt a category buying strategy. This not only maximises the wine list options, but ensures best costs and the optimum logistical solutions.

But if you’re an independent restaurant, or part of a very small independent group, then that’s a lot harder to do. It’s easy to start to rely on key suppliers who, in many cases, will make life easier and provide all the solutions. Moreover, cost savings in terms of pricing and logistics may not be high on the list of priorities for sommeliers who don’t own their restaurant and, therefore, don’t have any direct financial tie-in with the costs of the wine list. Similarly, for restaurants without expert wine staff, a certain reliance is inevitably placed in the hands of the supplier.

Lack of training
Classic training has always focused on the product – knowledge of which is needed by sommeliers and front of house, and both the UK Sommelier Association and the Wine & Spirit Education Trust courses focus largely on product and provenance.

But one glaring and gaping void seems to be the relative lack of commercial training provided, as WSET chief executive Ian Harris admits: ‘We don’t include commercial training until Diploma level. We do run a specific Business and Commercial Knowledge three-day course once a year, but we get very few on-trade salespeople or buyers.’

Off-trade sales teams are trained up to the hilt, as are buyers, but with the exception of companies such as Hatch Mansfield, which sends its on-trade sales teams on this course, few on-trade people seem to engage with the commercial side of the business. Perhaps rapid personnel churn has something to do with it.

Gergely Barsi Szabó, sommelier at Bread Street Kitchen in London, is candid. ‘There isn’t enough commercial training for sommeliers and restaurant managers,’ he says. ‘There is still a gap in terms of commercial skills acumen. We need to play our role better, not just in how we deal with customers and their needs, but how we manage our suppliers.’

Restaurant managers and sommeliers are very busy people, but if they have responsibility for the purchasing, ordering and stock management of the list, then there is a great deal that can be learnt
from the off-trade.

‘Think more like a buyer,’ says Tom Wallis, sales director UK and Ireland for Accolade Wines. ‘Cash is king. Negotiate. Tender. Look at payment terms – extended credit, minimum delivery levels, timing of orders – to maximise terms of credit. Don’t be afraid to ask for promotional retros or tasting stock when you’re featuring a key wine. If a wine’s not selling, and it’s a current vintage, negotiate with the supplier to have it picked
up and replaced.’

Neil Bruce, now head of wine at Fuller’s, previously implemented this strategy of minimising cost successfully for the Carluccio’s group. Now, more individual restaurants are following this approach, including Allium restaurant in Bath. ‘With a more detailed focus on negotiations, more awareness of market pricing, credit terms, stockholding, and the development of stronger working partnerships with a small selection of suppliers, we have created a list that offers innovation yet security, guides customers easily through choices, and has taken considerable cost out of the equation,’ says Andrew Foulkes, the restaurant’s GM. ‘This has enabled us to offer better value to our guests. We have applied this buying strategy to our beer offer with similar success.’

maximise profits big

Supplier relationships
The supply base is a key area where restaurants can reap real benefits, especially during the current period of both range and supplier rationalisation. Depending on the type of restaurant, the supply base can range from sole supply to more than 50 suppliers. The happy medium is somewhere between the two. Trading relationships will obviously differ depending on where the negotiation and buying decisions are made, and by whom.

‘For most restaurants, I would recommend at least two suppliers,’ says David Gleave MW, MD of Liberty Wines. ‘This enforces a competitive environment on the suppliers, and gives the restaurants the chance to taste two wines – especially for house and generic wines – for each slot, to ensure they get the best quality, but also price, for the wines.’

Andrew Bewes, managing director of Hallgarten – Sommelier Wine Awards Speciality Merchant of the Year 2016 – agrees that competition is healthy. ‘You don’t have any buying muscle if you use 50-plus suppliers,’ he says. ‘How can you negotiate better terms if you’re only buying a tiny selection from myriad suppliers? This also impacts on buying terms, minimum orders and stockholding.’

One thing’s for sure: with increasing consolidation in the on-trade distributors and their sales teams being under increasing pressure to retain and grow their listings, this can work to the benefit of outlets.

‘Gone are the days when a rep could come in, show a few bottles and get a sale,’ says Ian Waddington, until recently group wine buying director for Gordon Ramsay Holdings. ‘Now, it’s about tendering, getting the best value and building the supplier relationship to work together to sell through.’

This is a view echoed by Wallis. ‘In the past, it was all about relationships, tradition and the easy route; now, the market is far more competitive and we all have to fight far harder. Off-trade buyers and on-trade group buyers are commercially savvy; they’re not complacent, they’re on the ball in terms of securing the best supplier relationships at all levels, and restaurant owners and managers can certainly learn from that.’

Premium casual dining is growing, and the opportunity for increased sales and profit is there. But to make the most of it, the gatekeepers to the on-trade universe need to sharpen up their commercial thinking.


FIVE TOP TIPS TO SAVE YOU THOUSANDS

RESEARCH
‘Find points of difference…’

Find out what your closely-located competitors are doing, how their lists are comprised, how they are set out, who they work with and, most importantly, where their pricing sits. This helps you remain competitive, find points of difference and keep ahead. Put pressure on your suppliers to deliver this information to you. If they want your business, then they need to give you a compelling argument to stock their wines, which includes covering all of the above.

maximise profitsBENCHMARK AND NEGOTIATE
‘Renegotiate pricing of your key wines every year…’

Never accept what an account manager tells you, however strong the relationship. Challenge them. Renegotiate pricing of champagne, prosecco, house wines and generics once a year. Tender this business out to three suppliers, giving you greater scope on the options, both in terms of quality and ensuring best price.

Pick the best wine. Then compare prices. Then negotiate. For an independent restaurant, this could save you several thousand pounds a year on these lines alone. These are the ‘bread and butter’ wines, and they need to work hard for you. It also keeps suppliers on their toes, as they know you are in control. Wines by the glass are an added piece of ammunition to the arsenal of negotiation tactics. Ask suppliers to work with you to support – and invest in – more unusual and ‘trade-up’ wines, maybe on a lower cash margin to encourage trial. And consider using higher cash margins for the ‘must-haves’ such as Pinot Grigio and Sauvignon Blanc.

PROMOTIONS AND SUPPLIER SUPPORT
‘If a wine’s not selling, swap it…’

Once the supplier base has been established, it’s all about partnerships and working to maximise sales. The first sale is the easy one; the regular pattern is the challenge to establish repeat purchase. And this is where good account managers come into their own, engaging with you, supporting you and helping you work those sales.

If a wine’s not selling, swap it and ask the supplier to take the stock back. Most importantly, work out a promotional plan. If you focus on a couple of key wines as the lead in a monthly campaign, ask for discount. Ask for support, be it a discounted price, or free stock.

It should be a similar situation with staff training and incentives – if your supplier wants to train your team,
to engage and encourage them to focus on selling their wine, then give the staff a reason to do so. Engaging the supplier in a staff incentive plan, be it a reward of a bottle of wine or a trip to Champagne is a guaranteed way to focus staff attention.

maximise profitsLOGISTICS/COST MANAGEMENT
‘Don’t tie up cash in stock that isn’t selling…’

How many sommeliers really think about payment terms and cost of stockholding? Of course, it depends where the responsibility for cost management lies, but I would hazard a guess that there is frequently a lack of cohesion between the accounts team and the wine team. Having a broad portfolio of wines is important; however, having cash tied up in stock that isn’t selling, and is ageing slowly but surely, is not such a good thing (unless you’ve bought young classics specifically with a view to age). The key is to balance the enthusiasm for a wine, with the practical logistics of marketing and selling it.

Similarly, maximising credit terms is important, so careful planning of order placing, based on when invoices are issued, can really make a difference here. Low minimum order agreements are also crucial.

SUPPLY BASE
‘Consolidation brings benefits…’

maximise profitsHistorically, restaurants have prided themselves on the vast array of suppliers with which they deal. But why? In today’s market it doesn’t really make any sense. A scattergun approach to ranging is certainly not going to bring the best cost prices, or level of marketing support.

A key reason for a broad base of suppliers has, traditionally, been because of differentiation and points of difference. But take the top 20 on-trade distributors today, and they all have a wealth of collateral, with a broad range of unique, top-quality wines, at every price point.

Consolidation brings benefits; namely, improved cost prices, and stronger supplier relations. Buying more from fewer not only helps cost prices but also helps with minimum orders, increased support and less admin. The supplier/buyer relationship in the on-trade is changing and an increased pattern of collaboration and partnership is developing.

About Author

Angela Mount

Angela Mount is the former head of wine-buying for Somerfield supermarkets and now works as a writer and consultant for restaurants, hotels and independent retailers.

Leave A Reply