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A new approach to pricing and pouring wine

As promised in the wake of the December budget that added €1 to the government duty on wine, we spent January dismantling not only our wine list but our approach to buying and selling wine. A lot of time was spent on analysing wine sales over the past couple of years, and a lot more on thinking about just exactly what it is that people want from a wine list.

The second question led us to this conclusion: a useful list isn’t about size or length; it’s more important that it offers a wide choice of wine styles that work well with the food; and it should allow the customer access to the entire list even if they don’t feel like drinking a whole bottle. More wines by the glass?…why not all wines by the glass?…why not all wines in more measures than glass and bottle?

So we installed a system that keeps opened bottles in perfect condition. Then we changed the measures on offer to these – a medium sized glass of 150ml, a little “quartino” carafe of 250ml, the classic “mezza” half-litre, and of course the full 750ml bottle. Next, we re-wrote the list to offer every wine in all of these sizes.

Wines at Cafe Paradiso. Photo: Jörg Köster

Along the way, we looked hard at every wine on the old list, dumped (or drank) a few monsters that were hanging around doing nothing and got in some very exciting new stars. There’s a link to the new list below, but please read on for a few minutes more, there’s even better news…

Back to the thing that first kicked off the process – government duties, taxes, and the cost of wine. It’s irrelevant now whether the duty increase was justified or not, the issue for us is about what happens after that. The classic system of pricing wine is to multiply the cost price, and that involves multiplying all the duty and the tax on that duty. As duty and taxes go up and up, this is looking like an archaic method. Also, on paper at least, the higher cost wines are multiplied into very high selling prices, making them very profitable indeed. Except that in recent years they mostly just sat there on the rack. The ‘profit’ was largely notional.

As is usual with statistics, we learned what we already instinctively knew – that the vast majority of our wine sales have been in the ‘by the glass’ and ‘wine of the month’ price range or just above. Most of those bottles have been giving us roughly the same actual margin, and the occasional sale of higher priced bottles with on-paper bigger margins makes little real difference to our turnover or profit.

The sensible conclusion is this: applying the real margin that we previously made on lower priced wines to ALL wines will make a huge change to the accessibility of the entire list, while changing very little about our how much we make on wine sales.

As of now and going forward, we won’t be multiplying anything, instead simply adding a flat sum to the cost of every bottle, whether that cost be €10 or €50. The result will be locked-down value on all of our wines, and seriously good value the higher up the wine chain you drink.

This isn’t an act of charity. Rather, it is a realisation that blindly using the standard system doesn’t serve us – or you – well any more. It may even be that by removing two of the barriers that make people nervous of straying up the wine list, i.e. the scary margins and bottle-only pricing, we may very well sell more wine.

Most importantly, we’re going to enjoy having an entire list of wines that we love open for you. Have fun with it.

As promised, here’s the new list, new prices, new measures.

Posted on: 25 January 2013

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