On-trade: putting up wine prices good for business

Published: 20 May, 2011

There's a simple way to make more profit in the on-trade ? a Wine Intelligence experiment showed putting up prices can add £46,000 more annual profit.

Consumers aren't calculators, and many wine drinkers equate high prices with high quality and are willing to pay more in on trade ? according to the WI survey.

Speaking at a seminar at the London Interational Wine Fair, WI revealed the results of an experiment in which a sample of regular wine consumers was divided into three groups and given three wine lists for a theoretical small restaurant.

Although all the wines were the same, one group was given a version of the list with a 66% margin applied to the wines. The second group received a list with a £5 or £10 cash margin applied, and a third group was given a list with a 72% mark-up on all wines. The same Pinot Grigio on the list was priced at £10.20, £12.50 or £15.70.

WI researcher Juan Park said that different consumers responded to the lists in different ways but overall "in our virtual restaurant model, the third list made £46,000 more profit over a year for operators, without squeezing suppliers". He added: "Consumers are not calculators, sometimes they aren't rational. They are guessing a wine's quality based on price, and are willing to pay extra for this."

But Park stressed that applying higher percentage margins won't work in all outlets and said the on-trade needs to work harder to make wine an engaging experience for consumers. The briefing focused on lost opportunities for sale and profit due to lack of visibility, lack of passion, knowledge and guidance from staff and disappointing wines.

Joan Torrents, Mitchells & Butlers wine purchasing manager, said part of delivering the 'wine experience' for customers involved making them aware that wine is an agricultural product.

"We had English sparkling wine in over Easter, and it worked very well, but the reality was that we couldn't get enough for what we needed. That could be a bad thing, but by explaining to customers that we could only get two cases per outlet (because of limited production) made them feel they were getting something a bit more special."

Wine Intelligence has found that of the UK's 28 million regular wine drinkers, 16 million visit pubs and bars regularly but of those 16 million, 6 million choose not to drink wine in these settings, often because the range, quality and service is perceived as poor.

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