Posted on | August 24, 2015
Written by | Jeff Siegel
Savvy California suppliers are getting creative to score vital restaurant traffic.
Saltgrass Steak House, with more than four dozen locations in five states, has never been much of a wine destination, sitting as it does somewhere between casual and fine dining.
“We still have quite a few guests who don’t want to buy $150 wines,” says Brian Webb, Corporate Beverage Manager for Saltgrass parent Landry’s. In this, he says, Saltgrass customers want to see brands on the list that they’re familiar with, but that haven’t been too exposed in the on-premise market.
How can restaurants do this, yet still boost wine sales? Simple: executives like Webb are working with well-known California producers and using wines either made and promoted for on-premise, or wines that usually don’t get a lot of retail exposure.
These wines differ from traditional restaurant private labels because there’s an actual winery behind them, just not a name on a label—what Christopher Silva, President of St. Francis Winery calls “brand equity.”
Looking for Results
So far, the results have been impressive—Saltgrass sold 1,200 cases of Rodney Strong’s Symmetry red blend in 3½ months during a promotion earlier this year. Meanwhile, Hess unoaked “Shirtail Creek” Chardonnay, an on-premise-focused brand, has been the No. 1 white wine by the glass at the 23 locations of The Palm for four years. And St. Francis annually sells out most of its restaurant Reserve line.
Given how the recession smacked the restaurant wine business badly, and that the recovery hasn’t much lessened the pain, boosting beverage revenue is crucial. Americans are still eating fewer meals out, according to several surveys, and even those who are eating out are buying less wine. The share of wine that consumers buy in restaurants, compared to what they buy off-premise, has fallen by some 10% since the start of the recession, according to figures compiled by Beverage Information Group. In 2014, restaurants accounted for 42.2% of all wine sales as measured in dollars, down from 47%
Meanwhile, restaurant wine prices are rising—one study said it’s increasingly difficult to find wine by the glass for less than $10—but not even higher prices have helped restaurants hold on to market share.
Throw in the quandary facing sommeliers and beverage directors, who must decide whether to go “new and different” with wine lists to fight consumer fatigue at the risk of confusing their customers, or to stick with familiar wines and run the risk of offending diners tired of paying $35 for a wine that they know costs $10 at the corner retailer.
Enter on-premise-focused brands.
“It always helps on-premise to have something that’s not in the normal marketplace,” says Angelica Sbai, The Palm’s National Director of Wine and Spirits. “And when you can find a label from someone like Hess, which has a good reputation and good exposure, but isn’t overexposed, that plays really well with our demographic.”
Is it any wonder that multi-hundred-thousand case wine companies like Hess, Rodney Strong and St. Francis have invested in these wines? Or that E&J Gallo recently adjusted their William Hill portfolio to separate the on-premise glass-pour stars from off-premise bottlings. These on-premise brands, say marketers and restaurant executives, offer a variety of advantages:
**Competitive pricing. St. Francis Reserves—a Cabernet Sauvignon, Merlot, and Zinfandel—are made to sell around $100 a bottle on-premise, filling a niche that Silva says restaurateurs have been asking for. Says Silva: “That’s the price customers will pay if they recognize the producer, and they will embrace it if they like the wine.” The Hess Shirtail is made to sell for about $10 a glass, hitting another restaurant customer sweet spot.
**Wines that reflect current trends. Rodney Strong Symmetry is part of one of the fastest-growing segments in the wine business, but isn’t seen as one of the grocery store wines that make up much of the red blend surge. “It’s a recognized label, and it’s sold at a good price off-premise,” says Webb. “Our guests see it as not the most expensive, but not the cheapest either”—something that’s crucial in helping customers parse wine lists. Saltgrass marked the Symmetry up two times, and sold so much by both the glass and bottle that Webb was afraid the chain would run out before the promotion ended (which didn’t happen).
**An entree for the winery’s other wines. Once sommeliers and beverage directors see how well the on-premise labels work, say winery officials, they’re more amenable to looking at the producer’s other wines. And, says Dan Wildermuth, Rodney Strong’s Vice President of Marketing, those wines can help restaurant’s fill holes on their lists, especially at national chains that take a more formulaic approach to creating lists.
**Brand equity. A story. A sense of place. Most private labels feature cute names for the consumer, and high margins for the restaurant, but not much else. A winery-based label, though, gives the wine credibility with customers, says Sbai. Waitstaff can tell them where it’s made, and the customer can even visit the winery.
“If I’m an operator, one of the biggest problems I face is whether my customers are going into a retailer, seeing the cost per bottle, and then looking at my wine list and are worried about getting ripped off,” says wine marketer Mark Gnur. “These labels help solve that problem, and a brand like Hess helps to sell the wine because customers know the label. So you get the best of both worlds with winery-labeled on-premise
And a better bottom line. Webb says using on-premise labels has encouraged Saltgrass customers to trade up, and sales for the entry level wines on the list have declined for four years in a row— more than made up by sales of what he calls more innovative wines on the list’s second tier. Sbai agrees, after seeing that her customers like the Shirtail so well, and at $10 a glass, that they’re more likely to buy a second glass.
“I think you’re going to see more and more of these kinds of wines,” she says. “There’s always been a disconnect with traditional, because the producer will move a lot of the labels to off-premise as soon as they become successful. But by doing this with with our core winery partners, there is credibility.”