Sunday, January 30, 2011

Wine Stock Management for Restaurants

David Kesmodel's article, Snooty? Not Today's Wine Drinkers, in the January 20th Wall Street Journal studies the new trends in the wine market.

A few of the findings I found interesting point to continued strong wine sales. The big shift down is in the price per bottle.

After trading down in the recession, many consumers are staying with lower-priced wines. The fastest-growing segment is $9-$12 a bottle.

Mid-priced bottles are the life of the party. Last year, unit sales of wines priced at $9 to $12 a bottle rose 12% in food, drug, convenience and other stores, a faster growth rate than in other price segments, according to market-research firm Nielsen Co.

Jordan Vineyard & Winery, whose wines are often found at high-end steakhouses, enjoyed a 5.5% increase in overall sales last year, and projects an increase of 6% to 7% this year, according to Chief Executive John Jordan. The Healdsburg, Calif., vintner's wines retail for between $28 and $55, and run anywhere from $65 to $125 per bottle in restaurants.

For most restaurants, this could produce much lower beverage cost % since the mark up on higher priced bottles is often lower than the popular house options. Of course, the gross profit per bottle will trend lower. This shift may allow some restaurants to end the practice of acquiring legacy wines just to remain on a list. As the value of the wine inventory drops, the turnover will improve.

If you have a large inventory of aging wine in the $100 per bottle range, you may want to take a write down. The accounting principle of lower of cost or market provides the justification for the write down. Cut the expensive wine inventory valuation by half and you may get a tax benefit in 2011.

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