Friday, June 24, 2011

L’eft Bank in Madison: from the Sugar River to the world – Part II of III

MadisonWineScene (MWS) recently interviewed Michael Paré, Wine Merchant with L’eft Bank Wine Company, 4918 Triangle Street, McFarland, WI about the wine business.

Founded in 1985 by Mark Johnston with his handy Ford Pinto and a few cases of Burgundy, L’eft Bank has grown to become the leading distributor of fine wines and spirits in Wisconsin. What’s with the apostrophe in the name? See for an explanation, and why a picture of newts leads off this posting.

A previous post discussed the wine importation/distribution business. This post will discuss wine sales to restaurants and retailers.

MWS: How do you get retailers/restaurants to carry a new wine producer?
Michael: With retailers, you take a sample bottle, you sample the wine, you talk about the features and benefits – a term from the Gallo playbook of selling -- why they should buy it, the profit they can make off the wine, their positioning of the wine price-point wise against their competitor down the street because you know your customer well enough to know how they are going to price things, exclusivity if there is an opportunity for that for a retailer. As a side note, exclusivity for a retailer is ok to some degree if you can hand-sell the wine to a customer face-to-face, but exclusivity will work against you if it is an inexpensive kind of commodity style wine where there is no brand recognition.

For restaurateurs when you show a wine, again same thing, you have to sample it, you have to talk about the features and the benefits, the aging and then often if you have it inexpensive enough they will want to know if they can pour it by the glass, or if they want to put it on the bottle list.  

There are different things to consider there, a wine that would retail for $15 or more is more likely to be on the bottle list than a wine that is less than $15 at retail. The next step is that often the restaurateurs will say “ok, do you have a better price for me because I know you are telling me that it will cost me $10, but do you have a better price if I pour it?” and then they are also going to ask if anybody else is pouring it, and if they are going to see it in grocery stores.

So if I went into L’Etoile with Bogle Cabernet they would say, “Well it’s at grocery stores so that is not going to work for us.”  If I go in with a new Cabernet which is $15, and they have a reputation that their client base can afford wines that are more expensive, they would say, “Is it at retail?” and I would say, “It’s new to us” or “Yes, but it is only at the independent retailers – Barriques, Steve’s, Riley’s, Star Liquor”. They would still ask for a better price if they poured it by the glass.

MWS: Why is that?
Michael: Retailers and restaurateurs are two different animals.  

Retailers are not as concerned about other people having it. Restaurateurs tend to not want to have something that’s at retail.

If you take a $10 wine at Steve’s for instance, and they sell it for $15. If I took the same wine to a restaurant and I said it is $10 they would say, “Ok for what are we going to pour this by the glass?”  They might say that they are going to pour it at $8 by the glass, so a little bit below their cost, and they will get four or five pours per bottle.  

The customer then looks at the bottle list price and they see the wine is $45 on the list, and they can go to Steve’s and buy it for $15, then they may not want to buy it because it looks like they are getting gouged. That’s why it is better for restaurants to not want to have something that’s at retail.

The reality is that retailers have a lot lower margin because they count on volume than restaurateurs who have a lower volume and a lot more to cover. A retailer may have three people working on any given day, a restaurateur could have 25. So a restaurateur does not want someone to come back and say I paid $45 for that bottle and I could have gone down the street and paid $15.

Also, as a restaurant you are looking at your costs and if you paid $10 for one bottle of wine and $25 for another, you are probably not going to make the same percent off each, because for the higher one you simply can’t charge that much, but you can maybe charge more on the cheaper one.

MWS: How much of L’eft Bank’s business is with restaurants as opposed to retailers?
Michael: Personally, I have 45 accounts, of which 10 are retailers and the rest are restaurants. In terms of sales about 60% restaurants and 40% retail.

MWS: Is there a difference between the wines sold to restaurants and wines sold to retailers?
Michael: There are some distributors that have some restaurant only wines. The whole idea is to go to a big hotel and say, “You need a banquet wine. Here is a Chardonnay for $3 and it is on-premise only”. And then you go to the hotel and put on a banquet and pay $25 for it. So there are places like that which have huge fixed costs to cover and so they want something like that.

Of course, if you go to any fine restaurant you are going to see a higher percentage of fine wines at those good restaurants because they are good wines. But the approach to wine is definitely different.

MWS: In what way?
Michael: In a fine dining restaurant the staff is trained to talk about the wines. In those restaurants there is a feeling of  -- I talked about the business model of discovering something and bringing it to the customer – when you have somebody say “We are serving you lamb from a farm that is 30 miles away, and we have been working with them, and it’s organic” – you are bringing them something special. They want to do the same thing with wine. They want to bring you something special – a wine from the southern Rhone valley that they just discovered and it’s only available at one other place in town. It gives people more reason to go to that restaurant – when they know they are going to have an unique experience with wine that they can’t get anywhere else.

With restaurants it is a little bit easier to anticipate what you should bring in as a wine rep. If you go in there and you see the same Cabernet by the glass, and you know that the restaurant turns their glass list over a lot, you know that at some point they are going to need to change that so you can kind of anticipate that. Some restaurants change it every month, or every week, even. I know a restaurant in Madison that does not change their regular wine list, but they have new features every single day. Other restaurants change their core lists a lot.

In Madison, with retailers, if you have a Cotes-du-Rhone that you can retail for under $15, you are probably going to sell it, unlike Chardonnay, Syrah and Petite Sirah which are harder to move. The retailer has to figure out what is the hot area, what is moving – Malbecs are great – you can sell a Malbec regardless of what it tastes like almost, it seems.

MWS: What is the business purpose of wine tasting dinners at restaurants?
Michael: If you go to a wine dinner and you have a sales rep that lives two blocks from there talking about the wines, there is nothing magical about that. If you have the winery owner from Italy standing in front of you telling you about when his dad planted the vines, or his grandfather built the winery – it is more romantic.

MWS: But does it result in more wine sales?
Michael: Sometimes.

It really depends upon the restaurant and the skill of the restaurant.

Also, it is like in-store wine tastings – if you are tasting wines like Barberas and Dolcettos – those are everyday wines but Barbarescos and Barolos are much more expensive, so to be able to taste before you buy, and if you are a wine collector, tasting Barbarescos and Barolos before you buy is a really good thing. Because if you pay $50 for this bottle of wine and you are supposed to wait 10 years before you can drink it, the risk is huge.

The next post will discuss trends in wines.

1 comment:

  1. I love wine. After tasting some good wines, I decided to drink wines instead of alcoholic drinks. I wish to taste those expensive wines that taste good in the future.