As September storms scupper hopes of an Indian summer, so the on trade has started gearing up for winter wine sales and the run up to Christmas. The spectre of the credit crunch has caused much hand-wringing and a great deal of moaning, but to what extent will it actually affect sales at this traditionally busy time of year?
The on trade, especially at the smaller end of the spectrum, runs on very tight margins and so is particularly sensitive to economic dips. If credit-crunched wine drinkers start spending less, it is the small establishments which will feel it first. I know of two small restaurateurs who have recently thrown in the towel rather than battle against ever diminishing monthly profits. Larger players are by no means immune either, as seen earlier in the year when the Massive Pub Company put the majority of its 46 sites into administration and eventually sold them to Innventive Pubs & Restaurants. They cited tough trading conditions, commenting “in the current conditions a five per cent decline on the top line becomes disastrous at the bottom line.”
Two other elephants in the room have added fuel to the financial flames, namely this year’s Budget and exchange rate uncertainty. In March Alistair Darling raised duty on still wine by a record 14p per bottle (to a total of £1.46 per bottle), making British drinkers the most heavily taxed in the EU. As duty is a per-bottle charge rather than a percentage, it makes up a greater proportion of the cost of cheaper wines, which has always seemed to me rather unfair as it penalises drinkers of less expensive wine. The on trade makes more money from the cheap end of its wine list than the expensive end, meaning this year’s duty increase is significant and will make its presence felt on balance sheets.
As for exchange rates, the strong euro has made non-European wine more attractive to on trade buyers. Around spring 2008 we saw a significant number of bars and restaurants delisting their French and Spanish house wines in favour of suppliers from countries which sell in dollars, such as Chile. However, we are now faced with a strengthening dollar (the pound fell 8.6% against the dollar in August, its worst monthly performance since it crashed out of the European Exchange Rate Mechanism in October 1992). With sterling weak against both the euro and the dollar, there may be no more room to manoeuvre and prices will simply have to be put up further. The on trade has by and large been able to pass on recent price rises to the consumer without complaint. As one south London bar manager said to me this week, “people will always find money for wine – it’s a staple, not a luxury!”
Another gripe among the capital’s restauranteurs is the restrictions placed on them by local authorities. The most high profile squabble of late concerned Tom Aiken’s eco-friendly fish and chip restaurant which was forced to close in August after only six months trading. Complaints about the smell from local residents and the effect this would have on their house prices prompted the Royal Borough of Kensington and Chelsea to start legal proceedings against the restaurant, following which Aikens decided to “cease trading until further notice”.
So what are London’s pubs, bars and restaurants doing in an attempt to lift sales? Rather than rehashing their entire list, some are concentrating on offering interesting specials in an attempt to woo drinkers who are fed up with the endless Pinot Grigios and fruity Californians. Unusual wine regions such as Mexico’s Guadalupe Valley or lesser-known varietals such as Grüner Veltliner and Petite Sirah are being served up as enticements. Prix Fixe set menus which include a glass of house wine are much in evidence. One West End Thai restaurant has a deal which throws in the whole bottle.
More wines are being offered by the glass, on the sensible reasoning that while people may not be brave enough to order an entire bottle of an unknown wine, they will happily take a punt on a glass of something new and different. This is facilitated by increasing numbers of wines coming with screw caps (easier for bar staff to open quickly) and by more bars investing in electric vacuum sealers which allow an opened bottle to last much longer before the wine starts to oxidise. Some bars have gone a step further and now serve wine on tap, although unsurprisingly this tends to be the more basic stuff.
One top London hotel is planning a series of ‘Meet the Winemaker’ dinner talks, each of which will comprise a presentation by a different winemaker followed by a dinner designed to complement the producer’s wines. Trendy Hoxton outlets are jumping on the green bandwagon with offerings such as European-only organic wines, which appeal to both the carbon footprint and natural living crowds – killing two birds with one bottle.
A growing trend is the number of establishments which are – infuriatingly, from the perspective of independent wine companies – signing up to exclusivity agreements with major drinks suppliers. The thinking is that locking in prices for a foreseeable period gives cash flow stability. Such agreements tie bars and restaurants in for anything from a year to three years – a long time in what can be a fast-moving market. Where cutting down on paperwork is all-important, small specialist suppliers will by definition be disadvantaged against the Matthew Clarkes and Waverley TBSs of the world who can offer a one-stop shop for wines, spirits and beers. The choice for the sommeliers and bar managers is essentially that of an easy life versus an interesting one. If they want to take the hassle-free route of locking themselves in to supplies of ubiquitous, branded wines then fine, but in doing so they may well be missing out on some real gems.
As for what we’re actually filling our glasses with, the consensus is that the wine drinking public is increasing in sophistication at an unprecedented rate. Tom Bird of Corney & Barrow told me “On the private client side we have growing numbers of relatively young customers with a remarkable depth of wine knowledge. A generation ago people would follow their wine merchant’s recommendations almost unthinkingly, whereas today the access to information is so much greater. Websites such as Jancis Robinson’s Purple Pages and eRobertParker mean today’s drinkers tend to be very well-informed”. Furthermore, we are gradually becoming aware of the increasing breadth of wines on offer today and appear to be responding positively. Whereas a decade ago on trade wine lists were fairly predictable affairs (oaked Chardonnay, a reasonably priced claret and so on), today you are just as likely to find great quality Torrontes, Macabeo and Godello.
The challenge for the on trade is to embrace this newfound open-mindedness among drinkers and offer approachable but interesting wine lists. The fact is that bars and restaurants expect to make 70% gross profit on most of their wines. So why would I pay £20 in a restaurant for a bottle of Gallo which my local supermarket sells for £5.99? If I am going to pay the mark-up demanded by the on trade I at least want to feel that I am getting something interesting and different which isn’t available in the offy on the corner.
The London on trade certainly has to tread carefully in the current penny-pinching climate. However, there are no prizes for being stodgy and dull. Pubs, bars and restaurants need to make their wine lists eye-catching and relevant to modern drinkers in order to entice custom away from the supermarket shelves and into their establishments. The evidence points to an increasingly savvy and enthusiastic set of drinkers out there who, given the right impetus, will not be afraid to part with good money in the cause of wine. The on trade needs to get the basics right with solid house wines which hit a price point (£13-14 is standard these days), backed up by a mixture of by-the-glass crowd pleasers (Pinot Grigio, if you must) and more exciting and unusual labels to spark some curiosity. If they get all this right there is no reason, from a wine perspective at least, why this Christmas shouldn’t be both merry and profitable.
