Margin is the difference between what you pay and how much you get back from your customer - the profit.
Attempt to make too much on a single bottle and your customer will drink something (or somewhere) else.
Don't make enough and you'll be out of business.
So, somewhere in the middle.........
In the old days, when UK fixed tax loads on each bottle were much lower, a straight 65% "gross profit percentage" was nice - sometimes even 70%. Deliverable, affordable for the customer, etc.
For regular provincial restaurants and bars (not big-city centre, celebrity-run or Michelin starred), these margins are simply not deliverable now; the customer knows too much and will baulk at paying the prices.
So what to do?
Our solution to this is to suggest a sliding scale of percentages focusing on a reasonably fixed sterling margin rather than percentages. The logic is, if you are okay with returning a profit of, say, £8.00 on a bottle of House wine, why attempt to make £25.00 on Champagne? Your costs of delivering it to the customer are similar.
Why not aim for £10.00 Champagne profit and stronger sales?
But how do I go about this?
Our simple-to-implement solution is to base everything around our Wine-Boutique retail price. You are getting a percentage discount from this price by being a Trade customer - the higher the price, the bigger the £ discount even though the % stays constant.
So, use out "retail" price and add a constant and fixed £ amount REGARDLESS OF THE PRICE LEVEL.
Let's say a tenner.
A bottle of wine retailing here for £10.00 bought by you for £8.00 (20% Trade discount) and sold for £10.00 + £10.00 = £20.00 returns you a margin of £12.00. A very decent quality level of wine at an okay restaurant price.
Compare this to a bottle of posher wine retailing here for £15.00 bought by you for £12.00 (20% Trade discount) and sold for £15.00 + £10.00 = £25.00 returns you a margin of £13.00. An upmarket claret/Rioja/Sancerre that would retail for £35.00 in "percentage-driven" outlets made much more affordable to your customer while returning you a slightly higher profit than the lesser wine.
Win win. Okay, a smaller win but one you can enjoy more often?
With me so far? Let's go crazy and choose a wine retailing here for £30.00 bought by you for £24.00 (20% Trade discount) and sold for £30.00 + £10.00 = £40.00 returning you a margin of £16.00. We're talking almost Champagne levels here. The old guard will be charging £75.00 for this and selling one three times a year. Or never.
Okay forty quid is still premium money but your customers might consider it more often especially when they weigh up the quality of what they will be drinking.
AND YOU MAKE MORE MONEY THAN SELLING THEM "HOUSE". Just less percentage.......
If you would like to investigate this concept with us further, get in touch firstname.lastname@example.org.