Supply chain and general inflation pressure have placed restaurants in the delicate position of raising prices monthly or quarterly, sometimes even more frequently. This is particularly astonishing when you consider that, historically, restaurants changed their menu pricing every six months or once a year.
And wine is not immune. Wine is usually one of the better money-makers in a restaurant, with much higher profit margins than food. Industry standards suggest alcohol sales contribute to about 20-25% of restaurant income. This, however, can vary dramatically.
Are you keeping up-to-date on the changing costs, and are they reflected in your menu in changing prices, items, and brands?
The Wine Market
While supply chain disruptions and labor shortages caused most of the appreciation, drought and successive smaller grape crops played a part in rising grape and, therefore, wine prices. The California Department of Water Resources reported that 2021 was the second driest year on record due to limited rainfall, extreme temperatures, and decreased snowpacks. In addition, successive years of drought have negatively impacted grape yields.
At EMERGING, we’ve been restaurants’ strategic partners for years, helping them successfully expand, increase profits, and integrate emerging technology. When we saw the unprecedented pressures our clients were facing in terms of costs and pricing, we knew we had to develop a strategy to help them successfully navigate these unique times.
F&B Insights was Born
F&B Insights is the world’s largest menu database. It allows you to search for any menu item in any market and see the prices and menu items. You can see how others in the industry respond to this unique environment, including when they increase the price of a menu item and by how much. You can also see what items have been added and removed. Essentially, you can identify opportunities to increase your prices without affecting demand.
To help support our clients, we compared the pricing of Napa Valley versus Sonoma Valley wines on over 40,000 menus over the past 12 months and from the last quarter to the previous year. Interestingly, Napa showed a significant price increase when compared to Sonoma wines. Over the last 12 months, Napa showed a 10% increase compared to Sonoma’s -1% reduction. When comparing the last quarter to the previous year, Napa shows an 11% increase, while Sonoma reveals a 3% increase.
While Napa’s claim to fame lies in its quality cabernet wines, many consider the price of these grapes inflated. For example, in 2021, a ton of cabernet sauvignon grapes in Napa County averaged $8,082, while the same amount in Sonoma County cost $2,728. Almost all grapes, except pinot noir, see significantly higher costs in Napa, just 14.5 miles from its Sonoma cousin.
The western part of Sonoma sits along the Pacific Coast, which translates to cooler ocean breezes that support grapes like pinot noir. Both locations, however, enjoy a dry, Mediterranean climate. With Napa Valley wines increasingly out of reach for some, Sonoma is seeing some growing interest, particularly for wines made from grapes grown in the Alexander Valley region.
Of course, it’s not just grapes affecting the increasing costs of wine. The price of glass bottles has risen by as much as 20-50%. This is partly due to soaring fuel and freight costs and the effects of the Ukraine war on many parts of Europe where growers typically purchase high-end bottles.
This is just one example of the current upheavals facing the food and beverage markets. However, by staying abreast of changing prices with competitors and the surrounding areas, you can make changes that retain profits without reducing demand.
A few of our clients had this to say, “The Menu Pricing tool has streamlined the process we use for our competitive analysis, and has allowed us to focus on what is truly important the guest experience.” – Steve Madonna, SVP of Culinary Bar Louie.
“Menu Pricing has been a great resource to identify where we can consider raising prices. Allowing us to see thousands of menus immediately, we can make very informed pricing decisions. The previous menu pricing process was painfully slow and very manual.” – Chris Bisaillon, CEO Bottleneck Management City Works / Pour House.
How much have restaurant prices increased in 2022?
The USDA’s restaurant purchases consumer price index increased 0.9% in June 2022 and rose 7.7% compared to a year ago. According to the National Restaurant Association, this represents the strongest 12-month increase in restaurant pricing since 1981. The price jump has been mainly due to increasing food and labor costs. Grocery store prices jumped even higher, with a 12.2% increase in the same time frame, the most significant 12-month increase since 1979.
How can I recession-proof my restaurant?
During recessions, some restaurants still seem to perform well, or at least stay afloat until the tides change. These times call for quick action. You can’t wait to raise prices when you’re losing money. Now, more than ever, operators need to crunch numbers daily, keep informed of their competitors’ responses to inflation, and take action.