Mr Chan meets the death spiral

To illustrate the ‘death spiral’ concept, let’s consider the example of Mr Chan.  Mr Chan manages a restaurant and sets his pricing based on his overhead costs, like rent and salaries, as well as marginal costs of food and beverage.  Business was doing well, but as the economy slowed, fewer customers were coming to the restaurant.  To cover his costs, Mr Chan decides to raise prices.  He thinks that with fewer customers, each will have to pay more for him to get the same revenues.

However, when he raises prices, the already price-sensitive customer feels his restaurant is getting too expensive, so they find another restaurant to frequent instead.  Again Mr Chan raises prices, losing even more customers and more money.  Mr Chan fell into the ‘death spiral’ because of cost-based pricing.  During a slow economy, a better pricing strategy might be to reduce prices, thereby attracting more customers and increasing revenues.  Better yet, Mr Chan should offer more value for the same price, allowing him to maintain prices and give customers a greater sense of value during tough economic times.

How much customers are willing to pay for your food and services is also determined by how your restaurant is positioned in the market. People are willing to pay different prices for similar products depending on who is providing them and what their perceptions of the seller are. If your restaurant is positioned well, you may choose to raise prices to focus on the high-value client and decrease demand from the low-value client.

Group-buying and the death spiral

Online group buying is a service that allows buyers to access products and services at a special discount on the condition that the minimum number of buyers would make the purchase. What group-buying website suggest is that group-buying discount customers will become regulars at the full price in the future.

In reality, online group-buying websites attract low-value customers in search of great one-time deals. These instant deal chasers are unlikely to become regular customers and usually don’t spend more than the voucher amount they purchase.

A group-buying strategy that may bring positive results is to structure the deal to promote a specific time of day that you would like to drive traffic, but not when the restaurant is already busy.  You don’t want to displace high-spending regulars, or to reset your market position where customers view your real pricing as a bad value. Group-buying at deep discount can have a severe impact on profitability or even viability of your restaurant, so it is of utmost importance to set the value expectations correctly and strike a balance between maintaining your market position and attracting new clients.

Know thy customer

The best pricing strategy is to know your target customer and set prices based on how that customer values your offering to maximise profits. Use marketing tools like group-buying discount sites cautiously for best results. And remember, the decisions you make today are the performance of your restaurant tomorrow.

When it comes to pairing wine with Chinese hot pot, the choice of soup base defines the nature of the dish. Choose your wine based on the broth rather than the ingredients to be cooked.

Mild white broth with chicken, seafood or vegetable

The delicate flavours of this soup are best paired with white wines that will not overpower it. Sauvignon Blanc or Chardonnay-based wines like white Burgundy are ideal.

Rich broth with pork bone, beef or satay

The salty savouriness of a soup dominated by meat flavours will soften tannins and bring out the fruitiness of red wine or rosé. Try an intense, juicy wine like California Merlot or a Grenache-based French or Spanish rosé.

Sichuan hot pot

For soup with fiery chilli, wines with a touch of sweetness will help cool the flame. Try something exotic and sweet, such as an off-dry Gewürztraminer (literally meaning “spice grapes”) or a German Riesling. But if you want to turn up the heat, go for a tannic or alcoholic red wine like a young Bordeaux or Shiraz.

Why Today’s Wine Lists Need Radical Change

Camphor Tea Smoked Duck

Wrapped in camphor tree leaves with tea, rice, brown sugar and spices, the duck is beautifully burnished and infused with fragrant smokiness. The deep earthy and smoky flavors go wonderfully with Italian Nebbiolo and Sangiovese, which give the same intoxicating earthiness.

Braised Chicken with Chinese Mushroom

Dehydrated mushrooms feature Umami (a fifth taste similar to ‘savouriness’), a very meaty and highly concentrated flavour. Umami-rich foods are best paired with juicy-fruity red with relatively low alcohol like Côte de Nuits Villages Pinot Noir. The softer tannins and flavours of oyster sauce and spice are a natural match with this dish.

Stir-fried Scallops with Broccoli and Black Truffle

Topped with the black truffle shavings, this dish is no longer the same as your ordinary scallops with vegetables. Light bodied New World Pinot Noir has pleasant earthy notes that complement the lingering truffle flavour. The juicy character wraps around the tannins so well that it won’t overpower the freshness of scallops.

Char-grilled Wagyu Beef

Wagyu beef is famous for its intensive marbling and juicy character. It is graded on a marbling scale of 1 to 12, with 12 being the highest quality. The degree of marbling and cooking methods affect our choice of wines. Generally, intensely flavored wines like Cabernet Sauvignon, Shiraz and Tempranillo from Rioja provide enough acid and tannic structure to carry this high-fat meat, without making it seem heavy.

1.     “Buying versus being sold”

In a perfect world, wine distributors work in the interest of your business, helping you select wines that best fit your restaurant concept and cuisine. In reality, this is not always the case. Sales representatives have different priorities than restaurateurs, and it is often in a salesman’s interest to sell old and unwanted stock from their warehouse. These wines may be overpriced, past drinking age or of poor quality.  If difficult for the distributor to sell, they will be difficult for you to sell and may be inappropriate for your restaurant. Make sure you taste every wine that you are offered before adding it to your wine list. If you aren’t confident about the wines in your restaurant, why stock them at all?

2.     “Rebates: it’s already your money!”

Rebates are a common practice in the beverage business. Cash refunds or rebates are often used to incentivize you to buy wines that you wouldn’t choose otherwise. They are also used to tie you in to a relationship, limiting your options. Keep in mind that a distributor will never lose money on a wine. If you are offered a rebate, it’s already your money! The distributor didn’t give you the best price, instead they charged you extra and held the money only to give it back later. The next time you are offered a rebate, ask for a better price instead, and keep your options open!

3.     “A long list is not necessarily a good list”

Whatever the size, a wine list should be accessible to customers, making them feel comfortable to find their perfect wine. Wine distributors often suggest that a longer list is better, that it gives the customer more options and makes the restaurant look more professional. Actually a long list can overwhelm customers and make them afraid to choose the wrong wine, which in turn will discourage them from choosing a wine and thus hurt wine sales. Distributors want you to have a longer list so you purchase more wines, helping them to fill sales quotas. A concise and focused wine list that gives your customer the confidence to make a purchase from a great selection of already well-chosen wines can help increase your wine sales.

Be sure to stop by, learn more about great wine programme for your restaurant and know how to unlock your potential for wine sales. We look forward to seeing you!

Venue:

Hall 3 F&G, Hong Kong Convention & Exhibition Centre

Date & time:

11 - 13 September 2012

Booth Number :

K53

Admission:

Get Your FREE Tickets here

Demand for wine in Hong Kong is growing fast and provides you a great opportunity to boost your restaurant’s overall profits. An increasing number of Hong Kong restaurants sell wine, but not all of them sell wines as well as expected. Many restaurants can sell more effectively by following the proven techniques explained here:

1. Choose the right wines for your menu, clientele and price positioning

Try not to rely entirely on the recommendations of the wine distributor’s sales representatives, as they are naturally steering towards their sales priorities, without knowing if the wines are salable in your restaurant. Selecting the right wines for your audience and cuisine is the best way to enhance the customers’ dining experience, and thus to promote wine sales.  When distributors bring you wine to try, taste them with your most popular dishes.  See if the wine enhances the flavors of the dish and look for good pairings at a reasonable price point compared to your average ticket price.

2. Beware of cash incentives (tie-ups)

Some people in the wine industry offer ‘cash incentives’ or ‘tie-ups’ for buying their wines. Keep in mind that if they’re offering a cheque, they will be getting that money back at the expense of your business and customer. Unsalable wines will not only sit in your restaurant with slow turnover, but also they tie up your working capital.

3. Communicate your wine programme

Now that you have a wonderful wine selection tailored to the different needs of customers and your food, make sure that your wines are visible to your guests. Lack of visibility is one of the biggest barriers to increasing wine sales. Simple things like displaying your wines where customers can see they have been well stored, putting glassware on the tables, and offering a well-designed wine list will let customers know you are serious about wine.

Steamed fish with scallions and soya sauce
White wine with high acid helps show-off the freshness of steamed fish. We recommend unoaked Chardonnay, New Zealand Sauvignon Blanc or dry Riesling. Their range of citrus, mineral and fruit characteristics give food flavors an extra brightness without overpowering the essence of delicate fish.

Raw oysters
Fresh, raw oysters go best with any unoaked dry white wine such as Chablis, Sancerre or Puilly Fuisse. Their high acidity and mineral character flatter the briny fresh oysters. And we recommend full-bodied white wine, like a mouth-filling Pinot Gris, for full-flavored, firm textured oysters.

Spicy crab
A white wine with a bit of residual sugar will ease the heat of chilies, allowing the flavor of the wine to show through against the spiciness rather than be overwhelmed by it. But if you want to turn up the heat, choose a tannic or alcoholic red wine like a young Bordeaux or Shiraz.

Stir-fried clams with black bean and chili
Light reds marry well with seafood dishes seasoned with a rich and savory sauce. Red wines with plenty of fruit like Australian GSM or juicy California Rhone blends would be a perfect match.

Baked lobster with cheese
Seafood served with a creamy cheese sauce is nicely matched with a full-bodied and round white wines like Meursault and Australian Chardonnay. The bold flavors of creamy sauce and rich texture of lobster are complimented by the buttery nature of richer-styled Chardonnay.

To avoid: Strong tannic red wine cannot only create a nasty metallic taste with delicate shellfish, but also will also be overpowering.

CHINA WINE AWARDS 2011 – HELD AT THE MIRA HOTEL HONG KONG

China Wine Awards: The perfect wine for China

In his 2004 book Paradox of Choice – Why More is Less, Barry Schwarz argues that many choices among consumer products can cause anxiety in the shopper and actually reduce consumer satisfaction. With more choices, consumers believe there is a perfect option, and the chance of not choosing it creates anxiety. With fewer options the expectation is not as great, and the responsibility for selecting the perfect option is transferred to the supermarket, shop or restaurant.

Choosing wines is a perfect opportunity for seeing the paradox of choice at work. Whether staring at the grocery store shelves or turning the pages of a wine list, consumers are bombarded with a bewildering range of choices, but have little information about choosing ‘the perfect wine’.

This can be very stressful, as Mike Veseth points out in his blog post The Paradox of [Wine] Choice. Veseth notes that products that simplify the choice among wines for consumers “are some of the hottest products in the wine market”.

A 2006 study by Wansink et al showed that wine sales increase when a restaurant offers recommendations as part of its wine list or if it offers food-wine pairings. Furthermore, they found that offering up to three pairings increased sales by nearly eight per cent, but more than three pairings saw a drop in sales again, suggesting that consumers were put off by too many choices.

As a restaurateur, how do you present the optimal wine list to invite customers to enjoy wine with their meal? Here are a few helpful tips:

1. Don’t feel pressured to offer a comprehensive and complicated wine selection.  Focus on a few wines that satisfy your clientele, pair well with your cuisine, align with your price-positioning, and are seasonally appropriate.
2. If you have a short list, get to know your wines well so that you can make recommendations, or provide information about your wines on the wine list beyond just the name, vintage and price, something that can help a customer understand their different options.
3. If you want to offer a more comprehensive list to satisfy your more expert clientele, be sure to have a few recommended wines or call out some worthy wine-food pairings for those who appreciate fewer choices.
4. If you offer more than 20 wines, have an expert on staff, either a buyer or sommelier, who can offer guidance to customers and give them confidence in their selection.

Preparing an optimal wine list for your restaurant is a challenge, but can improve profitability if you aren’t confusing your customers with too many choices.