Ep. 818 Dollars/Grapes: Optimize Profitability Of On Premise Wine Prog. | wine2wine Business Forum 2021

This episode is brought to you by the Italy International Academy, the toughest Italian wine program. One thousand candidates have produced two hundred and sixty two Italian wine ambassadors to date. Next courses in Hong Kong Russia, New York, and Verona. Think you make the cut. Apply now at viniti international dot com. Italian wine podcast, a wine to wine business forum twenty twenty one media park is proud to present a series of sessions highlighting the key themes and ideas from the two day event held on October the eighteenth and nineteenth twenty twenty one. This hybrid edition of the business forum was jam packed with the most informed speakers discussing some of the hottest topics in the wine industry today. For more information, please visit wine to wine dot net and tune in every Thursday at two PM central European time for more episodes recorded during this latest edition of wine to wine business forum. I Alicia Townstrengen. I am the vice president of the wine portfolio for Artruse, which is located in Boston and Brooklyn. And my name is Marian Leitner, and I'm the founder and CEO of Artruse wines. We're so excited to be here today to talk to you all about what's happening in the US, restaurant industry and the role and opportunity that we all have to really be good partners with them in their recovery. Yeah. So just to set the stage a little bit, the restaurant industry, which I think, is near and dear to all of our hearts, was probably one of the hardest hit industries in the states. Eight million employees were furloughed and, fired and let go. We lost over two hundred and eighty billion dollars in sales within the first thirteenth, thirteen months of the pandemic. I think we all were expecting the roaring twenties to come once everything reopened. But our rebound is pretty, pretty shaky, and there's so many reasons why that's the case. Supply chain, which I think everyone is experiencing bottlenecks. Labor costs, food costs are just out of the world at this moment, but our current pandemic in the States probably is the shortage of staff. It's really hard for people to get work work restaurant workers in. So why are we here today? You know, this is an industry that is so incredibly near and dear to everyone's heart. It's what we live on. Hospitality is so incredibly important. It it it gets us up on a on a on a on a on a Friday afternoon or not If we're still up at Friday, only getting up at Friday in the afternoon, there's a problem that we may have been out too late. I don't know that. But Friday morning, like, at Thursday night at a restaurant, it's like, yes, we can get to the weekend. But, Mary, can you give us an idea of the restaurant recovery, and what exactly is our role as the wine industry? So on premise in the United States represents roughly twenty five percent of all wine sales. And the thing that I think, at least I don't think I really understood, be pre pandemic is really the role that hospitality plays, in our society overall, which is basically in the US, it is the safe social safety net. It is the largest employer of single mothers, the largest employer of immigrants, the largest employer of recently incarcerated persons. And as so, you know, as we're thinking about how do we chart our way out of the pandemic? What's really critical to understand is that during this time, when restaurants are figuring out how to reboot their businesses, we truly have to partner with them and think differently to help them navigate out of the current situation that they're in because to your earlier point, I think when we were all locked down in our homes, we were all thinking about the roaring twenties and the opportunity to, see that once again. But the reality has been somewhat mixed. Restaurants, are either full one night and then completely empty the next. They're really struggling with inventory management, finding labor. And for many, their wine by the glass program is truly what supports their wine program. So I think that our job as suppliers has really shifted to how can we understand the situation they're in, understand the challenges that they're facing, which in many cases are How do I pay rent? How do I make sure that I can still provide a optimal experience for my customers? Because the other dynamic is that everybody learned to cook during the pandemic. And so now as we think about what role do we want restaurants and that experience of eating out to play, there is additional pressure to deliver a true experience while at the same time navigate these additional pressures. And so this is where I think it is the job of the wine community to who has relied on restaurants to pay our bills. Right? Because this has represented such a big part of our revenue historically. To instead shift the dynamic and say, how can I partner with you? And maybe even identify and adapt the way that I do business in order to create a situation where we're about we're all on stronger financial footing once more. And that I truly believe is the role of alternative packaging in this. Yeah. I I I absolutely agree with you. And, in twenty twelve, Kan Wine only made up two million dollars worth of sales in the States. And in twenty nineteen, we'd already jumped to ninety million, and in twenty twenty, two hundred million. So this is definitely not a fad. This is something that's going to be here to say, and it's not about putting bad, bulk wine in a can. It's about what would you say it's about? Uh-huh. And I and this is where I think they're I love coming to conferences like this, because You know, when we, like, when I come in and I say that I work for founded a canned wine company, everybody looks at me funny because they think that, you know, I'm threatening a a tradition. But what I actually would like to be provocative and share is that I truly believe that bottled wine is a relatively new invention during in a if you think that wine has existed for thousands of years, bottled wine and putting all wine in bottles is a relatively new convention. Less than a hundred years old. Up until the nineteen seventies, most wine was actually, served in alternative formats as and with less than one percent actually put in bottles in order to bottle age. And frankly, the American wine industry changed that and the demands of that. So what I see is truly reclaiming an older tradition of democratizing wine. By asking ourselves what is the right format for the wine that you're serving it in and what is the right occasion. And what it actually in allowing ourselves to ask those questions, we can actually then better serve some of our partners because we can address some fundamental problems that they run into. And those problems, those barriers to profitability are waste. So how often have you watched a bar manager throw out half a bottle of wine? It happens constantly. Particularly when you are going through a period where you're having a hard time predicting, many consumers are gonna customers are gonna be walking through your doors that night. The second big issue is, freshness. So very linked problems, but, hey, you opened up a bottle on a Monday night. Tuesday was really slow. Wednesday picked up. And the first couple of customers who then walked into your restaurant get a glass of wine that was opened on Monday, and it no longer tastes good. Then you're rubbing up against that whole I need to have a better experience than I can have at home, and that's not a dynamic or goal that you're able to achieve. The third piece is inventory management. So again, we're talking labor shortages. It is harder to run a restaurant now than it's ever been, and it's never been easy. And you have bar managers and directors of operations constantly having to tie back what they sold a night to what they currently have in inventory to make sure that they're not over ordering, and that we're really able to balance the books, if you will. And that's again, where alternative packaging can offer you a solution because you can basically sell a unit for every glass of wine that's ordered. And then the last dynamic, of course, is lowering garbage costs. And this is something that, again, as suppliers, we don't think much about But most restaurants in the United States actually pay for their recycling and garbage pickup. And it's actually a huge expense and often drives whether or not a restaurant will even pay to have recycling picked up. And so again, this is solutions where something like a keg, actually has the opportunity to collapse eighty percent of the waste that is produced by a bar or restaurant. Because of the format, and therefore that has a transcendent impact or, sorry, a cascading impact across these various problems and provides unique solutions because of it. No. I absolutely. I am a former wine director of a very large restaurant in Boston, fifteen million dollar restaurant, three and a half million dollars in wine sales. We did not recycle bottles. The number of beer bottles. It was a steak house. So you know that there are lots of beer bottles and lots of whiskey bottles and lots of wine bottles, but it was just too costly, especially if you're doing brunch or something of that nature where instead of having six bottles of Persecco or some bubbly leftover, getting a fresh glass every single time from a keg just makes sense in so many different ways. Do you wanna talk a little bit more about alternative packaging and different formats that you're you're working with? Absolutely. So let's be clear when we're talking about alternative formats what they are because to your point, there are actual there's Tetra PAC, there's box one. But for the purpose of today's conversation, we're gonna keep focused on cans and kicks. And that's largely because believe it or not cans are have carry a very different perception, than other alternative pack more consumer facing alternative packaging does. It's really having a moment, particularly among younger consumers. I'm happy to expand on that point. But also kegs are increasingly becoming a popular solution for because there's been advances in KEG technology where it used to be that wine Kegs had to have their own Kegorate Kegorator systems, so that meant that they need different wines. They were rather a expensive to install, and there was a lot of barriers, to adoption. Now the technology has advanced, through a number of different suppliers where you can actually run on the same lines as beer lines. And that's been a huge innovation for alternative packaging because it means that you can use existing infrastructure. And at the same time, a restaurant's then able to optimize a better, price per ounce, decreased labor needs because just think about during a brunch service walking up and down the stairs with a really heavy case of wine. And that's now eliminated because all you're doing is bringing up a keg. And then, of course, the third is, that that wine stays good for two weeks after opening. So it allows you to kind of weather these peaks and valleys of traffic, much easier. And, and because of that, you know, I think both of those adoptions, you're seeing a rapid acceleration of them in the on premise. No. Absolutely. And I think, to your point, you're making your money on that first glass of wine as opposed to the second one. That's actually yes. That's one of my favorite things to point out to customers is that Typically, you are paying for essentially the wholesale price of a bottle of wine for your first glass in the state so that a restaurant can cover cost. With alternative packaging, you know, they're able to still charge the same amount. But they're actually able to make money off of the first glass of wine because the fear is removed that, you know, the rest of the bottle is gonna go bad. No. Absolutely. I was I was just thinking something that has happened in the States, which I'm I'm hoping will continue to say is that restaurants are, we have more outside dining. I was outside in Boston in twenty degree weather with hand warmers, a blanket, trying to support all the restaurants in my neighborhood. But not only was there's takeout, but there's were there more outdoor dining, there's also takeout And I think there's a way that restaurant tours can utilize canned wine for what do you think? Well, absolutely. I think, again, this comes back to how we have to shift our mindset to really be partners to helping grow business opportunities together. And one of them truly exists in, takeaway is not going out. Delivery is is not going away. There is now techno newer technology that, has been adopted during the pandemic that, helps to, I mean, essentially help people increase their their basket size. By saying, hey, have a glass of wine with this as well. And I can sell you a bottle if you're buying for your family, or I could sell you a can. And it's just like you're experiencing that wine by the glass takeaway at home. Because I think the biggest thing that we have to wrap our heads around as we think differently and identify these new solutions is that just because we're, offering the option of a can of wine doesn't mean that the consumer is just gonna open the can and drink right from a cam. If you are the type of drinker who likes to open up a bottle of wine and drop a straw right in it, all the power to you. But my point being that most of us pour that wine into a glass. And that's exactly what you can do with alternative packaging. No. Absolutely. For me, personally, I don't drink from a bottle, so I don't necessarily feel the need to drink from a can. The can is just a vehicle, just like the bottle is. And for a sensory perspective, When you're drinking from a can, you taste it before you actually smell it. When you're drinking from a glass, you smell the wine before you're actually tasting, which enhances all of that. So I think that's really important. When people think of canned wines, it's not just for the beach. It's not just for where glass can't go. It's great. Arturus lives in my my beach bag during the summer, but I also, when my husband wants a bubbly, or I want something red, and we don't have to choose. We don't have to fight over which bottle of wine we're going to open at home or try to decide which wines we're going to to have in a restaurant if we're eating very different things. And this is not theoretical. I mean, just speaking from our own business experience, Arturo Ruth was a brand that was actually built in the on premise. We've we are poured in James Beard award winning restaurants, you know, very nice exclusive hotels around the country, and pre pandemic bars and restaurants actually represented eighty percent of our, of our revenue. And so this is a solution that people are hungry for pre pandemic. And now when we've gone back in to kind of re re engage that, segment. We're hearing, yeah, I thought this was cool before. This was a way to introduce wine to a new demographic, but now I see that there's a business case for this as well, and that's what's really resonating with them. Yeah. I think that, clearly there's a lot of work ahead of the industry. I think it will take years for restaurants to rebuild and to rebound. It's really important for us to be there to help them, not just because we, you know, it's we live in a capitalistic society, but because it's truly an industry that we care about, it's truly an industry that we love. And I think they need all the guidance and and and information and just thinking outside of the glass, I guess, at this point, and how to be profitable. And wine by the glass is where we all make our money in so many ways. Of course, bottled wines are incredibly important. But if you're utilizing an alternative packaging for your wind by the glass, it's just going to be more profitable. It absolutely is. But I I think a big piece of this too is that as an industry, part of our jobs in order to keep this industry in a healthy place is to recognize that things change and that we have to con we have to be flexible into adapting to the environment that we're all facing. And right now, that, environment is still while there's definitely been incredible, but, well, there's definitely been bright spots. We we still have to recognize that we need to position ourselves to a new generation of consumers. We need to continue to cultivate, younger generation into wine drinkers so that maybe it's canned wine that brings them in because thirty percent of buyers of canned wine are new to the industry, but that we're ultimately cultivating them to be high end users through education, but also by hitting home that wine doesn't just exist in an isolated environment. Wine is part of your lifestyle and can adapt to your lifestyle. And, one of the things that I loved, that was shared during, previous presentation was the evolution of wine being used at byob Korean barbecue places. Again, not traditionally something that we would think of. This is where wine is being paired. But what we have to recognize is It's gotta start with us. We need to understand who our customers are, how they're drinking wine, how they're interacting with them, and meet them there because the bar the Korean barbecue spots are also recovering from the pandemic, same as the Michelin Star restaurants. So let's be really creative in how we reach out to these important partners of ours not only because it's the right thing to do, but it's also intrinsic to our survival in continuing to be relevant. Yeah. That's a really good point. We are working on a a a project at Archerus on pairing Arturo's wines with takeout. The majority of takeout is probably global cuisine and not Euro centric. And for so long, people have been told that they're foods do not go with wines. Well, we know that's not the case, especially after last the last session, Korean Barbecue sounds delicious, anything I could imagine. But for a senseless plug of archers, tell me who you are, how you do it, Who are your winemakers? And what do you care about? So Archerus was really founded to democratize fine wine. The idea was how can we talk about the things and elements of wine that we love so much, but to to put them into words that consumers understand today. And to to say that, I'm gonna draw an analogy that that might feel a little squeamish, but, wine spends very little dollars on marketing. But we need to think the way that other consumer product goods do, like, you know, Harry's has revolutionized the razor industry, and Worby Parker has revolutionized glasses. They've done this by building mission driven brands that tell stories about their supply chain. Well, glass proceeding. And so cans are really and and our use of cans is about saying, how do I bring a better last of wine to consumers. And we do that by recognizing that not all wines are meant to be put in cans. So we go out and we partner with exciting, young winemakers. Who are making fresh young wines that are ready to be drunk now, and that's what we focus on for the format. Our model is rather unique rather than, than buy a winery or build a winery. Or purchased bulk wine. We've instead borrowed actually from our brethren in spirits and the craft beer industry, by creating a a model where first we ask ourselves what is the varietal? What story do we wanna tell? What varietal do we wanna bring to market? And then we ask ourselves what's the most marketable region for that varietal? And then we go out and we find a awesome winemaker who's, living in that particular region to work with us, to identify the, grape growers or vineyards that we wanna partner with in that meet our our standards. And then we rent capacity in an existing winery to make our wine, and then bring it to the United States. And this allows us to bring, really high quality, dangerously delicious wines to consumers from all around the world. That's great. That's wonderful. Thank you so much. Anything else you want to add about restaurant recovery, or should we open this up for some questions? I think the only thing that I just wanna hit home again is rest and this is not just a problem that's unique to the United States. I think it's, top of mind just because of the size. You know, there's a million literally a million restaurants in the United States pre pandemic. So it just represents a huge opportunity for all of us. And I I would just urge us all to challenge how we've always the challenge, the practices that we've traditionally used to be successful in that channel, and to really put our thinking caps on to see things from the perspective of the of the businesses that we're partnering with and, truly, think about a new way of solving these problems because that's actually what's kind of exciting about times of great, challenge is we get this opportunity to to really question the way that we've always done things and potentially find a new way of operating that could bring greater value to everybody. That's awesome. Great. Thanks, Marion. How about some questions? Gentlemen. Hi, Alicia, Marion. It's like I saw you last night. No. Great presentation. My question is about all alternative packaging, something I'm really interested in. I'm not a, I'm not against them. I'm actually pro can. I'm pro stealth and pro screw cap anything. It's gonna make the line better. I have a question for you, Marian. I'm really curious, and I recently shot a video on my YouTube channel. Where Bordeaux producer sent me the same wine in bottle and can. I did white, rose, and red. And it was just so fascinating to see that there was a diff, like, for instance, the red was, and the can was oxidized compared to the to the one in bottle. So I was wondering what the what the challenges are canning wine versus bottling. Oh my god. I love this question so much. So the first thing that I would say to that is if you think that the same approach to bottling wine is how you're gonna take to canning wine. Like, you gotta throw out that thinking. And if you want that wine to present the same way in a can as it do his bottle, you actually have to start in the vineyard. Because there are certain practices that you need to think about, because the reality is is that the same the part of why I love cans is that as the opportunity to hermetically seal a fresh wine, so that it truly tastes as young and delicious as if it was, like, you know, exactly as the winemaker would want it. But you have to be really thoughtful about how you can it in order to have that end result. Because the same benefits of can are also the great challenges that it, are are the same reasons why it poses great challenges to the canning process. Bottoming is very forgiving. Bottling allows for discrete's amount of oxygen, to obviously come into the bottle, but it also allows gases to leave. So when you think about things like so two levels, those actually can be higher in bottles than they can be in cans. When you're focused on canning wine, you need to think about things like dissolved oxygen, and the molecular structure of the wine. To a degree that you're probably not thinking about in a typical bottle process. And so we've been canning wine now for six years. We have made a lot of mistakes, and, we've learned a lot. But I'm really proud of where we've ended up. And I I truly think and and I know this for a fact because we one of our biggest partners in the US is JetBlue, and we won in a blind taste test, that JetBlue contract against thirty other brands, many of whom were in a bottle, because they thought that our wine was the best, even though we weren't the cheapest option. And so you can get to a place where you can't tell the difference, but you have to be really thoughtful about every layer of production and treated as a separate process. And this is also why you cannot. And I say this as somebody who's building a brand in the alternative packaging industry. So it's more of a plea. Don't take leftover wine that was meant to be put in a bottle and put it in a can. You have to treat it differently from even the way that those grapes are grown. Okay. So we refer to your brand a lot with our clients but there is this big gaping problem outside of America, which is a very tiny company called baroque's controls the global patent for canned wine and the VIN safe system. Meaning that not only do you have to pay, I think, when I last looked at it, it was zero point zero two dollars per can in order to do it, but you can only work through their approved packages. And they have a very strict contract that includes clauses such as you cannot say anything that demeans their brand. So let's look at this, talk about transparency. If I'm a wine brand in Italy or in New Zealand or in Australia, I don't have an option to compete. I don't have an option to express discontent with those who allow me to produce the canned wine. How does the rest of the world compete with American canned wines when we're facing all of these challenges just to begin with. That's a really great question and really thought provoking. And I should start by saying that that's a terrible business practice. I don't work with them, so I can say something like that. Yeah. And I would also just add that one of the things that is really special about being in the alcohol industry among creators is collaboration. It's, you know, to draw a parallel with craft beer. Jim Cook, who's the father kind of of the craft beer movement. He's the founder of Boston Beer Company and the Sam Adams brand. One of the first things that he did was he started, consortium of craft beer producers so that they could share their learnings around producing beer. And it's basically allowed that category to flourish. And so I think that what's really tragic about it is that this actually step, hampers that conversation, and hampers our ability to share learnings with one another and to experiment because we, you know, natural wine is a different process that needs a different canning process than more traditional wine. And so it's a it's a great question. I don't have an easy answer to it, but it's one that we need to talk more about and continue to, to have an open conversation about it so that we can maybe ask them instead to lend their leadership towards building this category. Rather than taxing small producers for participating. Great. That's awesome. Anyone else? One question I have. When you are talking to operators and specifically about, you know, the on premise programs, Do you ever get questions about the metallic impact of the can on the product? And if so, how do you address that question? Absolutely. That's another great question. Of course, absolutely. We get that. And I think that it it sort of relates back to that canning question we got earlier where I'll be the first to admit. There's some tragically bad canned wines out there. Which is why we should be sharing our knowledge, and having more thoughtful conversations about the practices behind this because they shouldn't exist because it hurts the category. And the reality is that, you know, the way that a can is made, it's the same thing of, like, does beer have a metallic taste? Then it doesn't. It it has both of them have liners. That as long as you're sensitive to the chemistry behind the liners are going to actually protect the wine from the aluminum. And so when done properly, you will not taste any aluminum. And what's more, a lot of people think they carry the sensation of having the metal on their mouth, but this is why I'm the biggest advocate for pour your can wine into a glass. Have a sensory a full on sensory experience. This is really just meant to be a serving size, a vessel. But I love drinking wine out of a glass, and I intend to always. So again, I I solve this problem often by just challenging them to a blind taste test and usually comes out great. Hi. I have a question regarding to like the expiration date. And normally after bottling, what's the date you will put on on the cans and how long it can maintain the freshness of the ones. That's a great another great question. So right now so there's the kind of answer to that is twofold. So there's what the supplier I'm sorry. When I say supplier, I mean, there's what the manufacturer of the can can will will present as a legal guarantee. And right now, the maximum legal guarantee that they'll offer is one year. So that is one year from the time that the wine is filled. Now if you follow the right practices, the wine should still taste great for longer than that. But I would say that the whole purpose of, of the can is fat is high velocity. So it's not meant to be put in a can and then left in your basement for years. It's meant to be drunk that evening or right away. And in fact, the whole idea behind the company was that ninety seven percent of Americans. They consume their wine within seventy two hours after a purchase, and it's less than two years old. So again, high velocity young wine. And so that's really the approach that we take to canning. So much so that I think one of the more one of the more, established ways that you would approach packaging is you have a new vintage, and then you bottle everything right away. We actually don't do that. We are constantly canning throughout the year. In order to ensure that we're really elongating the shelf life. Did I answer that question? Could you speak a little bit to that point, about the analysis that we go through with Cornell or the corrosion tests or Yeah. Absolutely. So, so at the most basic level, when we are getting ready to can a wine, the first thing that we do is we reach out to the can manufacturer and we send them samples. Where they actually test the wine. And they're testing the wine for a variety of things, like acidity level, but also, what they're really screening for are different practices that were employed in the vineyard or due during the winemaking process. That could interact poorly with the lining on the inside of the cam. The most well established of this, for instance, is copper. You know, spraying copper that's considered an organic intervention that's employed in many, many vineyards throughout the world. And small traces of copper are okay. But you have to be very careful how much you use because otherwise that can erode the the can. So that's just one example. And so once you get the certification back that actually, you know, your wine has been made within, or showing that it will be able to show well within the can. Then they that's when they kind of give you the endorsement of, like, okay, we this is, like, you have a year long shelf life. Then what we do is we're constantly testing the wine for particular things. So free ISO two is one of them. Acidity level is another, and then dissolved oxygen is the big one. And dissolved oxygen, again, is not something that we talk a lot about, in the wine industry overall. They talk about it a ton in beer. And so we have a lot actually to learn from our colleagues in that category from this. But you wanna have the dissolved oxygen as low as possible because the product the can is hermetically sealed. And so there's no escape for any of the gases that are inside of it. And so, yeah, that's that's kind of the kind of big major things that we watch out for. So we're constantly we're we're testing the wine before we begin the canning process. We're testing the wine right before we can, to control for a number of factors. And then we're periodically pulling the can off of the line in order to test it during to make sure that no, you know, maybe, if if you're canning over multiple days and the machines are washed in between canning days, that there's no traceability of anything else that you could impact the can. And the the kind of and then finally, we're we're testing gosh, I think it's every eight weeks, post canning so that we can make sure that we're continuing to guarantee the quality, but also because we're really trying to study and understand the life cycle of wine in a can so that we can bring better wine to consumers. So it's a constant evolution and we're working with a number of partners whether it be UC Davis down in California, Cornell, in upstate New York, which is where we can, as well as what the can manufacturer it's art itself. So that Again, we're we're not only understanding the can and the liner and how that interacts with the wine, but how the wine is developing inside the can. Any other questions? I I think I have to close the room anyways. Let's give it up for Alicia and Marion. You guys. Thank you so much. That was what a great session. I absolutely learned so much from you guys. And if you want to come back, for some more tomorrow morning, I believe it it's the first thing in the morning, nine o'clock, nine AM. Alicia will be back to talk about the democratization of wine, and that's nine AM in the auditorium tomorrow morning. Okay? Thank you so much. Thank you. Okay. Everyone get the hell out. I gotta sanitize the room. This is so crazy. I have to sanitize the room, like, every single after every single session. Okay. Let's hear it for stevie. Listen to the Italian wine podcast wherever you get your podcasts. We're on SoundCloud Apple Podcasts, Spotify, EmLISM, and more. Don't forget to subscribe and rate the show. If you enjoy listening, please consider donating through Italian wine podcast dot com. 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