Knowledge of wine earns sommeliers credentials and opportunities, yet what it takes to keep a position and advance is the ability to provide excellent service while running a profitable business. Successfully managing inventory, working with distributors, navigating legal issues, and training staff are essential—but often learned on the job. This guide explores these aspects of the industry, focusing on wine program management in restaurants.
No business can survive without sustained profitability—which requires more than simply selling wine above its purchase price.
The first term to understand is markup, or the percentage increase between the cost of goods and the selling price. For example, a 33% markup on a bottle that cost $100 results in a $133 selling price. Rather than specific percentages, however, the terms 2x (two times), 3x (three times), and so on are often used to define markup. The markup percentage is calculated by dividing the gross profit by the initial cost and multiplying by 100. Thus, at the outdated “standard” bottle markup of 3x, markup is not 300% but 200%.
Initial Cost: $10
Markup: 3x
Listed Price: $30
Gross Profit: $20
$20/$10 x 100 = 200% Markup
Cost of goods sold (COGS) is calculated by taking the starting inventory of a period, adding the purchases of that period, and subtracting the ending inventory. It represents the cost of bottles sold, incorporating factors such as waste, over-pours, breakage, spillage, complementary pours, and inventory errors to reveal true product cost. Because sales can fluctuate dramatically day-to-day, financial performance is evaluated based on longer periods of time, such as a month, quarter, or year.
One small point (not super relevant to a business unless they're trying to import wine won at auction, themselves, granted)- Free on Board is not a price, it's a legal concept defining when liability and ownership are turned over. Your description isn't clear, either; are you trying to describe FoB Origin or Destination, or does it vary by importer, country, or even producer?
Hey Emily! Great point. In the world of Law, your definition is technically correct. That being said, this guide focuses on beverage business versus legal jargon. We do mention the legal elements in the guide, but yes, in the world of wine, this is a pricing term based on the definition above.