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 Thus, at the outdated “standard” bottle markup of 3x, markup is not 300% but 200%.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.
Love this, always happy to see more of this on the site beyond the forum discussions as this is often a missing skill set from many staff. Really appreciate this being compiled in an article like this.
That is why you have to look at your P&L, as well as your per item pour cost. The wine cost/profit percentage will guide your wine list prices, but the P&L, which is based over a longer period of time and reflects other associated costs that need to be considered, will give you the best view of your business and ultimately how you should be structuring your price scale. If you are paying attention to both then upper management will not have a lot to argue about - assuming business is sound.
Thank you for the information. This really helps.
The markup in the example is correct. While it may initially sound counter intuitive, a 3x markup is a 200% markup.
Nice info. Though a few updates to consider. The Mark up in first example is 300%, not 200%, 3 times mark up. Markup is the ratio between the cost of a good($10) and its selling price($30). Formula is incorrect, that's why numbers don't add up. Also, 'laid in cost' is super low and should be much, much, much higher. May I suggest $2 a bottle.