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Private-label wine flows onto menus

Casual-dining operators capitalize 
on novelty factor, high margins

A growing number of casual-dining chains are going into private practice when it comes to augmenting their wine lists.

Over the past few months, both Maggiano’s Little Italy and P.F. Chang’s have popped the corks on private-label wines, joining the ranks of upscale steakhouses like Ruth’s Chris and a number of high-end independents and hotels that have been offering them for several years.

The emerging trend toward showcasing proprietary-label wines offers a number of advantages for chain operators, experts
say, not the least of which is the ability to enjoy a higher profit margin on bottle and by-the-glass sales. 

Showcasing private-label varietals also enables operators to further differentiate their brands from the competition, they add.

“A lot of hotels have created private-label wines,” said Angie Eckelkamp, a marketing manager who works with Maggiano’s beverage innovation team. “Restaurants seem to be moving that way.”

Eckelkamp helped bring the private-label Salut Amico wine to all 44 U.S. units of the Brinker International brand in April.

“It’s a unique, signature offering that’s kind of special to offer to our guests,” Eckelkamp said. “We had talked a long time with Constellation [Brands Inc., the wine company based in Victor, N.Y.] about creating a signature wine specifically for Maggiano’s. We wanted to give our guests a unique offering.”

A private-label wine works especially well for an upper-end concept, said Eileen Fredrikson, partner in the Gomberg, Fredrikson & Associates consultancy in Woodside, Calif.

“Wine is a part of the ethos of the place,” she said.

David Henkes, vice president at the Technomic consultancy in Chicago, said house wines were included in 49 percent of wine occasions in the fourth quarter of last year, up from 43 percent in the fourth quarter a year before.

“It’s certainly something the consumers are demanding,” said Henkes, who is Technomic’s on-premise practice leader. “Because it’s a survey, we don’t get into a lot of the ‘whys’ about it. But clearly it’s a value perception. There’s a perception in the mind of the consumer that house wines are a better value.”

The deep economic downturn has led customers to either cut back on wine purchases or buy down to lower-priced offerings, such as more moderately priced house wines of all sorts. As the recession headed toward its depths in late 2008, wine purchases took a nosedive, Henkes observed. 

“Those who were drinking were much more value-
conscious,” he said. “You are seeing the chains respond to the value perception.”

An advantage for restaurant operators of offering private-
label wines is that it allows them to offer guests a differentiated sort of experience.

“The more sophisticated wine drinkers may be comparing labels, or varietals or types of wine to what they are buying in a [retail] store or other restaurants,” Henkes said. “What this does is give consumers an opportunity to get something they can’t get anywhere else.”

Some psychology also is at play. Private-label wines have no “street pricing,” so the chain can set the prices to benefit the house.

With no reference points, Henkes said, it “prevents consumers from doing that sort of mental comparison in their mind that says this should be X dollars, and it allows the restaurant operator a little more leeway in terms of what they can charge and how they position that wine.”

Jonathan A. Gelula, president of KDM Global Partners LLC, creates proprietary-label wines for hotels and restaurants. Besides higher profit margins for both wines-by-the-glass and bottle sales, the private-label wines help ensure against “sticker shock” — especially valuable in weak economic times.

“When customers recognize a brand on a restaurant’s wine menu and see that the restaurant is earning upwards of a 300-percent margin on that bottle, this creates dissonance,” Gelula said. “No restaurant wants to alienate its clientele, especially during a recession, where business is already down. The margin earned by the restaurant on its own 
private-label wine is not transparent — i.e., the restaurant may be earning an even higher margin, but only the owner knows since that bottle is not available for sale elsewhere.”

Gelula also said it helps accentuate a restaurant’s brand, cultivating customer loyalty for both food and wine.

For four years Ruth’s Chris Steak House has been offering a private-label Parducci Pinot Noir. Last June, a spokeswoman said the 117-unit high-end chain added Mendocino Fog Cabernet, Chardonnay and Merlot and then in August 2009 a proprietary Fess Parker Red Blend.

Maggiano’s decided to work with the Italy-based Ruffino, with which it had teamed in the past to showcase exclusive wines.

“The process took a little over a year,” Eckelkamp said. “We’re an Italian concept, and Ruffino is an Italian winery, so it fit perfectly.”

Maggiano’s team started to talk with the winery back in March 2009. It conducted tastings, held a contest to name the wine, created the copy and label, and forecast sales, and then Constellation worked with Ruffino and distributors to get the wine into the U.S. locations. The wine appeared in U.S. Maggiano’s stores this past April, more than a year after the process began.

Eckelkamp said Maggiano’s marketing team developed the label and copy that went on the wine, called Salut Amico, which means “Cheers, Friends.”

Maggiano’s has 87 wines on its list, and Salut Amico got a marketing bump for its debut with table tents and special events. “Sales have been really nice,” Eckelkamp said. Margins, she added, “have been in line with our other wines.”

P.F. Chang’s China Bistro introduced its two private-label wines in April: a Sauvignon Blanc and a Syrah blend. They are merchandised under the label Vineyard 518, said P.F. Chang’s, which noted that 518 in Chinese numerology means “I will prosper.”

P.F. Chang’s, which operates 197 bistros, worked with Wattle Creek Winery in Mendocino, Calif., to make the wine 
especially for the Chinese-based menu. 

“The fruit for Vineyard 518 comes from the Yorkville Highlands appellation in Mendocino, a high-
altitude, coastal growing region that offers full varietal expression as well as crisp, refreshing balance,” the company said. The wines are priced at $4.50 for a half glass, $7.50 for a full glass and $15.50 for a half carafe, the company said.

Maggiano’s new wine already has developed fans among customers who, while pleased that they can order Salut Amico in the restaurants, find themselves a little disappointed, too.

“Some of our guests have asked us if they can buy bottles in the restaurant and take them home,” Eckelkamp said, “which is not legal in any of our states. So it’s a very unique offering.” 

Contact Ron Ruggless at [email protected].

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