Welcome back to Business of Drinks. I'm Scott Rosenbaum.
And I'm Erica Ducey. Today we're talking with Eric Siegelbaum, founder of a Malfi
Beverage Company, which is creator of Cherto Cocktails, an RTD brand. Eric is a long time
summer, yay, an experienced educator, a trade ambassador, and a former corporate beverage
director for star restaurants, where he oversaw a $100 million beverage program across
nearly 50 properties. If Eric's name sounds familiar, it might be because he was a previous
guest on Business of Drinks. On Episode 39, he joined us to discuss supplier distributor
relationships. Eric is one of those rare operators who has worked on every side of the business
as a buyer, as a consultant, and now he is a brand founder. And that perspective really
shapes this conversation, because he's not just speaking in theory, he is speaking from
his own experience, from what actually works when you are responsible for sales performance
of a brand. And the central idea in this episode is one that may sound simple, but can
be really tough in practice, which is that selling is not about your product. It's about
the buyer. More specifically, right, it is how your product helps a buyer make more money,
save more time, or run a more efficient operation. And Eric breaks down what this looks like
in practice, how to approach accounts, how to position what you're selling, and how to
build relationships that actually lead to repeat business.
And there's a really important point here about how people think about making money, and
where a lot of the industry gets it wrong, especially when it comes to margin.
Absolutely. This is one of those ideas that really stuck with me, right? Eric argues that
percentage margins don't necessarily matter as much to operators as total dollars in
the bank. And if you're blindly trying to optimize for margin instead of velocity and
repeat business, you can be limiting your growth.
And he takes that further into how operators actually structure their programs, including
how pricing works across a menu, how different products play different roles, and how higher
cost items can actually drive more overall revenue when they're positioned the right way.
There is so much gold here. Eric shares an incredible story about how fully understanding
operations can be critical in building sales. He walks us through how something as simple
as the speed of service can unlock significant revenue, using an example of a stadium where
reducing drink prep time could translate into tens of thousands of dollars or more in additional
sales in a single day.
And for anyone trying to break into accounts, especially early stage brands or newer sales
reps, Eric lays out a very clear approach. It starts with understanding the account before
you ever try to sell into it and then building from there.
He also gets into inventory turnover cash flow and how money actually moves through the
three tier system, which is critical if you want to understand where margins are created
and where their loss.
And throughout the conversation, there's a consistent focus on relationships, not in
a surface level way, but in terms of how strong partnerships actually get built and why
they are what ultimately drives long term growth.
So whether you're building a brand managing accounts or selling into them, this episode
gives you a much clearer picture of how the business really operates day to day.
So let's get into it. Here's our conversation with Eric Siegelbaum.
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And now back to the show.
Eric, welcome back. So happy to have you on business of drinks.
Thank you. Happy to be back. I feel like it's an honor to get a repeat performance.
Yeah. Yeah. You were previously on episode 39 where Eric had got to speak with you.
And now it's it's my pleasure.
Awesome. Well, my pleasure as well. I'm really, really happy to be back.
So last, you spoke with us. You were co-founder and and running Swig Partners, which kind
of does distributor matchmaking alongside all the many, many things you do and educating,
promoting knowledge about the business of wine and beverage alcohol over the past two
years. Can you catch us up on what you've been up to?
Yeah. Absolutely. So I'm still one of the founding partners of Swig Partners. That
stands for strategic wholesale import growth partners. We are basically beverage alcohol
yentas. We help beverage alcohol brands and non-alcoholic wines and spirits find importers
or distributors in any and all 50 states. So whether they're a foreign brand or domestic
brand, whether they're entering the US for the first time or whether they already have
a footprint here, whether they're looking to tap new markets or make a change in existing
markets, my partners and I basically with our experience in national accounts have a lot
of warm connections. And as you know, you know, if you send an email to contact @instartribus
distributor here or info at, you're not going to get a response. We get about a 96% open
and 93% response rate when we send the message. So ultimately, Swig Partners is the way I
explain it to a potential new client is we get to know your dating profile. We set you
up on some blind dates and you invite us to the wedding once you get married.
That's still going strong. So for anyone listening, any brand managers or brand people
that need our help, please, please don't hesitate to reach out to us at Swig Partners. We'd
love to help you get your foot in the door wherever you want to be, help you create your
strategy for where you should be. I write about the business of beverage in both some general
tasting panel, I've been a staff editor for Gully eight years now for both of those publications.
My columns are called winning at beverage and the business of wine. And they basically
are all about anything you need to know as a brand in terms of succeeding in beverage alcohol.
So that's still going strong. I'm still the vice president of the United Summales Foundation
where charity that founded in March of 2020 due to our industry being eviscerated by COVID.
And here we are six years later. We've raised over two million dollars. We've given out more
than 5,000 emergency financial assistance grants to wine industry professionals in critical
financial need through no fault of their own. But the most recent and biggest update is that
my four year project of creating the world's best RTD, Cherto, is now alive as is the product.
So we are alive. We are official. We soft-launched Cherto almost three months ago. And it has been,
oh boy, you know, funny, this is, you know, the business of drinks. I thought I was getting
into the beverage alcohol business. No, I was getting into the logistics and supply chain
management business. Well, it's amazing. And I look forward to kind of detailing, you know, your
process because we have this front row seat of someone who has set on, I'm not going to say,
both sides of the table, I'm going to say on every side of the table, right? Your background in
fine dining has a buyer, both for single properties and then eventually multiple properties
corporately, right? And now you're founding a brand. So I want to get kind of a feeling for all
the angles and we're going to touch on all of them. But let's start with your launching this brand.
You see other brands launch all the time. Is there something about your go-to market strategy
for Cherto that is different and why? Cherto, which means of course, or definitely or yes,
absolutely. You know, so Cherto was not a vanity project for me. I think sometimes people are
like, there's money to be made in this segment. Everybody's making money. I want to get in there
and make some money and put my name on something. That was not what Cherto was for me. I really
approached Cherto from the perspective of a buyer. So in my last buyer role, the last time I saw
W2, I was Stephen Stars corporate beverage director. So star restaurants, his apex empire on the
East Coast. I was running a roughly 110 to 120 million dollar a year national accounts beverage
program. So by when I left, I think we had about 48 properties. I opened three to five properties
a year with Stephen star. Everything from LaCoucou, which was the James Beard Best New restaurant
in the country. The year we opened and has a Michelin star to when I used to live in DC like diplomat
in St. Ansem, Budacan, Mori Motto, Upland, Clock Tower, Elves pastis, the new pastis. We can go on
and on 20 something properties and filly. My point is as a when I say high level, I'm not talking
about myself. I'm talking about the program as a high level beverage operator with everything from
fast casual Mexican to the finest of fine dining restaurants in the French cuisine in the country
and everything in between. My focus is and always has been on the finance operations and logistics,
the business of beverage from that world. And so when I wanted to start Cherto, it was largely me
looking at the RTD world and the broader market that the term I've coined is captive luxury.
The captive luxury market that was being underserved, unfulfilled from a guest standpoint or a
customer standpoint, but more over the millions and frankly billions of dollars that were being left
on the table because there was not a product that was suitable in look, right? There was not a product
that was suitable in taste and there was not a product that was suitable for upscale and luxury
tier environments to put in front of their guests or customers and use it to build revenue.
and at great margins as well. So Cherto was my answer to let me help my friends and colleagues
and compatriots across the beverage alcohol industry make more money, drive gross revenue,
increase gross profit. So this was not just, ooh, I really liked Nodroni's. I wish I could have
my own little brand name. It really was, there's a hole in this industry that is ready to be filled.
And fortunately, I had some competitive advantages that a lot of upstart brands don't have
that allowed me to take this project to life. And here we are four years later. And drink
into this breast and martini right now. Well, congratulations again on the launch. Super
exciting to see that take place. You know, from your perspective, in terms of meeting the needs of
a particular retailer or a fine dining establishment, you know, when you go into a potential
account with Cherto or any brand, you know, what are you thinking? Are you thinking, I need to introduce
this buyer to this particular flavor profile? Are you thinking I need to solve a problem around
their margins? Is it about learning what that problem is? What's your perspective when
heading into an account and thinking about how to sell into it? Sure. So I've written extensively
about this in some general and tasting panel. I've done podcasts about it. I've lectured about it
about how to speak buyer. Having been a buyer, we speak a very special language. And let me be
brutally honest, no insult to any individual. There are a lot of egos. There are a lot of
unfriendly attitudes. There are a lot of, I am God, mentalities in the buyer world, especially as
you get up the ranks to really big buyers. So there's definitely a little bit of a, you got to
appease the ego a little bit, mentality. But ultimately, the number one piece of advice I give,
the sort of hallmark of everything I talk about when I talk about how do you sell to a buyer?
Is it is not about your product strengths. It is about understanding their needs and how your
product can help make their job easier. Save them time because I promise none of us have enough time
and make them more money. And I think we're not just for chair-till, but we're any brain manager
or owner or whatever of any beverage alcohol brand. When they're pitching to buyers, tend to focus
on how great their product is and what their product story is and how many points and all of the
things that make it special. And that messaging is important, but that should not be your leading
message. Your leading message should not be the transaction. It should be the partnership.
I as a buyer, I'm putting on my buyer hat. Now, I as a buyer know it's your job to sell to me.
I as a buyer know that you want to sell to me because if I buy, you make more money. That is,
that is like the overt and implicit implication of our relationship. But if you make it about the
transaction, you may or may not get a transaction once you may or may not get a recurring transaction,
but you will not gain the relationship. I encourage everyone to think about the relationship. It is
not about how good your product is, is about how your product can make the buyer look better
financially, give them a raise no matter how they're paid, whether it's bonus or whatever,
make them in their business more money, save them time, the biggest resource that we don't have,
and make life easier for them. My pitch for chair-till is the same. I always want to try to understand
the account before I go and I don't walk into an account blind. You will never hear me say the words,
this is perfect for you. That's like nails on a chalkboard to say that to a buyer. How dare you
tell me what's perfect for my, my program? Like that's not how this works. But at the end of the day,
if I'm speaking to a hotelier, I'm talking about the value of minibar, in-room dining, where they
might not have a bartender, banquets events, catering sales, things like that. Grab and go. It's a very
different conversation than if I'm talking to the buyer for a stadium or a theater or the symphony.
It's very different than if I'm talking to a retailer. So it's not what is my product and why it's
a great. It's what is the use case for my product to help make you more money in your life?
I love that and let me know if I'm capturing this correctly. It's less what my product or brand is,
and more what it can do for you, my partner, the person I'm selling it to, is that correct?
Exactly. I'm taking back, I'm thinking about my mom who, for the longest time, I tried to sell my
mother on the idea of drinking great quality wine when all she wanted was an inexpensive wine that
she could put ice cubes with and feel guilt-free. And it took 20 years, but I came around at the
seller to her. You're in Portugal where there are myriad great wines that are not expensive,
that do the job, and you wouldn't feel bad about putting a nice cup in it if that's the way she wants
to drink it. Absolutely, absolutely. So one thing I know that you and I are in steadfast agreement
with is the idea that there obviously needs to be a knowledge about product, whether it be wine or
spirit when it comes to production and laws and taste, but the industry is often underserved by
folks that don't understand the basic mathematics. And I'm curious from a sales perspective,
if you see any common or recurring math mistakes from entry level sales people over and over again.
So I might, I might, I'm going to answer this, but I'm going to speak more to economics than
street math. Again, it kind of harkens back to a strong salesperson, whether you are a distributor
sales rep, whether you are a brand owner anywhere in between sales director or whatever it is,
it harkens back to not being transactional. And the price of Cherto is almost like an afterthought.
I barely, I mean, obviously we talk about it, they need to know that's usually the very last thing
after I've had 10 or 15 or 20 or 30 or sometimes an hour with a buyer just enjoying
the relationship, whether it's brand new or refreshing an existing one. And, and having these
great conversations about how we can mutually benefit one another, because again, the implicit
benefit to me as the person's on the product is my business succeeds or, or I personally succeed
when you buy this, right? That's we know that. But the economics of this are something I rarely,
it has to come up in conversation, but it's not something I talk about. And a lot of buyers, so
when you're talking about sort of math mistakes, I would say it's not even necessarily a math mistake,
but a lot of buyers lead with this is such a great price. Let's talk about what makes it so great.
It's like, no, no, no, no, no, like let's get excited about the thing first. And then we can talk
about the transaction that's going to follow. So that I think is the one thing that people do wrong.
Or it's like, well, it's this much, but for you, it's this discount. That is so disingenuous.
No, it's not for you that there's this discount. This is the built-in discount that you've arranged
with your, with your sales channels, whether it's your distributor, whether whatever you know,
it's like, front line is this, quantity is this, but for you, I can, I can arrange a deep discount.
It's so disingenuous. In some states, it's not legal, but in the places where it is legal,
it's like, we see through that, just be like, look, here's what it is. Now, it's completely okay
to respond to something. I mean, like, hey, it's front line this. It's cutie that. And they've
been like, is there anything we can do to sharpen the pencil? Or like, hey, at that price point,
maybe it doesn't quite fit what I need for to run my margins and put this out of the price.
I'm looking for, I'm like, well, let's talk about it. Because again, partnership, you know,
I would much rather do 100 more transactions with a partner at a lower margin and make the money
on the repetitions than I would be steadfast in my like, well, this is what it costs and maybe do
1/8 the business. And I want this on my epitaph. You don't put percentage points in the bank,
right? I care about the relationship, but when it comes to the math of things, the economics of
things, it's not the percentage. It's the actual dollars. So if I can make more gross revenue and
more eventual gross profit on a lower percentage margin, that is fundamentally better for my business
than if I do less repetitions, less turnover at a better margin because as much as my accountants
love percentage points, as much as your investors might love percentage points and as much as
your board of directors and your VPs and your seniors might love percentage points at the end
of the day. It's dollars in the bank of gross revenue and dollars in the bank of gross profit
that mattered most. I love that. You're beating me to the punch. I was going to bring up with concept
that I sometimes hear, you know, penny profit versus percentage margin and you've encapsulated
it perfect, right? Which is it's about dollars in the bank at the end of the day or the register
as it were. Tell me a little bit about how you think about quantity of discounts as you refer to
them QDs or pricing waterfalls, right? Is it, you know, the mandate of the rep, is it about trying to
get a buyer to go kind of further down that waterfall and take 10 cases over one or is it, is it
about kind of something else? So I can only speak to my experience. This is my first time having
a product and selling anything, right? I'm used to being the buyer in this conversation. It is an
expectation in our industry in beverage alcohol that there are volume discounts. It doesn't matter
if you're wine, beer, spirits, RTDs, whatever. That is just a buyer expectation and part of the reason
for that is when you have purchasing power. Again, I was buying like $110 million a year beverage.
I would expect that given my ability, given my, the cash flow through my corporate accounting
departments and given my ability to do some serious volume that there would be an added benefit.
And again, this is where partnership comes in. But let's look at Budacan in New York as an example.
A buy the bottle at Budacan sells more cases a year than most high volume restaurants buy the glass.
I mean, we had some wines by the bottle that were selling 100 cases a year by the bottle,
not by the glass, right? Now granted, that's an extreme example. But if I can give that kind of
is by the glass six, seven, eight, nine, 100 cases a year, if I can give you that kind of business,
I'm expecting to pay less than the person that can maybe only give you 10, 15, 20, 30, 40 cases of
business over the course of the year. And the reason for that and it all is back to partnership.
And again, this is where it's legal in New York. Everybody gets the same discounts. You have to
price post the volumes, all of those things, right? So now I'm not talking about free goods or illegal
issues there. The expectation is that you benefit from the discounts because you're doing the
repetitions and you're making more overall and gross revenue and gross profit, even at a lower margin.
I benefit because with my purchasing power, I'm buying it for less. I can put it out at a lower
Chris or I can put it.
right at the same price as my competitive set,
and I can take a better margin without gouging guess.
So either way, it financially benefits both the gross revenue
and gross profit of my account, as well as yours.
So yeah, so there's an absolute expectation
of QDs, quantity discounts.
That being said, I don't mess with the margins
of my partners.
So it's my brand, my business partner,
my principal partner, and this is the importer.
So we set our margins, but then we let the distributors
decide what they're going to charge in.
We expect people to be pretty standard
and we ask them to make sure they have
a volume discount and maybe a deep discount
for very high volume for some of our high volume accounts.
But we really let them decide.
When a buyer queues to us, like, hey, this would be a go,
but I really needed to be at this price.
If that means that we on our side is the importer
and owners of the brand also need to shrink our margins
in order to make that relationship work,
that's a conversation we have with our distributors.
And again, it's partnership.
So we might ask the distributor like, hey,
we know that what you need to get to this point
is going to be hard on you.
So we'll contribute some of this
and we'll bring our margin down a little bit as well.
So again, the partnership is not just with end buyer.
It's with every partner along the supply chain.
I'm curious if, you know, when it comes to these quantity
discounts and volume, right, both as a buyer
and now as a brand owner, right?
How do you think about, not in terms of absolute quantities,
but in terms of maybe days or weeks or months,
is there a sweet spot for either a retailer or restaurant
when it comes to inventory turnover?
Like how much there, you know, I'd love to take 10 cases,
but in their mind, they're thinking,
there's no way I'm moving through more than four this month
or over the next two weeks.
How much did you stock when you were a buyer
or seek to stock and how much are you discovering
might be too much?
How do you think about that issue?
- Scott, I'm happy now because you were getting deep
into one of my favorite topics.
So what we're really talking about is a number of things.
Number one, I think the most important factor
for a buyer to understand is purchases to sales, right?
You have to understand what you're purchasing
relative to predictable and predictive sales
outside of any extreme circumstances.
Now, purchases to sales is not the only factor
a buyer should consider, but if you're buying 50 cases
of something where you're anticipated run rate
is 20 to 30 cases, then you're indebting yourself
cash flow wise to inventory that you don't need to
unless it's to take advantage of a big quantity discount.
So purchases to sales is pretty important.
That's based on historical data.
This is a brand new product.
You have no historical data
of chair-toned groney purchases to sales.
So you learn that.
It grows, it changes, it evolves depending on the season,
depending on all sorts of things.
What are the events in your city, things like that?
So that's number one.
The most important thing in the first part
of the answer to your question is really understanding
inventory turnover dollars are so much more important
than inventory turnover items.
So I'm now talking as a beverage manager,
not as the brand owner of a brand with two products, right?
Of course, the turnover of chair-toe.
If I'm a retailer, I'm a stadium, I'm a concert hall,
I'm a luxury hotel, whatever.
Of course, they need to turnover.
The inventory needs to sell absolutely.
But for beverage managers, what you need to be looking at
is your inventory dollar turnover.
And it depends on the account.
It depends if you're on or off-premise.
It depends what type of on-premise.
So I can't give you a magic number.
But I can tell you, number one, inventory
is an asset, not a liability, especially
when it's wine, which is an inventory that appreciates.
And number two, in my restaurants,
I was looking for a three-to-six-week inventory dollar turnover.
Now, that doesn't mean every wine would
sell in three to six weeks.
There are some wines that are on the list that are designed
not to sell.
I have a whole runner in some journal
where Episodes are issue four of about a six-part series
of transactional psychology.
One of the things I talk about is an upper-limit modifier.
An upper-limit modifier is your most expensive product
in a category.
And it's really not designed to sell.
It's designed to make the second, third,
and fourth most expensive items more appealing, kind of like
with the rule of three.
But it also is designed to sell when somebody wants to buy it
because you can't sell it if you don't have it.
Let's use DRC as an example.
If you have a wine list with DRC,
I don't expect your DRC inventory to sell through every six weeks.
I expect the dollar value of your total inventory
to sell through every six weeks.
And when you sell one or two or three
or five bottles of DRC, you're that's great.
That's great gross revenue and great gross profit dollars
into your account.
But that product serves as an upper-limit modifier.
So not so much talking about Cherto
and how a retailer would want to see inventory turnover.
But just in general, turnover dollars number one,
inventory is an asset not a liability.
Two, number three purchases to sales.
If you're over purchasing on your dollars on your sales dollars,
then you're going to always be cash flow negative.
And I don't know very many owners and operators
like cash flow negative, right?
So it's just about sensible management.
But at the end of the day, if you know,
so one last thing I'll say about purchases to sales
is if you're a retail and you're bringing in Cherto,
you're like, these look great.
We have no idea what sales will look like.
We anticipate we'll sell 12 cases a month,
but there's a quantity discount at 30 cases.
It would maybe make sense to bring on 30 cases
so you could take a little bit of a better margin
because it's not like you won't sell those.
And let's say that was your prediction
and you sell seven cases a month.
Okay, you got a couple extra months of inventory,
but you'll turn it over.
It's not a big deal.
If the quantity discount is worthwhile,
that being said, some quantity discounts are so minor.
It makes no sense.
The amount of time I see price posting
and it's like a frontline, 1299, five case, 1214 or 1163.
It's like, if my usage on that is going to be
a case in a half a month,
there is no need for me to commit the dollars
and the physical space.
Let's talk about the finite amount of space of storage
to save 70 cents a bottle
or whatever it is, 80 cents a bottle, 90 cents a bottle.
It's almost irrelevant
and it's not worth tripping over cases of wine
in the sellers or in the store room
just to save what will amount to at the end of the life
of those 50 cases, something like 40 bucks.
- Yeah.
I love your mentioning of this concept of upper limit modifier.
I think of it as price anchoring, right?
Kind of these ideas that come from behavioral economics, right?
Now, people, both customers and consumers
and make decisions in your time as a beverage director
in your time selling cherto thus far,
have you come across any tried and true psychological methods
for tapping into these needs desires of buyers
that kind of work time and again or not?
- So I am an amateur study of behavioral economics
or as I like to call it transactional psychology.
I have tens of thousands of empirical data points
of evidence about what makes sense and what doesn't.
So, I wanna answer this without anybody thinking
that there's manipulation going on.
Understanding how people think helps you anchor
how you are going to present to them.
It's not a manipulation.
I was the head somebody for the world back in 2012.
And if you're not familiar with that ship,
just Google the world ship and go down
a 30 minute internet rabbit hole.
But basically, world's largest luxury mega yacht,
the size of a 2000 passenger cruise ship
and in that same footprint about a hundred
and I think 47 privately owned apartments.
The crafts way to say it would be the residents
were 1% of the 1% more billionaires and millionaires.
This was nobody's first home.
It couldn't be second, third, fourth, fifth, sixth, eighth home.
How many people had their private jets follow the ship
in case they wanted to pop off and go somewhere?
Anyway, these were people who, I mean, in the time,
if they were walking and they dropped $10,000
in the time the three seconds would take them to stop
and pick it up, they had made more money
just through their business entities and interests.
And it's not even worth their while to stop,
to pick up $10,000.
Lovely people.
The reason I bring this up is these are individuals
who the amount of the transaction was irrelevant.
I could have sold anyone of them a $100,000 bottle of wine.
It wouldn't matter.
The question was always, is it worth it?
Is it a good value?
They didn't care what something costs.
They cared that it made sense
and it was a good use of their resources.
Even though those financial resources were absolutely limitless.
So when it comes to like the transactional psychology
of this, it's not about what it costs.
It's about making sure that the value proposition
is communicated in a way that aligns
with the needs and goals of the buyers.
So I'll give you a prescient example with Chertel.
One of the use cases, the early use case,
when I already thought I wanted to do this,
but before we had come to life,
I was at a Seahawks Cardinals game to go hawks.
That was a really great Super Bowl
that I watched from Wine Paris,
watched 'til five in the morning in France,
cheering in a French sports bar.
It was a rough day at Wine Paris the next day.
I'm not gonna lie.
But I was at a Seahawks Cardinals game in Phoenix
about four years ago.
And I was with some friends and we wanted a cocktail.
And we knew there was gonna be a line.
So we left it about the midway through the second half.
We got in line.
And almost at the end of the third quarter,
we finally got our cocktails.
It took almost an hour.
And first of all, they were undrinkably terrible.
They were $38 a piece.
They were so bad.
I didn't even wanna drink it after all that.
But what really frustrated me was,
I watched on bartender spill over two bottles
worth of liquor.
Every time they went to the jigger,
they were spilling.
Every time they took it away, they were spilling.
I watched them mismeasure.
I watched no consistency, no cost of goods control.
I watched them take shots.
I watched them drop and break a bottle.
But more than anything, I saw the timeline.
I started timing the repetitions from order to production.
And it was about four minutes.
And so as a beverage operator, in my mind, I'm screaming
because even when you shake the espresso martini,
this is an eight second pickup.
And so I did the math.
Forget that I was in line for an hour,
just in the 20 minutes of halftime.
If that one bar could have taken their production time
from four minutes to eight seconds,
they would have done $32,000 more business
just at one outlet in one stadium in one 20 minute period.
That stadium had over a dozen outlets.
That means that stadium could have been close
to a half a million dollars of extra revenue
in the 20 minutes of halftime
if they had something like this.
Also, 100% cost of goods control, right?
No shrinkage, no loss, no waste, no doing shots.
put a thousand units in that venue. And at the end of the day, they owe you a thousand units
of sales or whatever the sales were, plus the amount of units equals a thousand, right?
So when I am talking to large venues, stadiums, venues, arenas and all that, my talk about
cherto is not about a mouthy coast in the palm of your hand. I mean, it is, right? It's
understanding the psychological needs of that buyer, stable cost of goods, no loss, shrinkage, theft,
whatever. Well, like you're not having bartenders doing shots. And the economics of the speed
of service, it's not a labor cost savings because that labor is already baked into that timeline.
But it's the economics of the speed of service and the ability for this to drive gross profit.
That is a very different conversation than if I'm talking to the buyer, I was talking to the buyer
of Italy, for instance, very different conversations that the conversation is about,
this is Italy in the palm of your hand. These are made on the mouthy coast. This is the most
significant cocktail in Italy in the groan. It's not that the economics of this product don't matter.
They do. It's about understanding, I wouldn't even say a pitch. It's not, I don't pitch
cherto. I talk about cherto, but it's about understanding the needs, the inherent, the subconscious,
and the psychological needs and the operational needs of the buyer with whom you're interacting,
and adjusting the conversations who focus on meeting those needs. Again, it's the partnership.
How does this help you? For the buyer, Italy, this helps you because it is germane to your concept
and it's a great looking and great tasting product. I promise you people are going to come back
and buy more. When I'm in a stadium, that's a very different conversation.
Yeah. That's about relevance. It's about minimizing dissonance. If I have a problem and you're
not addressing it, there's noise. Can we zoom out for a moment? You talked about waste,
spillage, overpouring theft. We might term this yield. This is something that doesn't show up.
If I'm a salesperson and I've got my price sheet, I'm selling this wine in a bottle at one case,
three case, five case discount. Yield isn't baked into that. I'm curious how a rep can help a buyer
solve or address the issue of yield when they're not dealing with, say, a can cocktail.
Sure. Yield is not static. It's very, as to your point, yield calculations for a bottle of wine
are different even if it's by the bottle or by the glass. It's different in what category it is.
If it's sparkling, if it's sweet, the life of an open bottle of sparkling wine by the glass is
in on-premise is basically two days unless you have like a really expensive preservation system.
If you're using like the Corovan sparkling, that's a different story, but I'm just saying in general,
right? Versus the yield, the life of an open bottle of sweet wine, vintage port, let's say,
is a month. If you're using Madeira, indefinite. That bottle can be open for five years and it won't
change, right? So yield is not static. Number one, number two, yield concerns are different when
you are using a mixing product, i.e. liquor of any kind versus a, as is product, i.e. wine.
So when a sales rep is selling wine, the yield calculation doesn't really come into play.
For on-premise, they're going to build in the price. This should come as no surprise that almost
every on-premise, the first glass of wine sells the bottle because if you only sell one glass and
you lose the rest of the bottle to oxidation or it doesn't sell or whatever, then you've at least
broken even, right? That's kind of industry standard. So it's not so much the thing with wine,
but when it comes to spirits, let's say, we'll take RTDs out of the equation. When it comes to
pick a spirit, that might be served just as a measured pour or that might be served as a component
to a cocktail. And whenever you are dispensing liquor, you are potentially having yield issues.
How many times have you been sitting at a bar and there's always that one dude and it's always a
dude being like, "Oh, can you pour me a little heavier? I'm a regular here." Like, "Oh, that's it."
Like pour a little heavier, right? Or, you know, the guy, or just, I mean, how many times have you
seen somebody use a jigger and then overfill it? It's like, what is the point of measuring if you're not
actually using the measure? And as an aside, as a beverage professional, it's like the point
of measuring cocktails is because these cocktails are specced and tested and adjusted to be perfect
with these exact amounts. So when you don't use exact amounts, I mean, you want to, you want to
drive me nuts? And a growne is a measured one-to-one cocktail. How dare you try to eyeball a
growne? I don't care if you're the world's best bartender. I promise you cannot eyeball equal parts,
gin, red bitters, and sweet rumoo. You can't do it. And if you're overflowing the jigger with the
gin, you're not doing me a favor. You're actually making the cocktail inferior. But when it comes back
to yield, when we're talking about liquor specifically, you have to build in a percentage of loss.
I don't know the exact number, but I feel like in beverage programs past, we tended to build in like
six to eight percent loss per bottle to spillage, to dripping, to overpouring, to overmeasuring
things like that. That's just kind of a lost case that you take into your budgeting when you're
pricing out the cocktails and when you're thinking about your gross margins that you want to run in
your categories. Did you find with wine that you might bake in a certain percentage due to
court bottles, some 1% or something like that as well? No. And the reason for that is, again,
it all comes down to relationships. If I have a bad bottle, the expectation is that the distributor
is going to either credit it or replace it. And the expectation for them is that the supplier is
going to credit it or replace it. And whether that supplier is a brand group or the winery directly,
there's a built-in mechanism for that. It is really not the burden of the on-premise account
to bear a loss on most wine if it is actually and tangibly flawed. If a guest doesn't like it,
that is not the distributor's problem, not at all. And there's a way to handle that. I'll address
down a second if you want. But the exception here would be rare, super high-end, limited bottles.
If you've got a 1961 Lafitte and it's fallen apart and it's technically flawed because of
its age or storage or whatever, that becomes a really big gray area to expect the distributor to
credit that. But that is a few and far between situation. And that's really more about how a
sommelier beverage manager manages the expectations with the guest before pulling the court can after.
I can tell you, as a buyer, there have been so many times where I have
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[email protected]. Said to a distributor, "Hey, this bottle was rejected by the guest. I tasted it. Personally,
I don't think it's flawed. Are you willing and able to replace or credit it?" And if the
answer is no, I understand, because I'm telling you now, with integrity, I don't think this bottle
was flawed. But at the end of the day, it was rejected. It doesn't behoove me to force a guest to
drink a wine they don't like. So is there anything we can do? Can we split the cost? Can you figure
something out? And a savvy distributor will just be like, "Well, credit it." Because you know what,
the winery is going to credit them, or they're going to replace it. And like, I'm not talking
about doing that with $10,000 bottles. So I'm doing that with wholesale costs, anything under
$80 a bottle. Along those lines of building the relationship, once a salesperson sells a product
into an account, what have you found are the best ways, let's say, starting with on-premise,
that they can truly support potentially the growth, the increasing velocity of that product,
right, continuing to sell through. Is it simply staff training? Is it something else? Is there a
combination where, as a leader in corporate beverage, did you find salespeople really were able to
deliver when continuing to support a brand? And the best way that they can support a brand is
continuity. More than anything, that's the most valuable thing, saying that I'm going to ensure,
especially if it's by the glass, that you don't run out. You tell me what your forecasted
usage is, I'll put in a 10 to 20 percent buffer. Our distributorship will work with you to make sure
that we can get ahead of vintage changes. So if we're three months out from a new vintage or if
the container we're expecting to land in two weeks, but we'll build in a month-long buffer so that
you don't run out of product, that is the single greatest way. That doesn't ensure velocity,
but it doesn't show you, you can maintain your placement, because like the cardinal sin of
relationships with a buyer is running out of product, especially if it's by the glass or a well
product. I'll be honest, I generally didn't like to invite sales reps into due staff trainings,
because while they might be knowledgeable on the product, sales reps, I mean it's then in their
title, sales. I don't want my staff selling anything. I want them to be knowledgeable about the
product. As a sommelier, I've never sold a bottle of wine in my life, but I've made tens of
thousands of matches. My job is not to sell. There's a transaction involved, but my job as a sommelier
is to operate a well-organized and financially viable beverage program with a wine list that is a
sales tool, not a document of what's available to buy, and that could be a whole other podcast about
many writing and wine lists and all that, but with a well-trained staff. I don't want my staff
to sell the wine. I want my staff to understand the important points of the wine when talking to a
guest, so that the guest feels comfortable in making the decision to engage with that product.
So for a sales rep to provide me with the resources I need to do those trainings
are great. The best piece of advice I can give to anyone in that the sales buyer relationship
is continue to make yourself available and ask, just ask the buyer, how can I best support you?
What would make the most
sense. Do you need me to come in and run a credit card on a glass or a bottle of this once a month?
Like is that something that you're that is important? Do you want me to do abstract training? Do
you want me to drop off printed full-color tech sheets? Like how can I support you? Is a great
question. I think so many people try to figure out what people want and they forget to just ask
people what they want. Simply just just ask them how you can be a good supporter of it. But you know,
the thing that's important to me as a as a former buyer, when I have a good relationship, it is not
that this is a shadow discot by the glass and I'm going to pour shadow discot by the glass for as long
as it makes sense and then I'll change it. It is this is Scott, my amazing partner, my amazing
sales rep. This is his placement by the glass. I'm going to run it as long as it makes sense and when
it's time to make a change, either supply issues or seasonality or just ready to freshen things up,
I'm going to give Scott first right a refusal on a placement and say, hey, Scott, it's time for me to
move on from shout to the Scott. I want to give you first right a refusal on this on this by the
glass. Here is the profile and parameters of what I'm looking for price point, regionality, whatever,
tell me what you have because I'd love for you to maintain that placement. That is the that is the
power of a strong relationship. If you are a salesperson that is just based on the transactions with
this many points for this much score, this price, this discount, then the moment the buyer is ready
to make a change, you're not going to be top of mind when they're looking to make that change because
it's not your placement. It's just the brand in the slot. Everything you're saying is resonating.
I'm really would love to tap into this area, which is that that relationship aspect because what
you say, I see to be true, but that is not very hardening if I'm new to sales because I might
enter an account and I look at a list and I say, okay, that slot's taken by that person at that
company, that slot's taken by that person at that company. How do I break in? What advice do you
have? Letters to a young poet. Letters to a young sales rep. How do they break into that unicorn
account? Is it a matter of visiting once a month or a year before they crack that? Any shortcuts,
any tips there? I'll tell you, it's not easy because what you're really breaking into is the buying
personality of the buyer, the ethos of the program, the potential ego of the buyer, the competition
and what their budgets look like. You're a brand new sales rep without an expense account. You can't
compete with, I won't name the names of some of the big brands that are like, oh, hey, we're going
to take you to this Michelin star restaurant and then do a sunset cruise on our yacht with bottles
or champagne like you can't compete with that kind of stuff, right? So all of these things are a factor
and I can't give a one-size-fits-all answer, but here's what I can say. Again, I've written articles
about all of this, so I love that I can call back to them. The very first piece of advice I give,
letters to a new sales rep and when I say new sales rep, I don't mean green sales rep, it's your
first sales rep job. I mean, a sales rep that is new to an account. I don't care if you've been doing
this for 30 years or 30 days or 30 minutes. I ask them always when I do like distributor trainings,
I think what is the very first thing you do when you have a new, when you are assigned to a new
account, whether that account is brand new or it's brand new, what's the first thing you do?
And I get a myriad of answers like, oh, I call the buyer or I email and ask to make an appointment,
take a selection of really what I think would be really great for the account in, drop off some
bottles in my cart and say, hey, these bottles are for you. I would love to chat. Every one of those is
the wrong answer. Everyone is the wrong answer. The best way for a salesperson to engage with a new
account is to under the radar, visit the account. No bags dragged. No business cards given. Do not wear
that windbreaker that has the name of a wine brand or spirits brand on it. You are going in as a
spy. I don't care who you work for or what brands you have. Nothing about you should trigger
anyone to recognize that you are in the beverage alcohol industry unless somebody happens to know
you and recognize you. Right. That's a different story. And go in whether it's on premise or off
premise and just observe. I'm not saying go and spend a ton of money. If it's on premise, go sit at
the bar and have a tea and just watch. Look at their cocktail menu. Look at there by the glass list.
Look at their wine list. Look at their food menu. Look at their decor. Their ambiance. Listen to
the music. Look at the guests. Look at what are on people's tables. I can tell you I can clock and
espresso martini on a table in any dining room without even seeing it. It's like there's a disturbance
in the forest. I bet there's two espresso martini. Oh, there they are. Right. Just look and observe.
You don't have to spend a ton of money. Have a glass of wine. Have a tea. Have an appetizer. Whatever.
Observe the account and maybe do that twice. Get an idea of what they're doing. What their business
looks like. If you're sitting at the bar and they have transparent fridges, look at their wines by
the glass. Like physically how they are there. Look at how they merchandise their back bar. Look at
what's at eye level. Look at what's top shelf. Understand to the best of your abilities how they
operate first and foremost. The same thing for off-prem. Walk into that store and just look around
and when an intrepid retail salesperson comes over here is like, oh, let me help you buy some wine.
Don't be like, oh, no, it's cool. I'm in the wine business. I get it. No, no, no, no. Just say,
thank you. I'm just just looking around right now. But then let them make some recommendations.
Learn how they operate. Just think about a bottle of wine in a 30 to 40 dollar range. I'm not
really sure what I want. I kind of like everything. Maybe something medium-bodied and fresh and
fruit-driven, but what do you suggest? Just see how they operate. Get to understand the energy,
the function, the physicality of the spaces. They're printed collateral. Try to get an idea.
Try to formulate in your own mind what that business is about when it comes to beverage alcohol.
First, then when you engage with a buyer say, hey, my name is Eric. I've just been assigned to you.
I'm your sales rep for distributor X. I've been in a couple times. I've observed some really great
things. I think I have like a decent understanding of what you're trying to accomplish here,
but I'd love to hear it from you. Obviously, I'm a sales rep. It's my job to sell you stuff. But what
I'm more interested in is a partnership. I'd love to hear from you, buyer Scott. What the ethos is
of your wine program or your spirits program? What's important to you? How I can be a good partner to you?
What needs do you have or what needs do forecast having? Because you know what questions like that
are like, my soncer by the glass, I can't keep it in stock. Do you have a soncer? Do you have a
soncer with good volume? Whatever it is, whatever it is, show that buyer that you've done the work
and that you're interested in knowing how you can be useful to them and that you've put in the
effort to try to understand what they're doing, but you don't want to be so arrogant as to tell
them what they're doing. You want them to tell you what they're doing, how you can help.
The perfect example when I was the buyer for star restaurants with legit diplomat,
I'd have sales reps come in and they'd be like, this wine is perfect for you and I got really
fed up with that. Don't tell me what's perfect for me. That's my job as a sommelier. The ethos of
legit diplomat was all the wines were French or they were varieties you'd find in France. So every
section was like Ron Valley and Le Monde, the world, Bordeaux, Le Monde, Luar, Le Monde, whatever,
champagne or sparkling wine. And so I finally one day lost it. I wasn't rude. Well, maybe I was
a little rude. This guy's like, oh, this wine is so perfect for you. And it was a napazine. And I
said, okay, tell me why this wine is perfect for my account. And he's like, well, what do you mean?
I mean, it's a great price. It's 94 points. And it goes to this discount. You know, it's front line
1499, but you can pour it by the glass for 1199. You'll make so much money. And I was like, okay,
I'm going to stop you right here. You've just told me that this is perfect for my restaurant.
What you've done is given me a throw away sales term just like elegant. What does elegant
mean? It means absolutely nothing. People just say elevated my least favorite word on the
freaking planet, right? You didn't even take a minute to ask me what's important to me. And you
fundamentally failed to understand my beverage program operates. Like, do you know the ethos of my
wine list? He's like, well, yeah, you have like great wines at great prices. And it's mostly French.
I'm like, no, that is not the ethos of my wine list. Ethos of my wine list is we are French or
versions of French varieties that you'd find elsewhere in the world. Tell me where in France,
Zinfandel grows because you've just said it's perfect. Not I think this could be a good fit.
I'd be fine with that. This is perfect for your program. You don't understand the first thing
about my program. You're just coming in here and pitching me. And I got to tell you that is not
going to make for a meaningful relationship. So I'm going to suggest that like I'll schedule
meeting with you three weeks from now. Take three weeks to think about it. Pay attention to what
my program looks like. And then come back and I'll hear your pitch. But don't tell me something is
perfect. If it fundamentally has no business being in my restaurant, I love Barolo. I don't have
any Nebiole here because Nebiole doesn't grow in France. So like understand your buyer,
try to understand your buyer. Don't try to sell to your buyer. Wow. Wow. So much impact. I mean,
what you're sharing, I find it very fascinating that it echoes a lot of interpersonal
relationship advice, which is if there is a conflict between a couple, right? I was reading
this somewhere in New York Times well or something. It's like, well, the best things you can say is
tell me more. And that is exactly what I'm hearing. You know, a rep should potentially ask a buyer
after having visited an account without having an appointment to discuss wines on day one or
spirits or RTDs or beer, right? Is is go in so that you can at the very start say tell me more.
I already know something, but tell me more. I want to learn. And then you're a bit about not going
in with the bag or the swag, you know, for a very brief time in my career for about three months,
I sold sake and I'd gone into an account every two, three weeks with a bag. And every time I went
in clerk at the front of the store said the buyer is doing some accounting in the back. And
the gatekeeper. Yeah. And I finally went in without the roly bag with a shoulder bag that one day.
And I actually caught the buyer and someone behind me had a roly bag and I saw the buyer run to the
back because it was it was a not so silent alarm, right? That this is someone who was going to potentially
waste their time or talk their ear off. Yeah, no, it goes it goes a long way if you've got a roly bag
to lift it off the ground and and and make headway.
to the account. Yeah. For sure. So, you know, before we wrap things up, because you know
the business, the economics, so well, I want to spend time with numbers either real or imagined
when it comes to what might be useful and helping a rep understand the journey of a bottle,
or a can, or any package liquid, you know, if we start with a supplier, right, typically a
supplier sells a product via a case, right? And there's an FOB afraid on board. That's where
they're buying it from the supplier. The distributor buys it from the supplier for an FOB. Can you take
me through a product? Where is it go once it's purchased? Who's getting what type of markup? What
are the expectations? So that someone can, you know, present to an account and understand
some of why things are the way they are. Sure. Well, we'll keep terrorists out of this conversation
because that's a whole other layer of complexity here. And I'm going to spitball the math. It's
not going to be exact. Looking at Europe, let's take tariffs off the equation when a bottle is
X works or X seller, right? So that's the cost of the winery selling it for two to three euros.
Let's convert that in. Let's just say there once upon a time you're on dollar used to be basically
parity. Let's just say it's three dollars, right? X works. By the time that bottle gets to end user,
whether that's the off-premise customer buying or the on-premise consumer drinking it,
there are so many hands in the pot along the way. And it's and you know, at three dollar,
three dollar bottle from the winery where the winery might make a dollar on it if they're lucky,
might end up on a table for $45 when all is said and done. And again, depends if it's domestic or
foreign. There are a lot of things along the way. So let's start from from FOB, the freight
onboard, right? Ostensibly, the price that the wholesaler is going to buy it from the supplier,
whether the supplier is the winery, whether the supplier is an importer. And remember if it's an
importer, there's a layer there too. Typically speaking, fairly industry standard. And I'm not so
experienced on this side of things. So if I'm wrong, please don't come out with, you know,
with a million emails from a million distributors like, how could you say that? That's totally not true.
But it is my understanding that generally speaking, a distributor will take a roughly 40% margin. And
I want to be clear because people misunderstand the difference between margin and markup,
a 40% margin is not the same as a 40% markup. But typically, it's my understanding that from
supplier, a distributor will roughly take a 30 to 40% margin. It really depends on the supplier,
what their operating expenses are, you know, economies of scale, things like that. They will then
sell that to their buyer, who will, if it is off-premise, typically it's a 50% markup, not margin.
And if it is on-premise, it's generally, and again, this change is depending on the on the price
of the product, right? It's generally on average a 300% markup. If it's by the glass, it's usually a
four or 500% markup. If it's a luxury environment or a captive environment, like I was just talking with,
I'm doing an event in a few weeks at a luxury resort in Tucson, but like out in the desert. And so,
you know, we were talking about them ordering some wines. It was like, I need to understand when I
look at some of the wines that you could potentially order from your distributors, what your markup
is. It's like, oh, five to six times. I'm like, okay, so that means if I choose a wine that's 20
dollars a bottle, you're going to charge me 120 wholesale. You're going to charge me 120 dollars a
bottle list, which is absurd, but these things happen, right? So tracking, you know, rough numbers,
the FOB $10 to the, you know, X works four dollars. By the time the import fees, duty,
tariffs, landing and the importer margins come in. It's FOB $10 to the the wholesaler. That's maybe
$15, $16 to the, you know, wholesale cost front line. That could then put that bottle at $22
on the shelf or $48 a bottle. If it's not by the glass, $16 a glass or $60 a bottle. If it is by
the glass, that's just sort of how the economics work out. As an aside, for my beverage on premise
beverage buyers, you pour five glasses from a bottle standard, great. The bottle should always be
less expensive than five glasses aggregated so that your servers can say, if two people order a
glass of wine at a table, say, if you think you might each have another glass, there's five glasses
to a bottle. There's a much better value if you buy the bottle rather than the equivalent amount
of wine by the glass, but that has to actually be true and it has to be more than like a dollar savings.
So typically my my markup strategy while I'm on this tangent was for something by the glass
was somewhere between like four point two and four point five times the glass costs so that it was
somewhere between a half and almost a full glass cheaper to get the bottle because it is more
valuable to get the full the higher end sale upfront than the potential for more revenue because
transactional psychology and financial economics, people drink slower when it's by the glass
because they know they have to be triggered to another transaction. There's a psychology there
like absolute proven psychology versus by the bottle its excess and they're just going to keep going
and going and going. So yeah, so back to back to the question at hand, there are a lot of margins
and markups and and layers along the way through our mandated three tier system of distribution
and unfortunately now with higher operating costs with higher labor costs with everything else being
I miss precedent at times. I don't remember the last time it was precedented maybe 2018 was our
last precedent in here, but in these unprecedented times one of the things so it's kind of like
chicken and egg and you know restaurants aren't making as much and cost are more expensive so they
raise their prices so that's less of a value so people are buying less so they're not making as much
revenue so that's the doom spiral. So being thoughtful about margins and markups at every level
the winery what they're charging the importer if it's foreign whether it's foreign or domestic the
supplier the distributor and the honor off-premise account being strategic makes so much sense and
all comes back to what we started talking about almost an hour ago it's about the gross revenue
dollars and the gross profit dollars then it on and the sales frequency and the turnover rate
more than it is about the specific margin of percentage which might look good to your accounting
department on paper but won't look good in your bank. To that end before we wrap things up
one last kind of numbers question which is can you spend a moment just sharing any insider wisdom
you have around the idea and concept of blended or weighted margins which are so important when
it comes to dealing with things like volume or being able to sell in something that might not be
competitive in absolute dollars but also isn't necessarily going to hurt things if you're not selling
a ton of volume I'm curious if you could touch on that. Oh blended cost of goods is the most important
thing for for people to understand especially on-premise. The amount of times you know I used to work
for a big company so every month we our product cost managers would send reports and I kid you
not the report would look like this individually per restaurant they'd sort the inventory by list
price and then cost of goods percentage and then set a report with the top 20 cogs wines highlighted
in red saying you've got to increase prices on these wines the cogs is wrong this isn't sales this
is just what's in the system and the amount of times I had to explain blended cogs so let's take
it to buy the glass and one of the transactional psychology articles I wrote recently for some
journal I think it's issue two was about the concept that I call compelers but I also did a whole
two-part series last year about exactly this about buy the glass pricing and blended cost of goods
that's not shameless self-promotion it's just if you want to digest this find those articles
we will link to them okay perfect perfect but basically so whenever I had a beverage program on
premise with very few exceptions you know if it was a restaurant that only had 30 or less wines
total then this didn't work but for most restaurant beverage programs I've ever had I always had
three sparkling wines by the glass there was always an entry-level sparkling that was my I need
a sparkling wine to get the job done I need a sparkling wine for sparkling cocktails I need an
amenity for VIPs I need an amenity for recovery we're so sorry relate on your table happy anniversary
good to see you again regular except we haven't seen for a while whatever the discretionary reason to
give something away so there's always that entry-level sparkling then there's always a mid-price
sparkling and that one should be something different so usually my entry level would be again it
depends on the concept we're not talking about like Michelin star restaurants in New York but let's
just say I'll use a little diplomat as an example my entry-level sparkling was I don't know 10 or
$12 then I had a mid-tier around 18-ish dollars that was a sparkling rosé right so now we have a
different category so it's not about a different price it's about a different category in style of wine
the person that wants to drink sparkling rosé is going to order that because that's the option
they're not going to compare it against the the ten dollar sparkling not blank right because they
don't want a sparkling blank don't want a sparkling rosé and then I would always have at least one
champagne and usually my champagne was a very high-end champagne that I put in price as what I
call a compiler something that is recognizably such a great value that it compels people to buy it
at a diplomat that was crude for $45 a glass and right now people are screaming about the cogs
on that glass of crude right now granted this was a while ago where wasn't as expensive right but
even still that was terrible cost of goods and here's the logic I don't come into a restaurant
expecting to spend $45 on a glass of wine but when I see a wine like that that I know should be
90 to $120 a glass for $45 there is a huge trigger I am compelled to spend that so suddenly I
just spent 400 percent more than I was going to when I walked in on that glass of wine because
there is this compelling thing so right there that is a 400 percent increase rev gen on a guest
just for one glass but probably the whole table is going to get involved in that because wow what a
good deal so that could be an 800 a thousand 1,000 1600 percent revenue increase over them all
getting my entry level sparkling glass of wine no it's not going to work for everyone for sure
number one that calibrates the value of the experience just beyond the specific
product. Number two, it allows my servers to give a better guest experience and say things
like everybody deserves to drink the best. So we wanted to make it easy and approachable
for you to do that. But more than anything, it's that $45 of gross revenue. And I don't
remember the number $16 of gross profit in the bank. Now, my margins are way better on
that $10 glass of sparkling than I think I spent $7 or $6 a bottle on, right? When I
sell with that, I am putting $10 of gross revenue in the bank and $3 or $4 of gross profit.
I would much rather put the $45 of gross revenue in $12 or $16 of gross profit in the bank
on all accounts that worked. The cost of goods on that is terrible. It's like 65%. But
I'm going to sell $150 to $210 sparkling for every one glass of crude that I sell. And
if you take the entire category of not even wines by the glass, just sparkling wines
by the glass, then the blended cogs because my $10 glass, I'm running it. Whatever it is,
I don't know the math in my head right now. I'm running that at about seven or eight percent
cogs. And my crew, I'm running at 60% cogs. And the sales frequency of 100 at 10% blends
in with the sales frequency of 17 60% and my blended cogs on by the glass between that
sparkling categories, 12 bucks or 15 bucks or whatever it is, right? That is the value
of blended cost of goods. If you're just focusing on a single product with your horse blinders,
oh my god, this is 65% cost of goods. The same thing with my first growth portals. The
same thing with DRC. And one day I got a call saying, like, uh, how do you sell so much
of this? I'm like, I'll tell you because I buy it for $900 and I sell it for $1,400.
And that's terrible cogs. But that's why I sell so much of it. And every time I sell
it, I'm putting $1,400 of gross revenue and $500 of gross profit in the bank. And it's
an upper limit modifier and it's a compiler and it calibrates experience for my guests.
So when I sell it, it's still financially good for me. And the blended cogs on all of
my other wines by the bottle by 60 and 70 and 80 and $1,900 bottles of wine that I am taking
full markup on well, manage the six or 12 or 20 or 30 times a year. I sell a $1,400 bottle
at 60% cogs. Amazing. Essentially, the folks who are asking for a glass of Prosecco in
mass can subsidize the one person for every hundred that, uh, you know, that that wants
crew and knows what crew is. Exactly. And again, there's a psychology to this. It's about
making the, the more expensive product, more appealing to a guest to transact with. Basically,
at the end of the day, you've made more money for the restaurant. You've made more money
for your server, presuming they tip appropriately on it. So you've built their check average.
You've built their tip percentage, but the guest has had a better experience. There
are not a lot of of industries where the guest spending more is happier to have spent
more because they have had a much better experience. This is a perfect example for that.
You make something luxurious, accessible. The guest spent $45 instead of $10, and they're
happier for it. It is a win for everyone. And most importantly, it's a win for your
guest because that, guess what? They're going to post about on social media. They're going
to talk about it. They're going to come back. They're going to choose to come eat at your
restaurant because, man, I can get crewed for 45 bucks. And maybe that, those, that
math doesn't work anymore. That's just one example. You can do it with anything, right?
But it is a, it is also about, uh, future proofing your business and making sure that you
have repeat guests as those are bread and butter. So, so it's a win, win, win, win, win all
around. Let's bridge back to Cherto and the notion that you have made this leap from
buyer to seller in a way. Have you discovered anything about yourself or about sales in,
in making this leap in the last few months of having launched the brand? Yeah. I mean,
it's still weird for me to sit in front of a buyer and pitch to them. No, granted, I have
some special fluency in what needs to be said and how it needs to be said, right? But
it still feels weird to me to be on that other side because at the end of the day, I'm
really not trying to sell anyone anything. I'm trying to make the case for why this makes
sense for them long before I had Cherto. I can tell you that I am shocked at the wide
variance of buyer styles and personalities. You know, I always prided myself on communication,
accuracy, follow through, honesty, courtesy, and respect. Regrettably, this industry has
trained a lot of buyers that they don't need to be courteous. They don't need to be respectful.
They don't need to be honest. They don't need to communicate. And it's a little bit surprising
to me sometimes even like people I know, people I've hired to work for me, people I've
mentored where I can't even get a response to an email like, Hey, friend, can you tell me
if there's any time in the next six months that I can come see you for five minutes? You
know, so that that's a little bit shocking. And it's, you know, if I'm having those struggles
where I have these relationships, it's got to be pretty disconcerting for a sales rep
who might not have those relationships, especially if you're a new sales rep, right? So,
yeah, I've definitely learned some things. Fortunately, people have been very receptive to
Cherto. And again, it looks the part shameless self-promotion. It certainly tastes the part
by serious intention and multiple trips to Italy to perfect formulas. But ever again,
I designed this to be a really valuable tool for a buyer, not to be something I want
to sell and make money on. I'm not going to pretend I don't want to sell and make money
on it. This is my retirement plan, right? But, but it's not just buy this so I can, so
I can make money. It's, hey, here's a thing that makes a lot of sense. So yes, my advice
to every buyer is honesty, courtesy, respect. If something isn't going to work, be honest
and courteous about it and respectful and say, you know, it's just not going to work.
Thank you. Appreciate your time. There's no, there's no home for this year, right? If
you don't like it, that's okay. You know, I don't care for it. I'm not going to work
with it. Totally fine. If you say, yeah, this could work, mean it. Don't just dangle
in every month, be like, oh, yeah, check it with me in two months. I'm sorry. I'm busy
email me in six weeks. Like, just be honest, like I just had a buyer. He said, this is the
best espresso I've ever had in my life. I drink espresso at home every night, but we
just changed our mini bar offerings. We have 4,600 rooms. It's three weeks and thousands
of dollars of labor just to make a switch in my mini bar. Let alone the logistics of reprinting
menus and all that. He's like, I love this. It's probably going to be six or eight months
before I can even consider bringing it in, right? I appreciate that honesty, that respect
and that courtesy because he could have just been like, oh, this is great. Maybe. And then
it's like, well, what am I supposed to do with that? So buyers, honesty, courtesy, respect.
You can deliver bad news. You can deliver news that people don't want to hear in an honest
courtesy, respectful way. And have integrity. If you say you're going to work with something
work with it and it's okay. You don't have, like, you don't have to, you don't have to
work with everything. It's totally fine. Not every product is for everyone from a supplier
standpoint, as I am now technically a supplier. The most important trifecta right is communication
accuracy follow through. That is your triangle. And as long as you have at least two of those
factors, it will stand. But if you only have one, it falls. If you are being accurate and
communicating, you're good with the follow through, right? Let's say there, there's an
accuracy issue, but you're communicating and following through. You're good. Those are
the three most important things that I look for as a buyer and that you as a supplier or
salesperson need to make your mantra, communication, accuracy follow through. There are going
to be times where accuracy isn't there through no faults of your own, a miss pick, a short
on truck, whatever, right? Communicate, follow through. There are going to be times where
you get an order and an email and you, you follow through. Maybe you don't communicate
that the orders receive, but you follow through and it comes to you checked, you checked
it leaving the warehouse for accuracy and you communicate on whatever it is. Those are
the most important things. And as long as you're doing at least two of those things regularly,
there's an issue with the third thing. Whatever that third thing is, it's, it's the tolerance
for a buyer will be there because you're doing the other two things to make it. Amazing advice,
amazing advice. This has been such an incredible conversation and I thank you again for taking
time to talk with me to share your wisdom. Yeah, any final thoughts? Yeah, drinkcharoto.com.
If you'd like to purchase some for yourself, we're already in a few hundred retailers,
we're in about 30 states right now already. But also for any buyers that are listening,
if you find yourself in a captive luxury environment and a retail environment, if you're running
luxury hotels, stadiums, venues, golf and country clubs, members clubs, pool and beach
bars, nightlife, man, the amount of money you can make in a club with a bucket of espresso
martinis because nobody likes Red Bull vodka, no offense Red Bull, they just drink it because
they've got to get something for bottle service, right? Any buyers, I would love to chat
with you about Charoto where we are able to be available in almost all 50 states. There's
just a few of the control and franchise states where you haven't registered. My, I assume
my contact details are in the show notes. Reach out, we'll get some samples in front
of you. I would love to make the use case for how you can make more money and improve
guest experience with my product. That's why I spent four years designing this product.
So yeah, please reach out to me. And frankly, if anybody has any questions or wants to
dive deeper on any of the topics I discuss, whether it's transactional psychology, where
it's understanding a buyer behavior, where it's how to speak buyer and pitch and present,
how to be a better buyer, anything at all like that. Yes, there's going to be a whole
bunch of articles we can link you to, but I am committed to making time for people in
this industry. We all succeed based on the community. We are a huge, tiny industry.
So in whatever way I can help anyone, please do not hesitate to reach out to me. This is
what we're all here for. And nothing makes me happier than seeing other people succeed.
Even if you have an RTD brand and you also make their gronies and express them or to me,
I will tell you everything that I know because if you succeed, that doesn't mean I can't
advise versa. Amazing. Eric, thank you again. And have a great
day. Thank you Scott. It's been a pleasure.
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