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Why wine bars fail

Cathy Marston discusses 3 major reasons why running a specialised wine bar is unprofitable and unsustainable.

15 Jan 2013

Running a wine bar in Cape Town is not quite the easy ride many people seem to think it is.

3 well known wine bars have closed their doors in the past 2 months.

From my 8 years of running the wine bar, The Nose, here are 3 major reasons why I believe running a wine bar is unprofitable and unsustainable.

1. People don't understand wine bars

People often don't realize that a wine bar sells more than just wine - if I had a rand for every person who asked if we sold beer/coffee/soft drinks/food, I'd have been a hell of a lot richer than I am.

Although South Africans drink a lot, there isn't really a culture of going out drinking, as there is in the UK or the US. When people do meet up for a drink,  it is generally as a precursor to going out for dinner - people stay for one drink and then move on.

If customers think a wine bar only sells wine,  they will often just go straight to the restaurant or choose a more generic type of bar for their aperitifs. And with the cocktail culture coming back to the fore, with its trendy image, wider appeal and much greater profitability, it is difficult for a wine bar to compete.

2. Customer's eyes are bigger than their palates

People love to see a massive wine list, full of interesting-sounding wines, big names and older vintages, but what they actually want to purchase is a glass of Sauvignon Blanc for R22.

If you're lucky, you can tempt them to try one glass of something exciting before they switch to something cheaper, but the hard fact is that few people are prepared to spend the night drinking glasses of wine which cost R40-50 each.

Buying a bottle for R200 seems far more acceptable than buying 4 glasses for R50 each and apart from that affecting your sales, it also creates a problem here with stock management.

As soon as you open a bottle of wine, you open a limited window of time for you to sell it - generally 2-3 days. If it's an expensive bottle, there are not that many people who are prepared to pay for it and the risk of having to throw it away is much higher. And that can be your entire profits gone down the drain.

3. Perceived profiteering pisses off punters

A bottle of decent vodka costs around R150 and can be sold for over R450  giving you a profit of roughly 300%.

A bottle of Castle costs about R6.50 but generally sells for about R20 giving you a profit of over 300%.

But these mark-ups are not deemed acceptable for wine. It is harder in Cape Town than other cities because people are able to visit the farms and believe that restaurateurs buy wine at greatly reduced prices.

In fact, most trade prices are around cellar door, sometimes even slightly more and by the time distributor's fees are included, there is often very little difference between the retail price you see on the supermarket shelves and the price a restaurateur has paid.

Add in the Cape Town corkage culture and making profit on wine becomes very difficult.

All of this is accentuated if wine is your major selling point.

What's the answer?

It's difficult running any hospitality outlet in the current economic climate, but I do think these are an extra set of unique problems which only wine bars face.

Whether these are the reasons for all the wine bar closures of recent times, I cannot say, but the fact remains that Cape Town has no dedicated wine bars left in business.

If anyone wants to attempt it again, I wish them the very best of luck!

Follow @CathyMarston and @food24 on twitter for food and wine news.

Read more on: cathy marston  |  wine  |  profit

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