When restaurants and bars nationwide reopened and reinstated longer operating hours during the pandemic rebound, Kevin Bratt, concept wine director for the three-location Joe’s Seafood, Steak & Stone Crab, owned by Lettuce Entertain You Enterprises, decided to go all in on shoring up wine reserves at a time when many restaurants were shedding excess stock. “A lot of the direction wine buyers have received over the past two or three years was to liquidate inventory as much as possible to generate revenue,” he says. “On the flip side, I saw that as a great opportunity to capitalize on the availability of things that I didn’t have access to before, due to allocation.”

Overall, Bratt stuck to the restaurant’s core format, keeping the same size wine and reserve list, along with the same price points. “The biggest takeaway is that we have the ability to create deeper cellars with large inventory,” he says, noting that while some of the wine he’s been able to get his hands on might not move right away, he has the ability to cellar wines for the longer term. 

However, that’s not the case for many on-premise wine professionals who, due at least in part to the devastating impact of the Covid-19 pandemic and the ongoing sluggish economy, have opted to cull their wine lists to reduce risk and cost. “During times of economic uncertainty, some on-premise operators have a lower risk tolerance for bringing in untested products or varietals that might tie up dollars and be slower to turn,” says Deutsch Family Wine & Spirits president Tom Steffanci.

In that vein, John Haggai, president and CEO of Andover, Massachusetts-based Burtons Grill & Bar, says the chain had no choice when it came to cutting back. “We had over 50 wines on the list and we went down to around 16,” he says. “We stayed hyper-focused. But honestly it made us better, more aware, and more customer-focused.” 

As the chain pared down its selection, Haggai says well-known California wines were put front and center. “California wines, especially in our restaurants, always sell well,” he says. “They’re known, they’re safe, they’re reliable. We couldn’t afford to waste any, because we didn’t know if we were going to be open next week. We homed in on the consumer and what we knew would sell.” Now, at the start of 2023, the Burtons Grill & Bar list remains roughly 80% tried and true, with about 20% alternative varietals and esoteric wines, he notes. 

And even with a larger inventory, California wines also dominate at Joe’s Seafood, Prime Steak & Stone Crab locations, with Napa Valley Cabernet Sauvignon remaining the go-to offering, according to Bratt. “These labels are always near the top of our weekly sales lists, in the top ten generally both by the glass and by the bottle,” he says.

Powerhouse Producers

For smaller California wine producers, such strategies as Haggai’s can be problematic. But for the powerhouse producers that already dominate many wine lists, further streamlining can be a boon. Famed California winemaker Joe Wagner’s Copper Cane & Provisions, for example, hasn’t had problems keeping wine professionals interested in its wines. About 51% of its volume was in the on-premise prior to the pandemic. After the sharp downturn in 2020 and the subsequent rebuild over the last two years, that figure has rebounded to almost it’s previous level, at about 45% at the end of 2022. 

Wagner says the strong longer-term presence paid off, adding that his company hasn’t lost placements at large restaurant chains. “National accounts [have tended to] stay with what was working and not make any drastic changes,” he says. “If anything, they were cutting back their list and just focusing on what worked. Now we’re still seeing growth, but I think that a lot of that has to do with buyers going with the tried and true and not really taking huge risks until everything gets more stabilized.” 

Terlato Wine Group CEO Bill Terlato says there’s no question that restaurants across the country are shrinking their wine lists. “They obviously went through a lot of financial difficulty,” he says. “I think it’s something that will evolve over time, but right now they want products that are selling, and fewer of them.” 

Terlato acknowledges there’s an intensified competition for new listings, but says for those already in the mix, the situation can be positive. “We have good, strong brands that perform well,” he says. “Part of the benefit with the smaller lists is that if you have brands that move, you’re going to get more opportunities for new listings.” 

Another factor impacting the on-premise is the high turnover in restaurant staffs. J. Lohr Estates President and CEO Steve Lohr says the staffing situation presents challenges as well as opportunities. Lists are smaller, he notes, with well-known brands thriving and top varietals attracting consumers. But a larger-than-usual percentage of wine staff is relatively inexperienced, due to the high turnover. 

“A lot of buyers were either let go during the pandemic or they chose to do something else,” he says. “Now there are a lot of buyers who are quite new and don’t have a good understanding of wine and what makes it so unique. And it’s not just buyers—many of the staff are new also and may not know much about wine. Whatever a brand can do to educate serving staff will definitely help.” 

Treasury Wine Estates Americas president Ben Dollard also notes the shift. “There are a lot of new people coming into the wine category at the restaurant level who have a thirst for knowledge,” he says. “I see that as a massive opportunity because it gives us a chance to tell our story. Treasury Americas has created an online tasting tool called Tasting Room that guides servers and on-premise wine professionals on the basics of wine service.

Stalwart Selections

Amidst the upheaval of the past three years, one area of relative constancy is the consumer popularity of certain California regions and varietals. “Cabernet Sauvignon and Chardonnay remain very strong,” says Terlato. “Pinot Noir is also doing well, and Merlot is finding increased interest.”

Dollard also sees the ongoing adoption of well-known varietals. Within the Treasury portfolio, he adds, that means solid demand for Napa Valley Cabernet Sauvignon and Chardonnay, and for Sauvignon Blanc—particularly in by-the-glass programs.

At Joe’s Seafood, Prime Steak & Stone Crab locations, Bratt says patrons haven’t been too put off by the higher price tags such brands carry, although wine buyers are always looking for more affordable Napa Valley Cabernet options. “As we find new brands that fit into the sweet spot—let’s says $115-$175 a 750-ml. for Napa Valley Cabernet—we add them because some of the wines that were in that category before have now priced themselves out of that range,” Bratt says. “Our team is always looking for more wines to fit back into that range, so people can continue with what they were normally spending.”

Burtons Grill & Bar also moves a considerable amount of Cabernet Sauvignon from Napa and elsewhere. “Cabernet is where the action is,” says Haggai. “Chardonnay and Pinot Noir round out the top three. Bordeaux blends are a go-to for our consumers, and Sonoma and Napa wines are selling great.” Sparkling wines of all types are also booming at Burtons, Haggai notes, and he adds that he’s also interested in Cabernet Franc and Zinfandel, both of which are gaining traction. Neither varietal is currently on the Burtons wine list. 

Napa Cabernet Sauvignon remains the pinnacle California wine, but it generally carries a price tag that is out of range for most consumers, and the recent fires and supply chain challenges have only pushed prices higher. Suppliers are always seeking to provide more affordable options. Terlato Wine Group, for example, is readying a new Cabernet Sauvignon from Paso Robles, called Paso-D’Oro, to be released this spring at a price of around $30. “I think Paso Robles offers an attractive price point with wines that are very distinctive and good,” Terlato says. 

More generally, Paso Robles is a big beneficiary of the ongoing Napa price and supply challenges. “There are regions that are eating into Napa’s share of the pie, and Paso is a huge one,” says Mike Eayad, general manager of Hearth & Hill Restaurant in Park City, Utah. “Paso Robles isn’t new to the game but people are looking directly at Paso wines— specifically Cabernets and red blends—as an alternative to Napa, without any need for us as sommeliers and wine directors and wine buyers to push them in that direction. The new wineries in Paso haven’t jumped in price tremendously over the past years with inflation. There’s a reputation and consistency in Paso that’s comparable to Napa, but without the Napa price point.”

Another contender is Santa Barbara, which Eayad says is absolutely crushing it right now. “There are seriously great Pinot Noirs in that region, and the Cabernet Franc and to a lesser extent the Syrah coming out of Santa Barbara County are incredible,” Eayad says. “I think a Syrah or Cabernet Franc from Santa Barbara can be a little more approachable for guests than something that’s going to be $125 or $150 coming out of Napa. The risk-reward ratio is a little bit more palatable when they’re only spending $60-$80 on a bottle in a restaurant.”

Premiumization Under Pressure

Premiumization has been a buzz word in the beverage alcohol industry for many years, even through the pandemic and all the upheaval it brought. Now, with economic challenges at the start of 2023, suppliers are waiting to see the impact on consumer price acceptance. Wagner of Copper Cane says restaurant by-the-glass programs continue to seek wines that can be priced in the $12-$20 per-glass range, which roughly translates into $20-$50 a bottle at retail. “I don’t think that that’s going to slow down,” he says. “I think part of that is due to the fact that our brands are well-established, and people still want to climb that ladder of drinking better. We’ve sometimes seen that trade down happen in tough economic times but for the time being that movement isn’t evident.”  At J. Lohr Estates, price hikes that the winery implemented for off-premise sales were tabled for the on-premise in acknowledgement of the ongoing struggles for the on-premise sector. Lohr says he’s noticed many restaurants have raised prices on all wine in excess of supplier increases, effectively increasing their wine profit margins to offset some of the additional food and labor costs they’ve encountered recently. 

Thus far, consumers haven’t rejected such moves, but there are signs of a slowdown. “Part of it is that people aren’t going out to eat as often,” Lohr says. “And whereas restaurants have raised glass and bottle prices, they also recognize certain consumers are price sensitive so they’re having happy hours and other specials. People want the experience and they want to splurge a little bit—they’re just not doing it as often.” 

With the economy on shaky ground at the start of 2023, wine professionals in all three tiers are preparing for an impact, although many expect it to be mild. “Consumers have identified in surveys that going out to eat is one of the expenses they intend to reduce due to inflation and lower expendable income,” says Deutsch’s Steffanci. “I expect restaurants, and by default the California wine sold there, to be under pressure in 2023 as a result. But I don’t expect steep declines. Eating out remains an affordable luxury and consumers still value being out, as the bad memory of being ‘shut in’ is still top of mind.” 

While most suppliers say they expect a modest downward swing as consumers are a bit more cautious with spending, they also believe cutbacks on larger luxury purchases will be more prevalent. “I think the on-premise is going to continue to perform well even if we have economic challenges,” says Terlato. “Going out to dinner with friends is a simple pleasure. We bring some joy, peace, and relaxation to people’s lives, and that is something that’s not going to stop.”