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Rationalise Prices To Earn More

By bringing down your profit percentage to a reasonable extent per bottle and economising your beverage offerings, you'll be able to step up sales, deplete your inventories faster and let volumes drive your earnings, writes Prasanjit Singh.


The pricing of alcoholic beverages is a constant source of friction between five-star hotels and their customers. Our well-travelled customers may be well-heeled, but they are not prepared to pay more than what they consider to be just prices for their favourite alcoholic beverages.

They don't quibble about the price of a pizza or lamb chops, but they feel cheated when they have to pay three to five times more than what they'd be charged by a restaurant in Paris or Milan, that too for entry-level wines. It's time for the industry to listen to the consumer and take a fresh look at beverage pricing policies.

At the Hyatt Regency, New Delhi , we have been able to shore up our beverage revenues by actually reducing prices, and it is because we've understood the importance of incremental revenue.

You can't take a profit percentage home; instead, you can crank up your earnings by reducing prices and pushing volumes. By following this policy since May 2004, the Hyatt Regency has been able to increase its wine sales to 3,200 bottles a month, up from 1,800 bottles in January last year. Did anyone say we can't sell wine in a whisky-driven market like India ?

Our banquet alcohol sales, meanwhile, have gone up from Rs 3-4 lakh a month to Rs 15-18 lakh, primarily because of a 'drink as much as you can' package that we offer to those who host banquets at our hotel. The offer, priced at Rs 275, Rs 375 or Rs 475 per head, entitles the host to serve as much alcohol as his guests are prepared to consume within a specified time band. It increases the host's comfort level, because it relieves him of the burden to keeping a track of bottles actually consumed or worry about pilferage.

What we have managed to established is that rational pricing is a volume driver and it helps us make more money at the end of the day. Though the beverage cost of our core wines is now pegged at 35-38%, our beverage APC has grown significantly on the strength of volume increases. Our inventory also has been depleting very fast -- by December 2004, we nearly exhausted the wine that we had purchased in May.

The hypothesis we've been able to prove is that pricing must mirror demand and not be influenced by our notions of what it should be. Don't blame the product for poor sales; take a hard look instead at your pricing policy.

We identified a core list of 24 wines that accounts for 60-65% of the sales at La Piazza and brought their prices down. Last year, the minimum price of a bottle of wine was Rs 2,200; today, it's Rs 1,200. You can now get eight to ten wines in the Rs 1,200 to Rs 1,800 range. Concurrently, we brought down the prices of four key spirits, namely, Single Malts, Black Label, Red Label and Absolut, as well as imported beer.

We started noticing the initial results by August. Within months, the sales of our core wines went up, pushing volumes, although the graph for our upper-end wines didn't show any discernible movement. Last year, we also brought the prices at which we sourced our wines down by getting a consolidator in Holland to ship us a container.

We were able to effect substantial savings, which, along with the speed with which the stock has moved, justified the promptness with which our management forked out Rs 16 lakh at one go on a consolidated shipment of wine, which was an uncharted territory at that point of time. We also managed to keep our inventory down to a manageable level by limiting our wine list to 70-75 labels -- wines have got to move and not make your wine list look good. In our opinion, extensive wine lists may work in New York or London , but not in India , where the culture of drinking wine is yet to establish itself.

Back in May 2004, we converted a less-used store into a wine cellar where we can store up to 16,000 bottles at a time at an ambient temperature of 17-20 degrees C. It has significantly reduced spoilage and improved the quality of our wines. We are now in a position to send complimentary bottles of imported wine to Club at the Hyatt members on their marriage anniversary. And we intend to use the cellar for wine tasting sessions for groups of 10-12. Banquets, too, must be seen as opportunities to sell wine. All you need is to offer an irresistible package and market it effectively.

Another way to push wine sales is to sell sit-down wine dinners. It's true that you'll make easy money from a buffet, but sit-down dinners yield better, though hard-earned, money. It's easier, too, to control food costs when you're able to sell sit-down dinners. We have to keep thinking ahead of our competition, which explains our decision to introduce a wine buffet at the Polo Lounge. I'll be the happiest, though, when I'm able to serve wines by the carafe at La Piazza. That'll bring us a notch closer to international practices.

Our problem area remains imported beer. For some reason, none of the importers are able to forecast demand, which is why we keep getting landed with shortages every three or four weeks. The importers must set up a system so that the unmet demand for imported beers can be satisfied. We need not only a steady supply, but a greater variety as well. Only then can we do things like offer six pint bottles in an ice bucket and thereby increase our beer sales.

It doesn't take a rocket scientist to crank up alcohol sales. All it takes is business common sense. And the ability to take a giant leap of faith.

-- The writer is the Director (F&B), Hyatt Regency, New Delhi . He can be reached at

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