A wine list is a set of recommendations. It is also a business. Every bottle on it has a cost, a price and a profit. The Court’s Business Calculations say a Head Sommelier or Beverage Director must have a fundamental business insight to use at work.
The document starts from one plain idea: you buy something, sell it at a higher price, and the difference is your profit. The Court’s website notes that the Advanced and Master Sommelier Diploma examinations contain an element of these basic calculations.
01Three prices, one relationship
The document sets out three linked formulas. They are the same relationship, written three ways. Each uses the same example, a wine that costs £10 and sells for £25:
- Selling price minus cost price equals gross profit: sell at £25 a wine that costs £10, and £15 is your gross profit.
- Cost price plus gross profit equals selling price: buy at £10, add £15 profit, and £25 is your selling price.
- Selling price minus gross profit equals cost price: sell at £25, make £15 profit, and £10 is your cost price.
02Gross, net and percentages
Gross profit is not the money a business keeps. Net profit is gross profit minus all the overheads, such as staff costs, heating, lighting, laundry costs, taxes and rent. Net profit needs to be above zero, or the business is losing money.
In the same example, the £15 is a cash margin. As a share of the £25 selling price it is a 60% gross profit percentage, with the £10 cost making up the other 40%. The document writes this as GP plus CP equals SP.
