A head sommelier or beverage director needs a fundamental business insight to use at work. Terms and currencies differ across the world, but the basic principles are the same everywhere, and the Business Calculations set them out with worked examples and exam-style questions.
The principle underneath all of it is simple. You buy something, then sell it at a higher price, and the difference is your profit.
01Three sums, one principle
Three sums follow from buying and selling. Sell a wine at £25 that cost you £10, and £15 is your gross profit. Turn the same three numbers round and they give you the selling price, or the cost price.
Gross profit is not the end of the story. Net profit is gross profit minus all the overheads, such as staff costs, heating, lighting, laundry, taxes and rent, and it needs to exceed zero, or the business is losing money. The terms travel under other names too: gross profit is also gross income, cost price is the cost of goods sold (COGS), and opening and closing stock are beginning and ending inventory.
02Percentages, not pounds
In that example, the £15 is a cash margin, and it is also a 60% gross profit percentage: 60% profit and 40% cost make up the 100% selling price. Keep currency and percentage fractions apart. Pounds, dollars, euros and yen are prices; 50%, or 0.50, is a fraction.
To break a price down, multiply the selling price by the fraction you need. With a selling price of 20 and a 75% gross profit, the cost price is 20 × 0.25, which is 5. Multiplying by 0.75 would give the profit, not the cost.
To set a selling price from a target, divide the cost price by the cost percentage, which is one minus the gross profit. A wine bought at £25 and sold at 65% gross profit gives 25 ÷ 0.35 = 71.42, so the selling price would be £71.50. Gross profit percentage works the other way: selling price minus cost price, divided by the selling price. A 12-bottle case of Grand Cru Burgundy bought for £900 costs £75 a bottle; sold at £190, that is 115 ÷ 190, or 60% gross profit.
03Glasses in a bottle
A sommelier should be able to count the glasses in a bottle in centilitres, millilitres and ounces. One centilitre is 10ml. A 750ml bottle is 25.4 fluid ounces in the USA, and 26.4 UK imperial fluid ounces.
Put the pieces together and a glass can be priced. A six-bottle case of Port bought for £350 costs £58.33 a bottle. At 7.5 glasses of 100ml a bottle, each glass costs £7.77, and at 60% gross profit that is 7.77 ÷ 0.4 = 19.45. The glass sells for £19.50, rounded to the nearest 50p.
| Glasses | Left over | |
|---|---|---|
| 125ml | 6 | None |
| 175ml | 4 | 50ml |
| 100ml | 7.5 | None |
| 50ml | 15 | None |
| 5oz (USA) | 5 | 0.4oz |
| 2oz (USA) | 12 | 0.7oz |
04Budgets and the stocktake
The questions grow into the problems a head sommelier meets. A guest has £100 a head for a four-course dinner for 25 people, and the chef takes £40 for food. That leaves £60 for wine, or £15 a course, and at 33% cost price, £5 per person per course. At six 125ml glasses a bottle, 25 glasses a course need 4.16 bottles: five bottles a course, and 20 in total.
Two scenarios close the document. In the first, you are the head sommelier of a prestigious restaurant, with 20 minutes to fill in the missing parts of next year’s beverage budget and team payroll. In the second, you have 12 minutes with a monthly stocktake: work out sales figures, fill in gross profit percentages and selling prices, find three errors in the wording of the wine list, and explain why opening stock, closing stock and the difference may not agree. The answers give four reasons:
- Wastage from wines by the glass: overpouring, underpouring, or wine out of condition that was not recorded.
- A miscount during the stocktake.
- Theft, or an incorrect delivery.
- Wine not properly allocated from another source, such as a tasting menu, the kitchen, or marketing and gifts.
Questions candidates ask
How do you calculate gross profit percentage?
Take the cost price from the selling price, then divide by the selling price. A bottle that costs £75 and sells for £190 makes 115 ÷ 190, or 60%.
How many glasses are in a bottle of wine?
A 750ml bottle holds six 125ml glasses, four 175ml glasses with 50ml left over, or fifteen 50ml glasses.
What is the difference between gross and net profit?
Net profit is gross profit minus all the overheads, such as staff costs, heating, lighting, laundry, taxes and rent.
Keep the money and the percentages apart.
Sources
- Court of Master Sommeliers, Business Calculations 24.6