Successful Beverage Management — Proven Strategies for the On-Premise Operator

Copyright Bar Prophets 2010

Successful Beverage Management —

Proven Strategies for the On-Premise Operator

APRIL 2010

Presented By:

JACK ROBERTIELLOBeverage Writer/Former Editor of Cheers Magazine, Drinks Ink

ROBERT PLOTKIN

Author/Beverage Management Consultant, BarMedia

MODULE THREE:SIX WAYS TO INCREASE SALES IN A

DOWN ECONOMY


Taking The High Road — Premium Spirits Yield Larger Margins

• Despite the Recession, on-premise sales of premium spirits continue to increase

• Prevailing attitude in U.S. — life’s too short to drink cheap booze



• Consumers now have higher expectations about the quality of their drinks

• Consumer Research: 84% said cocktails made with premium spirits taste better

• Consumers said they expect to pay an additional $2.80 for a branded cocktail


$ .67 drink cost ÷ $4.50 sales price = 14.9% cost percentage


Margarita made with WELL Tequila

1 ¼ oz. Pepe Lopez Tequila $ .34½ oz. Triple Sec + $ .123 oz. sweet ‘n’ sour + $ .21Drink Cost = $ .67

Call Brands Deliver Bigger Profits

$4.50 sales price - $.67 drink cost = $3.83 gross profit



Margarita made with PREMIUM Tequila

1 ¼ oz. El Jimador Reposado $ .65½ oz. Triple Sec + $ .123 oz. sweet ‘n’ sour + $ .21Drink Cost = $ .98


$ .98 drink cost ÷ $6.00 sales price = 16.3% cost percentage$6.00 sales price - $ .98 drink cost = $5.02 gross profit



Margarita made with SUPER-PREMIUM Tequila

1 ¼ oz. Herradurra Reposado $1.50½ oz. Triple Sec + $ .123 oz. sweet ‘n’ sour + $ .21Drink Cost = $1.83


$ 1.83 drink cost ÷ $7.50 sales price = 24.4% cost percentage$7.50 sales price - $1.83 drink cost = $5.67 gross profit


Getting More Bang From The Most Important Bottles In The House

• Well liquor is used in more drinks than any other type of spirits

• Brands featured in the well significantly impacts profitability



• Selection criteria — featured brands need to conform to concept and clientele

• The bar’s price structure is based on the well



• Often featured at operations with a predominantly price-conscious clientele

• Advantages — low cost per ounce and relatively low carrying cost

• Disadvantages — low quality, no brand recognition, heightened liability

Pouring Brands


Brand NameLiter Cost

Cost Per Ounce

Castillo Rum $ 6.15 $ .18Gilbeys Vodka $ 6.24 $ .18Early Times Bourbon $ 6.77 $ .20Gilbeys Gin $ 8.00 $ .24Old Smuggler Scotch $ 8.39 $ .25Pepe Lopez Gold Tequila $10.47 $ .27Average Liter Cost $ 7.42 $ .22

Example of a Pouring Brands Well



Average Well Cost = $ .22/ounce Average Portion Cost (1.25 oz) = $ .28

Drink Price

Cost Percentage

Gross Profit

$3.00 9.3% $2.72$3.50 8.0% $3.22$4.00 7.0% $3.72$4.50 6.2% $4.22$5.00 5.6% $4.72


Profit Potential — Pouring Brands


• Best suited for a value-conscious clientele or brand-conscious clientele

• Advantages — moderate cost per oz, high quality, enhanced brand recognition

• Disadvantages — elevated cost per ounce, slightly higher carrying costs


Premium Brands


Well Liquors — The Most Important Bottles in the House

Example of a Premium Brands Well

Brand NameLiter Costs

Cost Per Ounce

Ballantines Scotch $11.60 $ .34Old Forester 86º Bourbon $11.93 $ .35Finlandia Vodka $12.10 $ .36Appleton Dark Rum $12.75 $ .38Cuervo Especial Tequila $14.77 $ .44Beefeater London Dry Gin $19.02 $ .56Average Liter Cost $13.70 $ .40 (+ $ .18/oz)


Average Well Cost = $ .40/ounce Average Portion Cost (1.25 oz) = $ .50

Drink Price

Cost Percentage

Gross Profit

$3.50 14.3% $3.00$4.00 12.5% $3.50$4.50 11.1% $4.00$5.00 10.0% $4.50$5.50 9.1% $5.00


Profit Potential Premium Brands Well



Profit Comparison

Drink Price

Cost Percentage

Gross Profit

Pouring Brands $4.00 7.0% $3.72Premium Brands $4.00 12.5% $3.50



Profit Comparison

Drink Price

Cost Percentage

Gross Profit

Pouring Brands $4.00 7.0% $3.72Premium Brands $4.25 11.7% $3.75


Merchandising For Success — Increasing The Impact of Your Backbar

• The backbar is your most effective marketing device

• It’s essential the backbar is stocked with the right product mix


• Reassess status of underperforming products — those that take 4+ months to deplete

• Drop dead stock — products that take longer than 9 months to deplete

• Drop duplicate flavors or repetitive styles



• Reducing inventory levels frees working capital & lessens exposure to loss

• Concentric merchandising — bestselling products positioned in center of backbar



• Vertically extend each category of spirits with at least one above-premium brand

• Adopt a marketing position — horizontally expand a select category of spirits

• Dedicate a portion of the bar’s marketing to that spirit



• Guests typically spend 2 minutes with food menus; 20 seconds with bar menu

• Essential your bar menu is well-conceived and easy to read in dim lighting

Bar Menus — Increasing Their Capacity To Drive Sales


• Roll-outthree separate menus; each with different specialty drinks

• Rotate the menus every two months and track the sales results

• Bestselling drinks should then be combined in one menu


Conduct Your Own Market Research


• 88% of consumers read the drink menus at full-service bars and restaurants

• 68% surveyed said the bar menu is the most significant choice influencer

• 58% of the consumers want the bar menu on the table at all times


What Consumer Research Reveals


• 81% of the consumers want drink prices listed on the menu

• 68% said they wanted to be able to read descriptions of the drinks

• 41% responded that they prefer seeing pictures of the drinks


What Consumer Research Reveals


• Functional descriptions only include mention of the ingredients in a drink

• Consumers were presented a Margarita menu with only functional descriptions

• 47% of consumers ordered the house, 31% top-shelf, 22% the ultra-premium


Menu Test #1 — Functional Descriptions Only



Source: NextLevel Marketing 2009

22%

31%

47%

0% 10% 20% 30% 40% 50% 60%

Ultra-premium

Top Shelf

House

Margarita Menu

House MargaritaCuervo Gold Tequila, triple sec and sweet and sour mix.

Top Shelf MargaritaSauza Hornitos Tequila, Cointreau and margarita mix.

Ultra-Premium, MargaritaPatron Silver Tequila, Cointreau, and margarita mix.



• Adding romance drink copy to menus drives significant drink trade-up

• 14% of consumers switched from ordering the house Margarita to branded a Margarita

Menu Test #2 — Added Romance Copy




36%

31%

33%

28% 30% 32% 34% 36% 38%

Ultra-premium

Top Shelf

House

Margarita Menu

House MargaritaCuervo Gold Tequila, triple sec and sweet and sour mix.

Top Shelf MargaritaSauza Hornitos Reposado Tequila, Cointreau Orange Liqueur and premium margarita mix served frozen or on the rocks.

Ultra-Premium, MargaritaOur distinctive, hand-shaken ultimate Margarita made with Patron Silver 100 Agave Tequila, Cointreau, and fresh squeezed lime juice served straight up or on the rocks.



• Only 5% of consumers were affected by the higher price of ultra-premium Margarita

• The switched from the ultra-premium to the premium Margarita

Menu Test #3 — With Added Romance Copy and Drink Prices




31%

36%

33%

28% 30% 32% 34% 36% 38%

Ultra-premium

Top Shelf

House

Margarita Menu

House Margarita $6.00Cuervo Gold Tequila, triple sec and sweet and sour mix.

Top Shelf Margarita $7.00Sauza Hornitos Reposado Tequila, Cointreau Orange Liqueur and premium margarita mix served frozen or on the rocks.

Ultra-Premium, Margarita $8.00Our distinctive, hand-shaken ultimate Margarita made with Patron Silver 100 Agave Tequila, Cointreau, and fresh squeezed lime juice served straight up or on the rocks.


• Consumers prefer stand-along bar menus • They want descriptions of the drinks they’re

ordering• They want to know how the drinks will look

and how much it will cost


Summary of Menu Testing


• Staff Training and Education — What Your Staff Doesn’t Know Can Cost You

• Training/education yields high ROI in form of increased staff competency

Investing In Your Sales Force — Helping Your Staff Help You


• Education — product knowledge/credibility pivotal to selling premium spirits

• Training — ensuring core competency - pouring, prices, mixology

• Challenge your bartenders to expand their professional skills/cross-training



• Suggestive selling techniques — helping the clientele make informed decisions

• Three sales tactics — how many brands to suggest?



• Americans are increasingly likely to not consume alcohol when entertaining

• However, few non-alcoholic programs are successful or noteworthy

• Most have little staff buy-in and don’t capture interest of clientele

Leveraging Beverage Trends — Taking Advantage of Latest Intel

Alcohol-Free Marketing — Risk-Free Profits in a .08 Universe


• High production value — muddling, handshaking and floats

• High perceived value — specialty glassware (16-18 oz. volume)

• Feature intriguing ingredients and unusual taste combinations

• Value Priced — avoid any appearance of price gouging


Success Formula — Alcohol-Free Specialties


• Locally produced, micro-distilled spirits surging in sales

• Organic spirits gaining traction with consumers• New Latin spirits on the rise — cachaça, pisco

and mezcal• Return to prominence — rye, gin and absinthe• Unqiue cordials and amaros — St-Germain,

Canton and Hum


Hot Spirit Trends



• As they say — “It’s more fun to eat in the bar than drink in the dining room”

• Cross-promoting food and beverages increase sales and defrays high food costs

• Practical benefits to clientele eating food while drinking

• Ensure bartenders familiar with food menu and trained on proper food service

Cross-Promoting Food and Beverages


• Don’t offer your clientele the same uninspired drinks as the competitors

• Enhanced mixology adds panache and perceived value without adding cost


Exceeding Guests’ Drink Expectations


Technique Matters — Production Value Sells• Handshaking a cocktail communicates

freshness and quality to your guests• Thoroughly mixes ingredients and chills

drink to serving temperature• Vigorously handshaking cocktails is an

underappreciated mixing technique• Adds water; softens the cocktail and

melds spirits and modifiers



Technique Matters — Production Value Sells

• Muddling is a high production value technique• It does for a cocktail what high-def does for

television• Muddling injects cocktails with vibrant flavors• Muddling fresh ingredients into cocktails requires

double-straining


MODULE FOUR:PRIORITIZED PROFIT ASSESSMENT


Answer #1 — 0 pointsAnswer #2 — 5 points

Answer #3 — 10 points

Assessing Your Operation’s Areas of Strength and Weakness

Scoring:


Section score of 45-50 = ExcellentSection score of 35-40 = Very Good Section score of 25-30 = Average

Section score of 0-20 = Below Average


Section Scoring:


180 - 200 points = Excellent You’re a seasoned pro with a finger firmly on the pulse

140 - 175 points = Very Good When it come to the bar, not much gets past you

100 - 135 points = Average Indicates significant room for improvement

0 - 95 points = Below Average You’re leaving too much money on the table


Total Score Four Sections:


• Step One: Sequence sections from lowest score (1st) to highest (4th)

• Step Two: Within each section, sequence responses from lowest score to highest

• Step Three: Your areas of weakness now top the lists within each of the four sections


Creating a Business Action Plan


#1 — Identify in what order you will address the areas of weakness

#2 — Identify who in the business will be responsible for initiating changes

#3 — Assign a date as to when the initiatives are to be implemented

#4 — Track each set of initiatives to ensure progress is being made


Creating a Business Action Plan


Successful Beverage Management —

Proven Strategies for the On-Premise Operator

JACK ROBERTIELLOBeverage writer/former editor of Cheers Magazine

Drinks InkBrooklyn NY

[email protected]

ROBERT PLOTKIN

Author/beverage management consultantBarMedia

Tucson AZ520.747.8131

[email protected]/barprofits.com

AMERICANcocktails.com

http://drinksink.blogspot.com/

http://www.barmedia.com/

http://www.barprofits.com/

http://www.americancocktails.com/

Documents

Successful Beverage Management — Proven Strategies for the On-Premise Operator