A Deeper Look into Creating an Effective Beverage Program

Last week, I mentioned that I find three things key to creating an effective bar program; balance, cost effectiveness, and uniqueness.  I also went over some detailed tips on bringing balance to your program.This week, we’ll go over some pointers on making your program as cost effective as possible.

First, there’s the basics.  Every cocktail, beer, and wine should be costed before you approve it to appear on your menu.  Even if it is something with standard pricing in your market, asking your bar manager (or even bartenders if they have menu development input) to cost out the products you sell sets a precedent.  You should have both the total cost (which should, for the most part, be within a few percentage points of your budgeted COGS for the category), and a cost per unit.  The cost per unit is important because should you experience higher than usual costs, it will help you troubleshoot your numbers, and see whether you have a bad menu, or are experiencing loss due to theft, sloppiness, or both.

The second basic point is making sure to minimize your losses.  Make sure that everything (even comped or discounted beverages, spills, etc.) is rung in.  Make sure your bar staff (and support staff) know you’re watching.

But beyond the basics, what can you do?

First of all, it’s alright to have some loss leaders.  Not every item has to be at or under your budgeted costs.  In fact, if you are truly balancing your menu, or if something is truly unique, it can easily go over the “allowed” cost percentage.  Make sure that a) its menu price is high enough that it doesn’t become both a loss leader and a sales leader, and b) there are other cocktails, beers, or wines that make up for it.  These are what some of us like to call your “work horses.”  I’ll use red wine as an example.  Your by the bottle options, and your higher end by the glass options, will probably be wines that someone willing to pay the price for is familiar with.  They will also be familiar with grocery store prices for the wine, which are often only a dollar or two more than what we pay wholesale at an on premise account.  Wine drinkers understand that restaurants are priced higher than grocery stores, but this still creates pressure to not “price gouge.”  For instance, we have a bottle of wine on my current list that we pay $28 for.  It retails for $38-45 a bottle.  We sell it for $75.  Yes, we sell it at a 37% cost!

That being said, my pinot noir by the glass costs me $8 a bottle.  It is an on premise only label (we’ll get to that in a minute), and we sell it for $9 a glass.  That’s about a 20% cost.  Which might not seem to balance out a 37% cost.  But my cab by the glass is about a 22% cost.  And combined, I sell about 10 bottles a week of my by the glass reds.  I sell about one $75 bottle a week.

The other trick I’ve alluded to here, which is related to next week’s topic, is to be aware of your competition.  Yes, we should work to achieve a profitable business by not “giving away the house.”  But if you are on a block full of sports bars where a Miller Lite is $4 every day, and $3 during sporting events, good luck selling one for $5.  Not only will you not sell any Miller Lite, you will also get a reputation as being overpriced, and hurt your overall top line sales.

Keep your pricing in line with your neighboring businesses, regardless of your concept!  Make the money back by selling products not available in grocery stores, and not available in your neighboring bars!

The final point I’d like to address though, is dealing with your vendors.  We are all in the service industry, and as such, are used to dealing with customers.  We often forget that when it comes to our vendors (whether liquor or otherwise), we are the customer!  How many times a week does a guest walk up to your bar and ask if you have any specials?

When it comes to pricing, don’t be afraid to ask.  Always tell your rep what it is that you can offer them, and ask them to go to their district or brand manager and ask for better pricing.  Understand how your vendors work with pricing.  Some distributors do volume deals.  Some will give discounts for well or cocktail menu placements, or for a “permanent” position on a rotating beer list.  Some will do more than one of these.  Understand how each of your distributors’ deals and discounts work, and use them to your advantage.

Remember, your reps, their bosses, and their supplier reps, all work on commission.  If you see a product you like, whether for a cocktail, the well, or the back bar, price it out compared to what you already use, or what your alternative would be.  Pull up a product mix and see how much of the product you’re likely to go through.  Show the rep what kind of money they could be making, and also be clear about what kind of pricing you need.

You may not get the pricing you want or need.  You won’t know unless you ask, though.  Also be aware that some companies won’t offer discounted pricing or case deals, but will “walk in” “sample” bottles to help lower costs long term.  Or, they will come in on a slower night or during a special event and swipe their card for their product at full retail price.  All of these can be beneficial to the business.  Just remember that you are the customer in this situation.  Don’t be a nightmare customer, but also don’t be afraid to ask for what you want.  Their job is to keep you happy, and to get their products behind your bar.

 Next week, we’ll go over how you can use the guidelines we discussed for creating a balanced and cost effective beverage program, and still create a unique program that sets you apart from your competition.



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