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The house sake featured at Katsuya by Starck
<p>The house sake featured at Katsuya by Starck</p>

7 ways to make your beverage business more profitable

Innovative operators share tips on ways to increase beverage profits &bull; See more Drink Trends

At Eastern Standard Kitchen

The bar was where you made your money. That’s what conventional wisdom always said. Today, it’s not that simple. Craft beer isn’t cheap. Neither are agave nectar and the bitters being used by most mixologists. Savvy customers can pull up the price of almost any bottle of wine with a click of their smartphone, meaning markups of 300 percent no longer fly. “People are way more savvy and inherently there’s a higher product cost,” says Boston restaurateur Garrett Harker. “But the bar is still where you have your variable spend. If you can deliver, and someone has three drinks and not one, you can really fill in the margin.” But how do you even know what to deliver? It starts with understanding your customer and your desired customer, says  Donna Hood Crecca, senior director at Technomic. From there, it’s all about differentiating the product and then executing. Here are seven tips from innovative operators on ways to increase beverage profits.

1. Don’t forget non-alcoholic beverages.

“If you’re not playing with non-alcoholic beverages, you’re crazy,” says Aimee Maher, the beverage director for Table 301 Restaurant Group. It’s a lesson she learned during a seminar at this year’s NRA show in Chicago, and something she’s brought back to Greenville, SC, and Table 301’s growing portfolio of acclaimed restaurants, including Soby’s, The Lazy Goat and Nose Dive.

“Create non-alcoholic beverages, like a mocktail list, using fresh fruit, lemonade, spritzers with juices and things like that,” she advises. “Instead of selling Coke or iced tea for $1.50, have fresh squeezed lemonade for $3.50.”

Jon Taffer, the personality behind the hit Spike TV show Bar Rescue and the president of the massive Nightclub & Bar Convention & Trade Show in Las Vegas, takes it a step further: “Iced tea is your enemy,” especially during lunch when six out of seven customers will order non-alcoholic beverages, he says.

He suggests offering premium soft drinks and plenty of diet options, which are often overlooked and usually more popular. “Get them into a bottle of Snapple for $4.95,” he says. “These companies spend millions to market these products and people want to try them. You can upsell to six out of seven customers.”

2. Get creative.

At McGillin’s Olde Ale House, Philadelphia’s oldest tavern, draft beer is king, but general manager Christopher Mullins, Jr. isn’t afraid to branch out with specialty drinks and shots. His bartenders create seasonal cocktails and even a special drink for each of Philadelphia’s sports teams. The Phanatic Irish Bomb—a half shot of Apple Pucker and Captain’s Morgan’s dropped into a pint of cider—would be doing better if the Phillies were, he says of the sports-crazed town. The unique concoctions provide something fun and interesting for both staff and customers, while driving additional sales and introducing new products.

At Harker’s Eastern Standard Kitchen & Drinks in Boston, where noted mixologist Jackson Cannon manages the bar, bartenders are given the chance to create their own original cocktails. They occasionally make the menu, but more importantly, they empower the staff and foster creativity. Robert Day, a regional beverage director for Richard Sandoval Restaurants in Washington DC and New York, suggests making traditional cocktails with different spirits. For example, he says, replacing whiskey with añejo tequila can put a different spin on a standard cocktail.

Pricing strategy

The bar at Eastern Standard

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3. Don’t be afraid to lower your prices.

Although it sounds counterintuitive, this can be a revenue- and even a profit-driving strategy. “It’s nice to have a 300-percent markup on a nice bottle of wine, but who’s ordering that?” asks John Murray, v.p. of operations for the David Burke Group. “It’s collecting dust, and by bringing that bottle down to an approachable price, now the guest is excited about it and we can talk about it and marry that beautiful steak to a comparable bottle of wine. And we’re confident the profit will take care of itself.”

The Burke Group rolled out a new pricing structure early this year in its seven Chicago and New York restaurants that lowered prices for wines across all price ranges. A wine the restaurant buys for $100 now sells for $175 or less—well below the $300 price other restaurants may still be charging.

The end result, Murray reports, is the restaurants are selling more bottles per guest and many customers are trading up from their $75-comfort zone to a $95 bottle that “takes them to a new world that would have been out of reach before.”

The profit margin may not be as high, but the actual profit in dollars could be if customers increase their spend. It’s the same tactic Ryan McCallum has seen work at some of SBE’s higher-end restaurants. Luxury items are priced more reasonably so guests “not only place that initial order, but opt for a second or third bottle or shot of high-end Scotch or Cognac,” says a beverage director for the Los Angeles-based company known for its restaurants and nightclubs.

What’s the secret for Jerry Lasco, the man behind The Tasting Room in Houston and the quickly expanding Max’s Wine Dive, who has built two concepts all about making wine more affordable and approachable? “It’s hustle,” he says of added-value services he offers, like wine lockers that clients pay a monthly fee for at The Tasting Room. “It’s doing the little things and building scale.”

4. Go beyond craft beer.

You’ve probably already noticed craft beer is pretty popular. Having the right local beers on tap or even your own housemade brew is imperative for most restaurants, but don’t stop there.

Many independent restaurants now offer cocktails made with beer as the primary ingredient, but the trend is going mainstream. In June, casual dining chain Red Robin introduced two “Can-Crafted Cocktails” served in limited edition and reusable beer cans. The Coors Light version is made with ginger liqueur, lemonade and topped with fresh-squeezed lemon, while the other is made with Blue Moon Belgian White, Svedka Clementine vodka, orange juice and fresh lime juice. Both cocktails sell for $4.99. “It’s a great point of differentiation and very on trend,” says Crecca. “The fact you’re seeing it in Red Robin means the mainstream consumer will wrap their mind around these and we should see more activity around beer cocktails.”

The new drinks have already become the chain’s top-selling cocktails. “Burgers and brews go so well together,” says Donna Ruch, the brand’s master mixologist. “We wanted a special presentation and knew beer cans were becoming popular, so we married the two and now have that wow factor.”

At the Katsuya by Starck property in Glendale, CA, the sushi concept from SBE has its own really cool—as in frozen—take on beer. Beyond an extensive menu of sake and fruit-infused sake drinks, it offers frozen Kirin Ichiban beer in two sizes for $5 and $8. The draft beer is topped with frozen beer foam cooled to 23 degrees. McCallum, the corporate beverage director, says the “beer slushy” is a perfect fit for the more casual location at a large outdoor lifestyle center where the temperatures can soar in the summer.

Work your relationships, resources

At the Tasting Room in Houston, Jerry Lasco says doing the litle things is how you make your money, not on wines marked up 300 percent.

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5. Don’t waste your resources.

With limited storage at The Lazy Goat in Greenville, SC, Table 301’s Maher quickly learned the benefits of cross utilization of product. “Why use [bottled] lemon juice when you can use lemons the kitchen already has,” she says, especially when chef Vicky Moore regularly has a case of 200 on hand for the restaurant’s made-from-scratch Mediterranean cuisine. For example, The Lazy Goat makes its own limoncello using vodka and lemon zest, leaving the rest of the fruit for kitchen use. It’s a creative and unique product that has become a point of differentiation, and the restaurant has the lowest cost of goods among the company’s seven units, becoming a template for the rest.

SBE’s McCallum offers a different way to accomplish the same goal. The Katsuya in Miami makes a Berry Yuzu Sangria using sake previously taken off the menu, combining it with fresh fruit marinated in Grand Marnier and berry rum (a lot is in back stock now, too, he says) and white cranberry juice, yuzu and simple syrup. Served over ice, the sangria provides a refreshingly different take on a classic summer drink. It’s become a crowd favorite for $10, while helping move surplus product.

6. Focus on flavor.

Bar Rescue’s Taffer says flavored spirits are “the single most powerful thing going on in the industry.” What started years ago with flavored vodka has spread to other categories, including what several managers say is by far the most popular spirit out there right now: cinnamon-flavored whiskey, consumed as a shot, over ice or as part of a cocktail. “Flavored spirits are providing mixing opportunities we haven’t seen in my lifetime,” Taffer explains. “The mixability of these flavors is fantastic. It’s getting people to taste spirits they’ve never tasted before. It’s ignited the bar business in a very fun way.”

Technomic projects continued growth for flavored vodka, whiskey, tequila, rum and expansion to other liqueurs. Crecca says “it’s all about flavor right now,” because that’s what consumers want.

El Centro D.F. in Washington DC, a Richard Sandoval Restaurant, makes its own flavored tequilas by soaking fresh fruit and vegetables with the spirit. The restaurant’s two locations have a combined 15 infusion jars behind the bars, and their spicy margarita and spicy mango margaritas made with Serrano pepper-infused tequila have become favorites, says beverage director Day. He also stresses the importance of using high quality and fresh ingredients when possible, from purees and fresh juices to high-end bitters and syrups.

7. Take advantage of good relationships.

“Hunt for the pricing you are looking for,” recommends Day, who notes local laws will dictate whom you can buy from and whether there is room for negotiation. But in DC, he says, there are so many suppliers it’s easy to shop around for price.

In South Carolina, Table 301’s Maher has similar advice. As a result of the growth in craft cocktails, flavored spirits and more artisanal producers, many brands fighting for exposure are offering discounts. “That’s why it all comes down to relationships with your distributors and sales [representatives],” she says.  “I’ll always ask them, ‘Who’s trying to get a place in our bar and who are you working with?’ A lot of these small companies want exposure and we’re getting lower costs because of it.”

Behind the bar

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As CEO of hospitality consulting company Barmetrix, Matt Rolfe works with more than 1,200 hotel, bar, restaurant and nightclub clients on a monthly basis to help increase their beverage profits. Here are his five steps to running a more profitable bar.

1. Complete a detailed review of your retail pricing strategy against your true competitive set every year. Decide where you want your business positioned and let your staff know. If you are at a low price point, celebrate it. If you are on the high end, make sure your staff delivers the service to support it.

2. The same way is the right way. It is important that bartenders make each drink the same way: same portions and same product. Train accordingly.

3. Begin with the end in mind. Make sure both management and staff are clear on inventory expectations. Set clear and measurable goals and let everyone know when and how they will be measured against those targets.  

4. Take action! Almost every operation in the industry is performing inventories. The most successful ones consider the inventory as 50 percent of the process and the other half is taking action on the results. Compile results in an accurate and timely fashion and find ways to reduce losses and capture opportunities.

5. Scoreboard your results. Post inventory results for all to see. Most employees only hear about inventory when results are bad. Celebrate successes, too.

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