1. Copyright BarProfits 2010 Successful Beverage Management — Proven Strategies for the On-Premise Operator Part Two: Increasing Sales In A Down Economy LAS VEGAS NIGHTCLUB & BAR SHOW MARCH 2010 Presented By: JACK ROBERTIELLO Beverage Writer/Former Editor of Cheers Magazine, Drinks Ink ROBERT PLOTKIN Author/Beverage Management Consultant, BarMedia

2. Copyright BarProfits 2010 Premium Sales Trending Up — Americans Are Drinking Less But Better 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 As evidence, on-premise sales of inexpensive value brands are flat or dropping Consumers now have higher expectations about the quality of their drinks

3. Copyright BarProfits 2010 Premium Sales Trending Up — Americans Are Drinking Less But Better A recent consumer research study: Conducted August 2009 by NextLevel Marketing and Nightclub & Bar Involved 1250 on-premise consumers — LDA, split 50% male / 50% female Over 80% strongly agreed that cocktails made with premium spirits taste better than those prepared with house brands Consumers said they expect to pay an additional $2.80 for a branded cocktail

4. Copyright BarProfits 2010 $.68 drink cost ÷ $4.50 sales price = 15.1% cost percentage Premium Sales Trending Up — Americans Are Drinking Less But Better Margarita made with WELL Tequila 1 ¼ oz. Well Tequila$.35 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $.68 Call Brands Deliver Bigger Profits $4.50 sales price - $.68 drink cost = $3.82 gross profit

5. Copyright BarProfits 2010 Premium Sales Trending Up — Americans Are Drinking Less But Better Margarita made with PREMIUM Tequila 1 ¼ oz. Premium Tequila$.72 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $1.05 Call Brands Deliver Bigger Profits $ 1.05 drink cost ÷ $6.00 sales price = 17.5% cost percentage $6.00 sales price - $1.05 drink cost = $4.95 gross profit

6. Copyright BarProfits 2010 Premium Sales Trending Up — Americans Are Drinking Less But Better Margarita made with SUPER-PREMIUM Tequila 1 ¼ oz. Super-Premium Tequila$1.39 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $1.72 Call Brands Deliver Bigger Profits $ 1.72 drink cost ÷ $7.50 sales price = 22.9% cost percentage $7.50 sales price - $1.72 drink cost = $5.78 gross profit

7. Copyright BarProfits 2010 Margarita made with Well tequila $.68 drink cost ÷ $4.50 sales price = 15.1% cost percentage $4.50 sales price - $.68 drink cost = $3.82 gross profit Margarita made with Premium Tequila $1.05 drink cost ÷ $6.00 sales price = 17.5% cost percentage $6.00 sales price - $1.05 drink cost = $4.95 gross profit Margarita made with Super-Premium Tequila $1.72 drink cost ÷ $7.50 sales price = 22.9% cost percentage $7.50 sales price - $1.72 drink cost = $5.78 gross profit Premium Sales Trending Up — Americans Are Drinking Less But Better

8. Copyright BarProfits 2010 Well Liquors — The Most Important Bottles in the House Well liquor is used in more drinks than any other type of spirits and typically has the highest sales volume As a result, featured brands will significantly impact profitability Bar’s price structure based on the well (e.g. well price plus $1 = call price, etc.) Selection criteria — featured brands need to conform to concept and clientele

9. Copyright BarProfits 2010 Well Liquors — The Most Important Bottles in the House 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 in the Well

10. Copyright BarProfits 2010 Brand Name Liter Cost Cost Per Ounce Rico Bay Rum$ 7.80$.23 Heaven Hill Bourbon$ 8.02$.24 Burnett’s Vodka$ 8.18$.24 Burnett’s Gin$ 8.94$.26 Tres Reyes Tequila$10.47$.31 Old Smugglers Scotch$10.58$.31 Average Liter Cost$ 9.00$.27 Example of a Pouring Brands Well Well Liquors — The Most Important Bottles in the House

11. Copyright BarProfits 2010 Well Liquors — The Most Important Bottles in the House Average Well Cost = $.27/ounce Average Portion Cost (1.25 oz) = $.34 Drink Price Cost Percentage Gross Profit $3.0011.3%$2.66 $3.50 9.7%$3.16 $4.00 8.5%$3.66 $4.50 7.6%$4.16 $5.00 6.8%$4.66 Profit Potential — Pouring Brands

12. Copyright BarProfits 2010 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 Well Liquors — The Most Important Bottles in the House Premium Brands in the Well

13. Copyright BarProfits 2010 Well Liquors — The Most Important Bottles in the House Example of a Premium Brands Well Brand Name Liter Costs Cost Per Ounce Seagrams Extra Dry Gin$12.82$.37 Old Fitzgerald Bourbon$10.08$.29 SKYY Vodka$17.18$.50 Cruzan Light Rum$ 8.48$.25 Lunazul Blanco Tequila$18.50$.54 Ballantine Scotch$13.63$.40 Average Liter Cost$13.45$.39 (+ $.12/oz)

14. Copyright BarProfits 2010 Well Liquors — The Most Important Bottles in the House Profit Potential Premium Brands Well Average Well Cost = $.39/ounce Average Portion Cost (1.25 oz) = $.49 Drink Price Cost Percentage Gross Profit $3.0011.3%$2.66 $3.50 9.7%$3.16 $4.00 8.5%$3.66 $4.50 7.6%$4.16 $5.00 6.8%$4.66

15. Copyright BarProfits 2010 Well Liquors — The Most Important Bottles in the House Profit Comparison Drink Price Cost Percentage Gross Profit Pouring Brands$4.50 7.6%$4.16 Premium Well$4.5010.8%$4.01

16. Copyright BarProfits 2010 Well Liquors — The Most Important Bottles in the House Profit Comparison Drink Price Cost Percentage Gross Profit Pouring Brands$4.50 7.6%$4.16 Premium Well$4.75 10.3%$4.26

17. Copyright BarProfits 2010 Backbar Management — Setting the Stage For Success Beverage sales in casual and tablecloth restaurants average nationally around 25% of gross revenue and account for over 50% of average net profits The backbar is an operation’s principal and most effective marketing device It’s essential to assess whether the backbar is stocked with the right product mix

18. Copyright BarProfits 2010 Look to reduce inventory levels — frees working capital & lessens exposure to loss 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 Concentric merchandising — bestselling products positioned in center of backbar Backbar Management — Adopting a Marketing Position

19. Copyright BarProfits 2010 Vertically extend each category of spirits with at least one above-premium brand Adopt a marketing position — horizontally expand a select category of spirits Staff education crucial to success of the strategy, facilitates server credibility Focus a portion of the bar’s marketing to that spirit: Create a line of specialty cocktails featuring the adopted spirit Devote space in the bar menu to list the name brand spirits stocked Promote tasting flights to showcase nuances between various brands Backbar Management — Adopting a Marketing Position

20. Copyright BarProfits 2010 Suggestive selling helps clientele make informed decisions A look at consumer perceptions about suggestive selling: Nearly 70% of the consumers said they walk into a restaurant without knowing beforehand what they were going to drink About two-thirds said they listen to server suggestions and trade-up to a premium brand Only 3% responded of the consumers said they stick with their original order Suggestive Selling — A Small Skill Set that Yields Big Results

21. Copyright BarProfits 2010 Three sales tactics — suggesting one, two or no name brands spirits Bar staff should deliver suggestions as if relaying insider information Guest hesitation before ordering is opportunity to present bar menu Of those consumers who typically stop after one drink, almost 25% said they would order another drink if only the server asked or didn’t take the cocktail menu away Suggestive Selling — A Small Skill Set that Yields Big Results

22. Copyright BarProfits 2010 Every bar regardless of size should promote using a bar menu While guests will typically spend 2 minutes perusing a food menu — people on average spend 20 seconds looking through a bar menu That makes it essential your bar menu is well-conceived, easy to read in dim lighting and loaded with sensational cocktails On average, consumers want to see 14 beers, 14 wines and 16 cocktails promoted on a bar menu Bar Menus — Proven Sales Drivers

23. Copyright BarProfits 2010 Test the appeal of specialty drinks before dubbing them your house signatures Create three separate menus each with different specialty drinks Rotate the menus every two months and track the sales results The bestselling drinks should then be combined in one menu Bar Menus — Proven Sales Drivers Conduct Your Own Market Research

24. Copyright BarProfits 2010 Nearly 90% of consumers read the drink menus at full-service bars and restaurants The majority of consumers 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 17% responded that the prefer table top cards to menus Only 11% said they prefer specialty drinks listed in the main food menu Bar Menu Effectiveness — Consumer Research Consumers Prefer Stand-Alone Drink Menus

25. Copyright BarProfits 2010 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 35% of the consumers want brand names listed in descriptions Bar Menu Effectiveness — Consumer Research Most Consumers Want Drink Prices and Drink Descriptions on Menus

26. Copyright BarProfits 2010 Functional descriptions only include mention of the ingredients in a drink Consumers presented a Margarita menu with only functional descriptions 47% of consumers would order house, 31% top-shelf, 22% the ultra-premium Bar Menu Effectiveness — Consumer Research Menu Test #1 — Functional Descriptions Only

27. Copyright BarProfits 2010 Bar Menu Effectiveness — Consumer Research Source: NextLevel Marketing 2009 Margarita Menu House Margarita Cuervo Gold Tequila, triple sec and sweet and sour mix. Top Shelf Margarita Sauza Hornitos Tequila, Cointreau and margarita mix. Ultra-Premium, Margarita Patron Silver Tequila, Cointreau, and margarita mix.

28. Copyright BarProfits 2010 Bar Menu Effectiveness — Consumer Research Adding romance drink copy to menus drives significant drink trade-up Consumer interest in ordering the house Margarita dropped from 47% to 33% Those interested in trading-up to a branded Margarita rose from 53% to 67% Menu Test #2 — With Added Romance Copy

29. Copyright BarProfits 2010 Bar Menu Effectiveness — Consumer Research Source: NextLevel Marketing 2009 Margarita Menu House Margarita Cuervo Gold Tequila, triple sec and sweet and sour mix. Top Shelf Margarita Sauza Hornitos Reposado Tequila, Cointreau Orange Liqueur and premium margarita mix served frozen or on the rocks. Ultra-Premium, Margarita Our 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.

30. Copyright BarProfits 2010 Bar Menu Effectiveness — Consumer Research When romance copy and drink prices were included on the menu… … 67% still wanted to order a branded Margarita … However, after seeing the price of the ultra- premium Margarita 5% of the consumers changed their minds and opted for the premium Margarita Menu Test #3 — With Added Romance Copy and Drink Prices

31. Copyright BarProfits 2010 Bar Menu Effectiveness — Consumer Research Source: NextLevel Marketing 2009 Margarita Menu House Margarita $6.00 Cuervo Gold Tequila, triple sec and sweet and sour mix. Top Shelf Margarita $7.00 Sauza Hornitos Reposado Tequila, Cointreau Orange Liqueur and premium margarita mix served frozen or on the rocks. Ultra-Premium, Margarita $8.00 Our 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.

32. Copyright BarProfits 2010 People want to know details about the drinks they’re ordering, just as they want to know about items on a food menu Consumers also want to know in advance how the drinks will look, what the ingredients are and how much they will cost Bar Menu Effectiveness — Consumer Research Summary of Menu Testing

33. Copyright BarProfits 2010 Don’t offer your clientele the same uninspired drinks as the competitors Enhanced mixology adds panache and perceived value without adding cost Increasing Revenue Through Mixology — Exceeding Guest Expectations Profit Through Enhanced Mixology

34. Copyright BarProfits 2010 Achieving Sessionability in Your Drinks: Sessionability is the most elusive of all qualities in a drink to achieve Term used to describe a cocktail that people can enjoy throughout an evening Cocktails must taste sufficiently interesting to make guests want another Drinks lacking character are a bore and guaranteed to send people packing Excessively flavorful cocktails quickly overwhelm the palate Alcohol strength a factor — sessionability decreases as potency increases Increasing Revenue Through Mixology — Exceeding Guest Expectations

35. Copyright BarProfits 2010 Technique Matters — Handshaking Vigorously handshaking cocktails is an underappreciated mixing technique Shaking a cocktail communicates freshness and quality to your guests Handshaking accomplishes a number of objectives: It thoroughly mixes ingredients into a homogenous cocktail Handshaking chills ingredients to serving temperature, around 37-38˚F Vigorous shaking also aerates the cocktail and produces froth on top Technique adds water; softens the cocktail and melds spirits and modifiers Increasing Revenue Through Mixology — Exceeding Guest Expectations

36. Copyright BarProfits 2010 Technique Matters — Muddling Enhanced production sells the sizzle, adds to the guest experience Muddling is a high production value technique It does for a cocktail what high-def does for television Muddling injects cocktails with fresh, vibrant flavors Drinks muddled in service glass — Mojitos, Caipirinhas, Old Fashioneds Increasing Revenue Through Mixology — Exceeding Guest Expectations

37. Copyright BarProfits 2010 Successful Beverage Management — Proven Strategies for the On-Premise Operator Part Two: Increasing Sales In A Down Economy JACK ROBERTIELLO Beverage writer/former editor of Cheers Magazine Drinks Ink Brooklyn NY 917.439.8467 applejak@earthlink.net drinksink.blogspot.com/ ROBERT PLOTKIN Author/beverage management consultant BarMedia Tucson AZ 520.747.8131 robert@barmedia.com barmedia.combarmedia.com/barprofits.combarprofits.com