1. Copyright Bar Prophets 2010 Successful Beverage Management — Proven Strategies for the On-Premise Operator APRIL 2010 Presented By: JACK ROBERTIELLO Beverage Writer/Former Editor of Cheers Magazine, Drinks Ink ROBERT PLOTKIN Author/Beverage Management Consultant, BarMedia

2. MODULE THREE: SIX WAYS TO INCREASE SALES IN A DOWN ECONOMY

3. Copyright Bar Prophets 2010 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

4. Copyright Bar Prophets 2010 Taking The High Road — Premium Spirits Yield Larger Margins 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

5. Copyright Bar Prophets 2010 $.67 drink cost ÷ $4.50 sales price = 14.9% cost percentage Taking The High Road — Premium Spirits Yield Larger Margins Margarita made with WELL Tequila 1 ¼ oz. Pepe Lopez Tequila$.34 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $.67 Call Brands Deliver Bigger Profits $4.50 sales price - $.67 drink cost = $3.83 gross profit

6. Copyright Bar Prophets 2010 Taking The High Road — Premium Spirits Yield Larger Margins Margarita made with PREMIUM Tequila 1 ¼ oz. El Jimador Reposado$.65 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $.98 Call Brands Deliver Bigger Profits $.98 drink cost ÷ $6.00 sales price = 16.3% cost percentage $6.00 sales price - $.98 drink cost = $5.02 gross profit

7. Copyright Bar Prophets 2010 Taking The High Road — Premium Spirits Yield Larger Margins Margarita made with SUPER-PREMIUM Tequila 1 ¼ oz. Herradurra Reposado$1.50 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $1.83 Call Brands Deliver Bigger Profits $ 1.83 drink cost ÷ $7.50 sales price = 24.4% cost percentage $7.50 sales price - $1.83 drink cost = $5.67 gross profit

8. Copyright Bar Prophets 2010 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

9. Copyright Bar Prophets 2010 Getting More Bang From The Most Important Bottles In The House Selection criteria — featured brands need to conform to concept and clientele The bar’s price structure is based on the well

10. Copyright Bar Prophets 2010 Getting More Bang From 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

11. Copyright Bar Prophets 2010 Brand Name Liter Cost Cost Per Ounce Castillo Rum$ 6.15$.18 Gilbeys Vodka$ 6.24$.18 Early Times Bourbon$ 6.77$.20 Gilbeys Gin$ 8.00$.24 Old Smuggler Scotch$ 8.39$.25 Pepe Lopez Gold Tequila$10.47$.27 Average Liter Cost$ 7.42$.22 Example of a Pouring Brands Well Getting More Bang From The Most Important Bottles In The House

12. Copyright Bar Prophets 2010 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 Getting More Bang From The Most Important Bottles In The House Profit Potential — Pouring Brands

13. Copyright Bar Prophets 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 Getting More Bang From The Most Important Bottles In The House Premium Brands

14. Copyright Bar Prophets 2010 Well Liquors — The Most Important Bottles in the House Example of a Premium Brands Well Brand Name Liter Costs Cost Per Ounce Ballantines Scotch$11.60$.34 Old Forester 86º Bourbon$11.93$.35 Finlandia Vodka$12.10$.36 Appleton Dark Rum$12.75$.38 Cuervo Especial Tequila$14.77$.44 Beefeater London Dry Gin$19.02$.56 Average Liter Cost$13.70$.40 (+ $.18/oz)

15. Copyright Bar Prophets 2010 Average Well Cost = $.40/ounce Average Portion Cost (1.25 oz) = $.50 Drink Price Cost Percentage Gross Profit $3.5014.3%$3.00 $4.0012.5%$3.50 $4.5011.1%$4.00 $5.0010.0%$4.50 $5.50 9.1%$5.00 Getting More Bang From The Most Important Bottles In The House Profit Potential Premium Brands Well

16. Copyright Bar Prophets 2010 Getting More Bang From The Most Important Bottles In The House Profit Comparison Drink Price Cost Percentage Gross Profit Pouring Brands$4.00 7.0%$3.72 Premium Brands$4.0012.5%$3.50

17. Copyright Bar Prophets 2010 Getting More Bang From The Most Important Bottles In The House Profit Comparison Drink Price Cost Percentage Gross Profit Pouring Brands$4.00 7.0%$3.72 Premium Brands$4.25 11.7%$3.75

18. Copyright Bar Prophets 2010 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

19. Copyright Bar Prophets 2010 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 Merchandising For Success — Increasing The Impact of Your Backbar

20. Copyright Bar Prophets 2010 Reducing inventory levels frees working capital & lessens exposure to loss Concentric merchandising — bestselling products positioned in center of backbar Merchandising For Success — Increasing The Impact of Your Backbar

21. Copyright Bar Prophets 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 Dedicate a portion of the bar’s marketing to that spirit Merchandising For Success — Increasing The Impact of Your Backbar

22. Copyright Bar Prophets 2010 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

23. Copyright Bar Prophets 2010 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 Bar Menus — Increasing Their Capacity To Drive Sales Conduct Your Own Market Research

24. Copyright Bar Prophets 2010 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 Bar Menus — Increasing Their Capacity To Drive Sales What Consumer Research Reveals

25. Copyright Bar Prophets 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 Bar Menus — Increasing Their Capacity To Drive Sales What Consumer Research Reveals

26. Copyright Bar Prophets 2010 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 Bar Menus — Increasing Their Capacity To Drive Sales Menu Test #1 — Functional Descriptions Only

27. Copyright Bar Prophets 2010 Bar Menus — Increasing Their Capacity To Drive Sales 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 Bar Prophets 2010 Bar Menus — Increasing Their Capacity To Drive Sales 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

29. Copyright Bar Prophets 2010 Bar Menus — Increasing Their Capacity To Drive Sales 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 Bar Prophets 2010 Bar Menus — Increasing Their Capacity To Drive Sales 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. Copyright Bar Prophets 2010 Bar Menus — Increasing Their Capacity To Drive Sales 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 Bar Prophets 2010 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 Bar Menus — Increasing Their Capacity To Drive Sales Summary of Menu Testing

33. Copyright Bar Prophets 2010 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

34. Copyright Bar Prophets 2010 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 Investing In Your Sales Force — Helping Your Staff Help You

35. Copyright Bar Prophets 2010 Suggestive selling techniques — helping the clientele make informed decisions Three sales tactics — how many brands to suggest? Investing In Your Sales Force — Helping Your Staff Help You

36. Copyright Bar Prophets 2010 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

37. Copyright Bar Prophets 2010 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 Leveraging Beverage Trends — Taking Advantage of Latest Intel Success Formula — Alcohol-Free Specialties

38. Copyright Bar Prophets 2010 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 Leveraging Beverage Trends — Taking Advantage of Latest Intel Hot Spirit Trends

39. Copyright Bar Prophets 2010 Leveraging Beverage Trends — Taking Advantage of Latest Intel 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

40. Copyright Bar Prophets 2010 Don’t offer your clientele the same uninspired drinks as the competitors Enhanced mixology adds panache and perceived value without adding cost Leveraging Beverage Trends — Taking Advantage of Latest Intel Exceeding Guests’ Drink Expectations

41. Copyright Bar Prophets 2010 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 Leveraging Beverage Trends — Taking Advantage of Latest Intel

42. Copyright Bar Prophets 2010 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 Leveraging Beverage Trends — Taking Advantage of Latest Intel

43. MODULE FOUR: PRIORITIZED PROFIT ASSESSMENT

44. Copyright Bar Prophets 2010 Answer #1 — 0 points Answer #2 — 5 points Answer #3 — 10 points Assessing Your Operation’s Areas of Strength and Weakness Scoring:

45. Copyright Bar Prophets 2010 Section score of 45-50 = Excellent Section score of 35-40 = Very Good Section score of 25-30 = Average Section score of 0-20 = Below Average Assessing Your Operation’s Areas of Strength and Weakness Section Scoring:

46. Copyright Bar Prophets 2010 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 Assessing Your Operation’s Areas of Strength and Weakness Total Score Four Sections:

47. Copyright Bar Prophets 2010 Step One: Sequence sections from lowest score (1 st ) to highest (4 th ) 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 Assessing Your Operation’s Areas of Strength and Weakness Creating a Business Action Plan

48. Copyright Bar Prophets 2010 #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 Assessing Your Operation’s Areas of Strength and Weakness Creating a Business Action Plan

49. Copyright Bar Prophets 2010 Successful Beverage Management — Proven Strategies for the On-Premise Operator 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 AMERICANcocktails.com