Driving Profits in the New Economy: Strategies for Increasing Sales in a Down Economy Presented by Robert Plotkin BarMedia Sean Ludford BevX.com Nightclub & Bar Show Las Vegas Monday, March 2 nd, :00 a.m. – 11:00 a.m.

Backbar Management — “Setting the Stage for Success” The backbar is highly valuable real estate, yet it’s often unmanaged Object is to shelve a balanced offering of exciting, profit-laden spirits

Tactic #1 – Drop Dead Stock Any product that takes 6 to 9 months or more to deplete is dead stock Dead stock detracts from backbar and takes up valuable shelf space Reassess the viability of slow moving brands (4 to 6 months to deplete) Reduce to deplete duplicate products on the backbar Backbar Management — “Setting the Stage for Success”

Tactic #2 – Call Brands Deliver Bigger Profits Vertically extend each category of spirits with at least one super-premium brand Super-premiums create up-selling opportunities and yield higher profits Long-term benefit — premium spirits make for better drinks and yield higher margins Backbar Management — “Setting the Stage for Success”

Margarita made with WELL Tequila $.68 drink cost ÷ $4.50 sales price = 15.1% cost percentage 1 ¼ oz. Well Tequila$.35 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $.68 Backbar Management — “Setting the Stage for Success”

Margarita made with WELL Tequila $4.50 sales price - $.68 drink cost = $3.82 gross profit 1 ¼ oz. Well Tequila$.35 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $.68 Backbar Management — “Setting the Stage for Success”

Margarita made with PREMIUM Tequila $1.50 drink cost ÷ $6.00 sales price = 17.5% cost percentage 1 ¼ oz. Sauza Hornitos$.72 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $1.05

Backbar Management — “Setting the Stage for Success” Margarita made with PREMIUM Tequila $6.00 sales price - $1.50 drink cost = $4.95 gross profit 1 ¼ oz. Sauza Hornitos$.72 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $1.05

Margarita made with SUPER-PREMIUM Tequila $1.72 drink cost ÷ $7.50 sales price = 22.9% cost percentage 1 ¼ oz. Sauza 3 G’s Plata$1.39 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $1.72 Backbar Management — “Setting the Stage for Success”

Margarita made with SUPER-PREMIUM Tequila $7.50 sales price - $1.72 drink cost = $5.78 gross profit 1 ¼ oz. Sauza 3 G’s Plata$1.39 ½ oz. Triple Sec+ $.12 3 oz. sweet ‘n’ sour+ $.21 Drink Cost= $1.72 Backbar Management — “Setting the Stage for Success”

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 Sauza Hornitos $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 Sauza Tres Generciones Plata $1.72 drink cost ÷ $7.50 sales price = 22.9% cost percentage $7.50 sales price - $1.72 drink cost = $5.78 gross profit

Tactic #3 – Expand Horizontally Take a marketing position and become a great tequilaria, bourbon bar, etc. Select a category of spirits and expand its the breadth horizontally Stock a diversity of styles to attract greater number of aficionados Introduce clientele to new, up and coming brands Backbar Management — “Setting the Stage for Success”

Tactic #4 – Marketing Support Devote a large part of the bar’s marketing to promoting featured spirit, e.g. Tequila Create a tequila menu with descriptions and tasting notes Promote a set of tequila-based specialty drinks Single out most popular of the specialties as your house signature cocktail Backbar Management — “Setting the Stage for Success”

Tactic #4 – Marketing Support Offer tasting flights — opportunity for guests to determine their favorite brands Schedule in-house tequila dinners or tastings featuring specific tequila ranges In-house catered gigs are a growing trend for increasing sales and guest loyalty Backbar Management — “Setting the Stage for Success”

Tactic #4 – Marketing Support Staff enthusiasm and expertise pivotal to program’s success Educate staff about the spirit and nuances between the various name brands Yields high ROI in form of enhanced credibility and increased sales abilities Backbar Management — “Setting the Stage for Success”

Tactic #5 – Merchandizing Product placement — adopt retail merchandising cardinal rule Studies reveal that consumers look first and longest at center of retail displays Concentric merchandising — bestselling products positioned in center of backbar Slower selling products should be placed further toward the outer edges Backbar Management — “Setting the Stage for Success”

Tactic #6 – Reassess House Brands Well liquors typically have the highest sales volume behind the bar Selection criteria — don’t serve your guests products you wouldn’t drink Featuring quality house brands in the well the savvy choice Backbar Management — “Setting the Stage for Success”

Tactic #6 – Reassess House Brands Premium spirit sales are steadily increasing, while value brands are flat Prevailing attitude in U.S. — life’s too short to drink cheap booze Consumers now have higher expectations about the quality of their drinks Premium wells — enhanced quality, increased profits and higher perceived value Backbar Management — “Setting the Stage for Success”

Example of a Pouring Brands’ Well Backbar Management — “Setting the Stage for Success” Brand Name Liter Costs Rico Bay Rum$ 7.80 Heaven Hill Bourbon$ 8.02 Burnett’s Vodka$ 8.18 Burnett’s Gin$ 8.94 Tres Reyes Tequila$10.47 Old Smugglers Scotch$10.58 Average Liter Cost$ 9.00

Backbar Management — “Setting the Stage for Success” Example of a Pouring Brands’ Well Brand Name Liter Costs 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

Backbar Management — “Setting the Stage for Success” Profit Potential — Pouring Brands Well Average Cost = $.27/ounce Average Portion Cost (1.25 oz) = $.34 Drink Price Cost Percentage Gross Profit $ %$2.66 $ %$3.16 $ %$3.66 $ %$4.16 $ %$4.66

Backbar Management — “Setting the Stage for Success” Profit Potential — Pouring Brands Well Average Cost = $.27/ounce Average Portion Cost (1.25 oz) = $.34 Drink Price Cost Percentage Gross Profit $ %$2.66 $ %$3.16 $ %$3.66 $ %$4.16 $ %$4.66

Example of a Premium Well Backbar Management — “Setting the Stage for Success” Brand Name Liter Costs Seagrams Extra Dry Gin$12.82 Old Fitzgerald Bourbon$10.08 SKYY Vodka$17.18 Cruzan Light Rum$ 8.48 Lunazul Blanco Tequila$18.50 Ballantine Scotch$13.63 Average Liter Cost$13.45 ( + $4.45/lt)

Backbar Management — “Setting the Stage for Success” Example of a Premium 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)

Backbar Management — “Setting the Stage for Success” Profit Potential — Premium Well Well Average Cost = $.39/ounce Average Portion Cost (1.25 oz) = $.49 (+ $.15) Drink Price Cost Percentage Gross Profit $ %$4.01 $ %$4.51 $ %$5.01 $ %$5.51 $ %$6.01

Backbar Management — “Setting the Stage for Success” Profit Comparison Drink Price Cost Percentage Gross Profit Pouring Brands$ %$4.16 (+ $.15) Premium Well$ %$4.01

Backbar Management — “Setting the Stage for Success” Profit Comparison Drink Price Cost Percentage Gross Profit Pouring Brands$ %$4.16 Premium Well$ %$4.51 (+ $.35)

Advantages of NOT Featuring Well Liquors Ensures that all drinks will be prepared with quality, name brand products Gross profit potential higher on every sale Necessitates that bartenders engage guests to determine their brand preferences Backbar Management — “Setting the Stage for Success”

The Cheers Paradigm Becoming a destination venue necessitates building repeat business Crucial to success — core clientele contribute on average 72% of revenue Building repeat business is achieved by exceeding guest expectations Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Profiting With Mixology Enhanced mixology adds appeal and perceived value without adding cost Don’t offer your clientele the same uninspired drinks as the competitors Breaking down the elements of a marketable specialty Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Anatomy of a Marketable Specialty — Sessionability Term used to describe a cocktail that people can enjoy throughout an evening Sessionability is an elusive quality — difficult to achieve in a drink Drink must be sufficiently interesting to make guests want another Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Anatomy of a Marketable Specialty — Sessionability Cocktails lacking character are a bore and guaranteed to send people packing Cocktails with excessive flavor are overbearing and quickly overpowers the palate Alcohol strength a factor — sessionability decreases as potency increases Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Anatomy of a Marketable Specialty — Balance A balanced cocktail is one in which… …all ingredients and flavors can be perceived …no characteristic (tart, sweet, savory and acidic) overshadows the others …its featured spirits can be tasted, but not felt Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Anatomy of a Marketable Specialty — Branding 1 st Immutable law of mixology — “The better the liquor, the better the drink” Featuring premium spirits in cocktails isn’t sacrilege; it’s an act of creative genius Specialties made with premium brands sell better and yield more profit Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Anatomy of a Marketable Specialty — High Production Value Enhanced production value adds sizzle, enhances the guest experience Mixing techniques with high production value — muddling and handshaking Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

High Production Value — Muddling Cocktails Muddling does for a cocktail what high-def does for television Injects cocktails with fresh ingredients — cucumbers, mint leaves, veggies and fruit Drinks muddled in service glass — Mojitos, Caipirinhas, Old Fashioneds Muddling and double straining fresh ingredients in signature cocktails Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

High Production Value — Handshaking Cocktails Handshaking drinks — loudly communicates freshness and proper technique to guest Technique thoroughly mixes ingredients into a homogenous cocktail Handshaking lowers ingredients to serving temperature — around 37-38˚F Vigorous shaking also aerates the cocktail — producing froth on top of the drink Technique also adds water — softens cocktail and melds spirits and modifiers Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Anatomy of a Marketable Specialty — Great First Impression Consumers buy with their eyes — decide whether they’ll like a drink before tasting it Aesthetic attributes of a cocktail with a great first impression Color — imbues a cocktail with intrigue and visual appeal Opacity — cocktails should be free of debris, sediment and cloudiness Aromatics — bouquet appeals to the olfactory sense; powerful stimulus Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Up-selling — effective sales technique and service-oriented consideration Suggestive sales techniques help guests make informed decisions Which is more effective — suggesting no brand, one or two name brands spirits? Deliver suggestions as if relaying insider information Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Cross-promoting food and beverage increases sales and defrays high food costs Practical benefits to clientele eating food while drinking Conventional wisdom — it’s more fun to eat in the bar than drink in the dining room Cross-train bartenders on proper food service Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Alcohol-Free Program Well-conceived alcohol-free program is a source of risk-free, sustainable profits Americans increasingly unlikely to consume alcohol outside of the home The demographics of alcohol-free drinkers include literally everyone Even when not imbibing, your guests deserve sexier options than tap water and soda Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

The Non-Alcoholic Disconnect Few non-alcoholic programs are successful from a revenue perspective Pervasive disconnect among bartenders who regard drinks without alcohol a snooze Non-alcoholic specialties are rarely special — drinks contrived with ingredients on-hand Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Succeeding With Alcohol-Free Orientation — converting ones thinking from “non-alcoholic” to “alcohol-free” Look to develop one alcohol-free signature drink appropriate for all trade periods Involve staff in the drink development — program depends largely on staff buy-in Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Succeeding With Alcohol-Free Alcohol-free specialty drink must have… …high production value — muddling, handshaking or floating the last ingredient(s) …high quality ingredients — feature unusual or exotic flavors …high perceived value — drink volume of between ounces …a reasonable price tag — don’t allow high sales price to inhibit sales volume Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Bar Savvy — Profiting From Spirit Infusions Infusions involve taking any inexpensive liquor, changing its flavor and character Infusions feature everything from fresh fruit to sun-dried tomatoes Infused spirits have scores of applications in every category of cocktails Infusions are highly profitable, yielding profit margins between 88-92% Create a winning infusion and there’s only one place people can get it Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Bar Savvy — Retro Drink Pricing Recession-weary guests could use a break — why not help? Occasionally roll your drink prices back to what they were in 1982, 1968 or 1945 Turn it into a regular promotion — flexible form of discounting prices Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Bar Savvy — Random Acts of Kindness In this rough economy, consider doing the delightfully unexpected Imagine applying the concept of random acts of kindness to your business What if you occasionally comp’ed guests their dinner or a round of drinks? “It’s just our way of saying thanks,” you’d say Exceed people’s expectations and build a loyal client base Increasing Sales Without Raising Prices — “Exceeding Guest Expectations”

Presented by Robert Plotkin BarMedia Sean Ludford BevX.com Driving Profits in the New Economy: Strategies for Increasing Sales in a Down Economy