Beverage Purchase, Receiving Storage & Issuing Licensing Types Types of Alcoholic Beverages Purchasing Standards Receiving Standards & Techniques Storage Principles Issuing Practices Non-Alcoholic Beverages

BEVERAGE COST CONTROL Alcoholic beverages are one of the highest margin, highest theft items in the foodservice business. They can either make or break a business depending on the level of control you have in place.

TYPES OF LICENSING LICENSED STATECONTROLLED STATES (i.e. Nebraska)(i.e. Iowa) Licensed liquor distributionState controlled distribution points; both wholesale & retail Taxed at distribution level &State controlled pricing end user level Competitive pricingCash only Credit terms availablePick-up only Delivery available Liquor cannot legally be transported across state line for purposes of sale. Franchise states: Brands are sold by one dealer only. Franchising limits competition and competitive pricing for that brand.

CLASSIFICATION OF ALCOHOLIC BEVERAGES Beer Beer: Fermented grain and hops -LagerMost popular beer in the U.S. -AlesEuropean and Microbreweries

Styles of Beer Sweet Ales Lagers Fruity Malty Bitter John Palmer, “How to Brew”,

WINE Flavor profiles depend on varietal, season, terroir and blend. Terminology: Appellation The unit of a classification system based on geography. Terroir wine Terroir refers to the site-specific differences in wines that are caused by factors such as soil types, drainage, local microclimate and sun exposure that has some sort of link to geography – where the grapes were grown and also local cultural influences. Commodity wine An inexpensive wine purchased in most cases not for its intrinsic qualities but because it serves a purpose, like milk, flour, sugar or instant coffee. Branded wine A wine that doesn’t come from a strictly defined patch of ground, but is instead marketed by a brand name or ‘make’. Branded wines are typically made from either brought- in grapes, or grapes from several disparate sources which may include many vineyards owned by the same company. Estate wine A wine that is made from grapes from a fairly narrowly defined patch of ground, such as a single vineyard, or sometimes several neighboring vineyards.

Wine Parings Chardonnay, Sauvignon Blanc: seafood, rich soup, vegetables, goat and other strongly flavored cheeses, cream sauces Gewürztraminer, Riesling: ham, pork, mild cheese, Indian, Thai and Chinese, chicken and turkey Merlot, Cabernet Sauvignon: roast beef or roast fowl, venison, cheddar, blue cheese Pinot Noir, Zinfandel: roast beef, turkey Port, Sauternes: chocolate, pastry, foie gras Shiraz: stew, casserole, ratatouille Sparkling: fancy hors d’oeuvres, sushi, omelets.

SPIRITS Fermented beverages, distilled (heated to steaming point so alcohol separates and is then cooled to condense to liquid), aged in wood to develop character, and diluted with distilled water to reach desired alcohol level. Proof: Two times the alcohol content of the spirit. (Originally a beverage was “proofed” by setting it on fire. If it would burn, it was said to be 100 proof, which was later found to be 50% alcohol.) Both proof and aging change the flavor profile of the beverage. Product can be categorized by brand loyalty/awareness: Well Brands--less expensive brands used to mix drinks when the customers does not call for a specific brand Call Brands--nationally recognized, more expensive brands that are ordered by brand name

ALCOHOL PURCHASING STANDARDS The same three standards that apply to food, apply to beverages. 1. Quality Brands/Labels Proof Varietals/Vintages 2. Quantity Case vs. Broken Case Bottle size Perpetual vs. Periodic Ordering 3. Cost May or may not be negotiable depending on the situation in your area

RECEIVING STANDARDS CHECK EVERYTHING WHILE THE DRIVER IS STILL THERE. ONCE HE LEAVES, IT’S TOO LATE!! IMMEDIATELY MOVE PRODUCT TO IT’S DESIGNATED, SECURE STORAGE AREA!!

Receiving Standards Quality Check every bottle in every case vs. purchase order Check name, label, vintage and proof Check corks on wine to make sure they are moist Check seals on liquor Check kegs to make sure they are cold (kegs are not pasteurized) Check expiration dates on kegs and some premium bottle beers Quantity Weigh all kegs Count every bottle in every case Quantities on the Purchase Order and Invoice MUST match Cost standard Prices on the purchase order MUST match the invoice Alert the driver and the adjustment the invoice If alternates have been shipped, check before accepting.

STORAGE STANDARDS 1. Protect the Quality of the Product Kegs must be kept refrigerated (shelf life of 1 month) Bottles stored at room temperature (shelf life 3 mos.) Wines must be stored at an angle with the cork down Maintain a constant cool temperature Humidity levels should be between 70% and 95% Protect your wine from vibration Protect from ultraviolet light Protect from odors such as chemicals and paints Distilled spirits are shelf stable—no refrigeration needed 2. Accessibility Organize by type, brand, etc 3. Safety Limit access Monitor or establish security Establish and maintain a stringent issuing policy/system

TURNOVER Turnover will tell whether Quantity Standards are correct Too SlowToo Fast Ties up cashPurchasing costs are high Increased storage costsOut-of-stocks increase customer dissatisfaction Encourages theft Product spoilage and waste INVENTORY FORMULAS $Average Inventory = $OI + $CI 2 Average Turnover = $COGS $Avg. Inv. Rule of Thumb: Industry Average Turnover, Beer & Spirits18-24 times Wine varies greatly by location, restaurant concept, wine list (wines kept for aging on site—only about 5% of wine produced)

BEVERAGE COSTS, AVERAGE INVENTORY AND TURNOVER.

ISSUING STANDARDS 1. Control from Abuse -Limit the number of people with authority to requisition -Never have same person requisition and stock their own bar -Each bar should have their own requisition form and pars 2. Cost Accountability -Each bottle charged to a service area when requisitioned -Bottle-for-Bottle (one full for one empty) -Visually inspect requisitions as they leave storage

NON-ALCOHOLIC BEVERAGES Much simpler part of the beverage business. More competitive pricing Lower in price Easier to order and handle (more like dry grocery than beverage) Forms Pre-mixed vs post-mixed Post-mixed is less expensive because you aren’t paying for water Requires less storage space Many companies provide mixing/dispensing equipment for brand loyalty Various sizes available Size purchased will be dictated by use (i.e. liters used for catering or service bar) “Guns” are becoming the most common form in many bars

CONTROLS IN BEVERAGE PRODUCTION Value of Beverage Production Types of Bars Production Controls Inventory Governmental Controls Well vs. Call Brands Inventory Valuation Wine Service

BEVERAGE PRODUCTION Because of their high markup and low COG, beverages are key to increasing the profitability of an operation. Par Levels, Product Mix and Product Form will be determined by the concept/target audience. Patrons are more loyal to beverages than to food. Most establishments will have more than one type of bar. Front Bar Service Bar Clientele can see the entire operationCaters to wait staff serving food May or may not be visible to clienteleMay not be visible to customers

Types of Bars Catering Bars can be Permanent vs. Portable Catering Bars can Vary by type of event Open Bar: Guest receive drinks gratis; limited brands Cash Bar: Guests buy drinks; broader product line Host Bar: Product is agreed on in advance Club Bar: Concept driven

CONTROLS Bottle-for-Bottle policy for every bar Standardized Recipes Consistent product=customer satisfaction Ability to forecast --COGS projections and correct ordering Automated beverage dispensing machines that produce exact recipe every time Generally not used for Front Bar, although increasing (i.e. frozen margarita machines, etc.) Service Gun for Alcoholic Beverages Sits BOH and works in conjunction with POS system Becoming more common in large operations Helps in inventory and sales reconciliation Shot glasses, Jiggers, Free Pour

BAR INVENTORY Typically done more frequently than food inventory Both stockroom and bar must be inventoried. Stockroom—Physical Count Bar Stock—Visual estimates of stock, by bottle Usually by 1/10ths.

GOVERNMENT CONTROLS Drinking age Type of outlet— wine & beer only, full license, BYO wine Dry counties/States Blue laws—time/day restrictions Package sales in licensed bars Limited # of licenses by area NOTE: Understand the regulations before you proceed.

DRAM LAWS Third party liability. If an intoxicated customer hurts or kills someone after leaving your establishment, the owners, bartender and servers can be held liable. Impact: Insurance rates have climbed Negative publicity for establishments involved Financial liability Training & Support: Alcohol Control Boards or State Patrol offer training Some major distributors offer training Offer training & set standards that are enforced

TRANSFERS State and Federal regulations place strict controls on the transfer of alcoholic beverages between locations, even within the same group. Monthly reports must be submitted to prove that the amount sold does not exceed the amount purchased. -Sales tax issues -No purchases at retail level Transfers internally should be documented -Wine transferred to the kitchen -Liqueurs used in desserts/sauces -All beverages for catering or room service

MONITORING BEVERAGE OPERATIONS Three methods of cost control: 1.Cost Approach—COGS usually reveal deviations when compared to the Operating Budget $COGS = O.I. + Purchases + Transfers In – Transfers Out –C.I.

Methods of Beverage Cost Control 2.Ounce Control Method—daily revenue/ inventory by ounce compared to ounces sold -Time consuming and tedious -Used in large establishments where POS systems are tied to automatic dispensers

Methods of Beverage Cost Control 3. Sales Value Approach—the value of each bottle is calculated based on standardized pour/recipes and retail prices Liter = 33 1oz. drinks Complicated by mixed drinks where 1 oz. is not the measure Historic data can be used to develop a “beverage differential” that identifies how much actual sales differ from the “per oz. sale”

BEVERAGE MIX POPULARITY & PROFITABILITY,