How Keeping Close Tabs On Your Liquor Supply Can Both Cut Costs & Generate Revenue
Industry studies have consistently shown that a full 25% to 30% of a bar's liquor inventory never converts into registered sales. That is the equivalent of about six to eight 1.25 oz portions per bottle (which should yield at least 25 portions.) This loss of liquor volume--due to unauthorized comps, over-pouring, spillage or theft--should be of great concern to any bar manager.
While losing 25% of a $25 bottle may not seem like a very serious problem--an unavoidable cost of doing business--the true cost is much greater than that $6 or $7 per bottle. The question you need to ask yourself is: Where is this lost liquor going? And how is it affecting sales? For instance, if your bartender is not pouring 1.25 oz portions, but is instead pouring 2 oz portions (say, perhaps, to curry favor with clients and receive a bigger tip), you're not just losing liquor volume, you're also losing potential sales. Where the customer may have been disposed to buy three drinks (3.75 ounces), he may now be content to buy just two 2-ounce drinks. Your bartender's actions, in this case, haven't merely cost you a dollar's worth of liquor, they may well have cost you $6-$8 in lost sales revenue (depending on how you price your drinks). And that's just for one customer buying two drinks. How often is this occurring? What if your bartender also happens to be giving away free drinks without your knowledge or authorization? The point is: "shrinkage" does not only affect supply costs, it can also affect revenues in a big way.
That's why loss prevention is so important. The profitability of your business depends on whole bunch of variables--the location of your establishment, the overall economy, ever-changing customer tastes.... Achieving profit growth can be difficult and can rarely be accomplished overnight. Increasing the price of your drinks is risky, and can prove more harmful than helpful as far as your bottom line is concerned. And growing your clientele usually takes time. The best way to increase profits in the short-term, therefore, is not to try to fiddle with pricing or to increase your client base. (Of course, this is something you should always be doing. But it is not easy to do in the short-term.) The quickest way to increase revenue is to make the most of the clients you're already serving. And one way to do this is to improve operations by getting tighter grip on your inventory. Loss of liquor supply at double-digit levels is not an "unavoidable cost of doing business". It is "bad business". And it is entirely avoidable. Put simply, loss prevention can pay big dividends. What's more, it can be achieved quite quickly through the implementation of a quality liquor inventory control system.
Topics:
liquor inventory,
Bar inventory,
bar inventory levels,
bar efficiency,
bar profitability,
Bar Management,
Liquor cost,
Liquor Inventory savings,
alcohol cost,
Increasing Profits,
Reducing Liquor Costs,
bar control,
inventory control,
managing liquor costs
By Elizabeth GodsmarkAtlantic Publishing
Part 4 of 4: Trim Liquor Costs
Liquor prices don't vary a great deal from one wholesaler to another. Packaging and size also tend to be fairly consistent. So, what can you do about reducing liquor costs in your operation? The answer is quite a lot! It's a misconception in the liquor trade that your options are limited when it comes to selling liquor. Consider the following opportunities:
- Bulk buys. Purchase staple liquors, such as whiskey, gin, vodka, brandy, rum and other popular spirits (e.g., fruit brandies) in bulk. They have a long shelf life and you know you can sell them within a reasonable period of time.
- Trends. Stay ahead of consumption trends. Respond quickly. For example, the current trend in the United States is toward "light" spirits such as 80-and 86-proof whiskies, instead of 100-proof (50 percent alcohol) bonded whiskies. Wholesalers, too, are keen to promote these alternatives.
- Distilled spirits. Their shelf life is exceptionally long. Buy distilled whenever possible, and minimize wastage.
- Well liquors. Which well liquors you choose can really make a difference in reducing costs. But don't buy at any price and compromise on quality.Your reputation is at stake. Customers often judge an establishment by the quality of its well liquor.
- Call liquors. Increase margins on call liquors (brand names). Guests who ask for Gordon's gin or Jack Daniel's whiskey, for example, are loyal to the brand and will probably not question the price.
This article is an excerpt from the Food Service Professional Guide to Controlling Liquor Wine & Beverage Costs, authored by Elizabeth Godsmark, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:
Atlantic Publishing Company
Amazon.com
Topics:
Hotel Inventory,
Liquor Inventory savings,
alcohol cost
By Elizabeth GodsmarkAtlantic Publishing
Part 7 of 7: Reduce Purchase Costs
The purchasing department is the linchpin when it comes to reducing costs. It is much easier to control costs in this area than anywhere else in the operation. The bottom line is that astute buying techniques offer the best opportunity for a business to increase its overall profits.
- Monitor market trends. An upsurge in popularity of a certain beverage can lead to increased competition amongst vendors. Play them off against each other occasionally. Negotiate. You have nothing to lose!
- Welcome new ideas. Purchasers should always be on the lookout for new ideas and new ways of reducing costs. Don't close your door to sales representatives. They may genuinely have something of interest to your establishment. Consider their promotional discounts.
- "Opportunity buys." Don't rule them out. Take a look at items that may soon be discontinued or overstocked merchandise where a supplier has simply miscalculated demand. You could make big savings.
- Cooperative purchasing. Consider "pool" purchasing with other enterprises. It can give you added purchasing power.
- Change purchase unit size. Buy drinks in larger volumes. This can trim costs considerably, particularly in the case of liquor purchases where sell-by dates tend to be more generous.
- Place multiple orders. Consider buying your full range of drinks from one wholesaler. It may offer you amazing reductions, especially if it's keen to do business with you on a repeat basis.
Topics:
liquor inventory,
inventory managers,
Bar inventory,
liquor purchasing,
managing liquor inventory cost,
bar business,
Bar Management,
Liquor Inventory savings,
inventory control,
managing liquor costs
By Elizabeth GodsmarkAtlantic Publishing
Part 3 of 7: Securing Purchasing Procedures
A Good Purchasing Security System Can Save You Big Bucks
Build security into your purchasing procedures. The choiceof security system, however, depends a lot upon the size of your operation. If you are the "head cook and bottle washer" of a small establishment, security is a much simpler issue. If, however, you are part of a larger enterprise where a number of personnel are involved in purchasing, then security becomes a major concern. If this is your lot, give the following issues serious consideration:
- Set up a reliable purchasing control system. Whether your chosen system is manually operated or computerized, it must be free from loopholes.
- Beware of bogus documentation. Make sure that routine purchasing procedures are accurately documented from start to finish. Attention to detail in this area will help alert you to breaches of security. Be constantly on the lookout for
calculation "errors," deliberate duplication, "incorrect" invoices and bogus credit requests. These are all common ploys used by unscrupulous purchasers and vendors.
- Beware of the possibility of kickbacks. Some buyers have been known to "work" with suppliers in return for benefits such as money or gifts. Unfortunately, it happens all too often. Such "practiced" buyers and sellers are often masters of disguise, so don't be green, be keen!
- Beware of purchaser theft. This can take several forms. Purchasers may order merchandise for their own personal use or they may buy wholesale with the intent to "selling on." A carefully designed purchasing system will take care of most of these problems.
Topics:
liquor purchasing,
Liquor Inventory savings,
purchasing,
managing liquor costs
