Tracy Finklang, corporate beverage manager for Louisville, Colo.-based Rock Bottom Restaurants Inc., simply stopped ordering kegs of beer from a supplier who raised the price by 14 percent.
“That was pretty extreme,” she says. “Most of the others were increasing [prices] by 10 percent, but I can no more pass on a 10-percent price increase to the guest than fly to the moon.”
As the recession pushes costs up and consumer spending down, savvier purchasing practices are just one of the ways operators like Finklang are working to maintain the margins on their beverage offerings. Others include innovative specialty drinks featuring less expensive alcohol brands and ingredients, regularly changing beverage menus, and a staff trained how best to market a restaurant’s liquid offerings.
While Rock Bottom’s concepts are well known for beer, including crafted beer at its Rock Bottom Restaurant & Brewery concept and beers from around the world at its Old Chicago brand, Finklang rounds out the company’s beverage choices with both alcoholic and nonalcoholic specialty drinks.
“We have everything, and we put it out front and center that we’re not just a beer place,” Finklang says. “We make great martinis. We have a drink, the pomojito, [a] pomegranate mojito. It screams out of the bar.”
Specialty drinks offer an advantage because they do not always call for expensive brands, she says.
“You can still keep the drinks fun and nicely decorated and tasty, just not use as much [alcohol],” Finklang says. “You can reduce the cost to the guest but still retain the margin. When I’m building specialty drinks, I’d rather sell two $5 drinks than one $8 drink.”
While margins are “money in the bank,” the real challenge for beverage managers and restaurant managers is to control the cost of goods, Finklang says.
“You can talk all day long about margins, but at the end of the day, your boss wants to know how come your cost of goods is so high,” she says.
The more expensive specialty drinks have a higher cost of goods, she explains. But they can yield a higher return if customers buy more of them than other drinks.
“You have to put forward the drinks that give the best value to the guest, but also the best margin and profitability to your bottom line,” Finklang says.
Not listing the brand name in the cocktail menu gives you more leeway to take advantage of supplier discounts and sales, says Sam Lipp, assistant general manager of Eleven Madison Park in New York, a fine-dining concept that is part of the Union Square Hospitality Group founded by restaurateur Danny Meyer.
Rather than include brand names, the beverage menu is kept simple with a list of ingredients, such as gin, vermouth and bitters, Lipp explains. This gives operators more freedom to watch for monthly specials from suppliers.
“The precision in which you make the drink and the portions and care with which you make it are so much more important than what brand name you use,” he says. “I’m not saying we make decisions based on price. We make decisions based on the quality of the spirit, our creativity, and the menu and the season. But within that, we look to see if there is something on a deep discount that month.”
Operators say they are seeing price-conscious customers order just one specialty drink or a more expensive glass of wine or beer. Then if they have a second beverage, it may be a house wine or beer or cheaper beverage.
“People are drinking less when they go out, but we started seeing that even before the economy, with concerns about safety and drinking and driving,” says Ryan Valentine, beverage director for Columbus, Ohio-based Cameron Mitchell Restaurants. “What they are doing in our restaurants is trading up on the quality for only one drink, rather than buying two of a cheaper one.”
Although consumption of spirits was down slightly in restaurants, consumers are becoming more discerning when purchasing alcohol, notes the chief executive of the Distilled Spirits Council of the United States, a Washington, D.C.-based trade association for distillers.
“Many consumers are trading around, not trading down,” says DISCUS chief executive Paul Cressy, who gave a media briefing on spirits sales and revenue earlier this year.
Sales of premium rums, tequilas and American and Canadian whiskeys continue to grow in 2008; however the trade association is concerned with how the economy is affecting restaurant sales.
According to DISCUS, on-premise sales slid 2.2 percent in 2008, from the year before, after steadily rising for the previous six years. Overall revenue growth for the spirits industry slowed to 2.8 percent to $18.7 million last year over 2007.
“Contrary to popular belief, the entire beverage alcohol sector is recession resistant, not recession proof,” Cressy says.
Customers are also more knowledgeable about wine and are looking for a good value when they go out, Valentine says.
“We still see people spending a lot of money on expensive wine, but it’s starting to change,” he says. “There is not as much exotic spending. People are not going to take risks. They are being more careful with their purchases and making better decisions about wine than they ever did.”
Valentine advises his restaurant managers to be smart about what they buy.
“We want to buy less of the things that don’t move and more of the things that do,” he says. “We want to have less money tied up in inventory and still have the same depth of offerings.”
Customers opting for just one specialty drink or cocktail are pushing operators to be more innovative and creative with their beverage offerings.
“There are two ways to make a profit in today’s market,” says Kenneth Luciano, general manager of MatrixFillmore, a lounge in San Francisco known for attracting famous rock bands in the 1960s. “You can offer some standard product at a cheap price to get people to come in and buy, or you can offer fresh quality and knowledge of the product at a fair price.”
MatrixFillmore is on its second new beverage menu in seven months since Luciano became general manager. His goal is to keep the beverage choices new and fresh so regular customers stay as interested as newcomers. The 150-seat lounge is one of 16 concepts and wineries owned by the Plumpjack Group.
“It’s like when you were in grade school and your mother made the same lunch for you every day,” Luciano says. “You’d spend half the time looking to trade your food for something else to eat. We offer a variety of things to keep regulars involved.”
Eleven Madison recently rolled out a new beverage menu, one that arranged cocktails and alcoholic drinks in an order similar to a chef’s tasting menu. The menu starts with aperitifs, then light spirits, dark spirits and concludes with after dinner digestifs, such as brandy.
The descriptions are kept simple, featuring stories about the drinks to build a connection with customers. For example, the “Martinez” is described as “the father of the modern martini cocktail.”
“This libation was likely created in Martinez, Calif.,” the drink menu says, “where a plaque commemorating this historic event stands on the corner of Alhambra Avenue and Masonic Street.”
At Cameron Mitchell’s Marcella’s Italian restaurants in Columbus, cocktail ingredients are influenced by the food menu. One popular drink is the strawberry balsamic martini. The concoction is made with vodka, hand-squeezed lime, strawberries and aged balsamic vinegar, and is topped with lemon-verbena foam.
“It’s very culinary,” Valentine says.
Just like any dish coming out of a kitchen, a cocktail has a recipe, Luciano notes.
“With any recipe, if you don’t follow it exactly, it will be different,” he says. “I’m a big fan of measuring our shots. You want to stay consistent in what you offer and make the best thing you can.”
Luciano has stopped buying readymade syrups and mixes and instead has bartenders make their own syrups and squeeze juices from local produce.
“Especially in these times, my focus is on adding value,” Luciano says, “adding any significant value to what your product is, whether fresh juices or knowledge or creativity of different cocktails.”
Ready-made syrups and juices, however, can help keep drinks consistent, particularly with drinks that call for ingredients that are not in season, Valentine says.
“Blueberries, for instance, are stingy,” he says. “They do not give off a lot of color and juice, so we use syrup to get the color and make it pop.”
Some operators also are trying to appeal to health-conscious consumers with tasty versions of their favorite food and beverages. For example, in late 2008, SushiSamba, a New York-based, multiunit concept serving Japanese, Brazilian and Peruvian cuisine, launched a menu of virgin, health-oriented cocktails.
“While the rise of artisanal cocktails has made a splash in the past year, health-conscious, affordable cocktails that combine fresh ingredients are growing in popularity,” said Joanna Cisowski, SushiSamba’s director of public relations. “SushiSamba launched its virgin-cocktail program to provide something often overlooked in health-conscious dining: tasty cocktails.”
SushiSamba’s new menu includes so-called “mocktails,” such as the Açai Fizz with açai, passion fruit, mango and egg white; and the Coco Leite with coconut milk, pineapple and mango. Already helping to drive traffic, the virgin menu will be available throughout 2009, Cisowski said.
A well-trained staff is another critical element for driving sales, operators say.
Union Square Hospitality Group offers introductory and advanced classes in wine to employees at all of its restaurants. These classes fill up quickly with not only servers, but bussers, dishwashers, cooks and managers, Lipp says.
“We stress education with our staff,” he says. “We look at this place as a graduate school of hospitality.
In addition to annual company-sponsored classes, Eleven Madison does a weekly “Happy Hour” class with the staff to review and learn about wines and spirits of various regions. For example, the “World of Whisky” class covers differences between blended and single-malt Scotch whisky, Irish and Scottish whiskies, bourbon, and rye. Servers also learn ways to improve sales at the table.
“If our people can’t get excited about the product and excited to tell you about our cocktails, how can the consumer latch on to it and get into the program?” Lipp asks.
Employees among Rock Bottom’s 103 units also learn everything they can about new menu items, including drinks.
“We call it ‘facting,’” says beverage manager Finklang. “Every team member sees the picture of the drink, the recipe, they watch the bartender make it, and they taste it—unless they are underage servers. They have to know how it’s made and how to describe it.”
At MatrixFillmore, general manager Luciano gets the entire staff involved with new products. Bartenders are challenged to come up with new drinks; servers compete in contests to see who can sell the most of a particular item.
“We’ll pick a product and they have to become familiar with it,” Luciano says. “We’ll give it to the bartenders for three weeks to give them time to learn the product and get creative with it. We’ll bring in the liquor purveyors to teach and judge to see who has created the best drink.”
Some of the drinks will end up on the menu, Luciano says. The drinks also give servers and bartenders something to talk with customers about.
“People care what they are drinking,” he says. “They want to know how it’s made, what kind of wood was used to age it.”
