In the first part of this blog post we discussed the many challenges that are present when trying to control the costs of your beverage program while maximizing profit. In today’s post we want to discuss some of the solutions.
These are the three key areas we are going to focus on to help you control the costs of your beverage program.
1. The buying process
Knowing what to buy is a key part of this entire pricing structure. Restaurant goers can easily spot or assess with their smartphone whether or not a price is an unfair mark up or not. So the days of crazy markups just won’t work any more.
It’s important to train all of your beverage buyers to create close relationships with the sales people walking through your door. Make sure they are paid on time, you are kind to them – heck, give them a sample of the evening’s amuse bouche when they drop by to show you a new sample. Good relationships = good information, aka tips on upcoming discounts, new releases or limited time offerings.
Grabbing a beverage that is sold in a limited number of places gives you the advantage. You don’t have to have to negotiate between having to increase profits and pricing fairly to your competition. Instead, you can reasonably price your wine, draw a crowd and make a profit.
Even better, knowing which products differentiate your from your competition allows you not only to provide a unique experience but also gives more room to adjust markup. It’s therefore critical to have insight into what the market around you is doing and how you compare.
2. The mark-up
The most common way to track costs and profitability is to use a fixed percentage margin. This makes it very easy to keep track of your sales and handpick your star profit generators.
However, a one shoe fits all model is becoming a harder and harder sell, as consumers use their smartphones to find great deals. You need to create a solution for your markups that will ensure monthly costs and profits are maintained. There is no one formula that will work for every restaurant. Again, sales volume at YOUR establishment is key.
For example, having a lower markup for a bottle of wine than the standard 3 to 4 times that we see most commonly in restaurants, can really make your list stand out and ultimately draw a bigger crowd, increasing your overall volume sold. This means that the right way to price your beverages needs to take into account your entire list and how consumers will split among different price points.
Another example is raising the wine by-the-glass markup on the labels you know people are confident drinking or easily recognize quality. Increasing consumer confidence is key to drive willingness to pay, which means that pricing your beverages also requires solid data on consumer preferences and quality perception.
3. The continuous improvement
Overall, restaurant pricing strategies are not a set it and forget it type of situation, but this is even more profound on the beverage side. You want to get every possible dollar on your high-margin product. While it might seem like an incredibly massive task to take this on for every single beverage you offer, it really key to be on top of this, not just for your top selling beverages.
Even minor changes can have a huge impact particularly with higher volume products. It’s key to know your products and your sales for those products, and also, to know which competitors carry those products, their prices, and current market trends. Make adjustments to those products that are seeing an increase or decrease in sales keeping all of these factors in mind.
Knowing your sales is the single most important key to control the costs of your beverage program. Check in DAILY. You should know what your best sellers are at every time of the year. This will help you instinctively know what to buy and how to price it. Predicting seasonality and making adjustments ahead of demand is another factor that drives successful beverage programs.
How does it all come together?
Three distinct sources of information that you must be paying close attention to, stand out from the topics above:
- what the market around you is doing and how you compare;
- how consumers will split among different price points, their preferences and perception of quality;
- how your current pricing structure is performing and how to adjust it to seasonal changes.
Access to this data, intelligence and improvement opportunities might seem hard to achieve, but we’ve got some good news. InVine has an incredible platform that can help you optimize your pricing in real time on all of your menus. Gather real data and make adjustments in seconds. Manage your beverage program on the go. Gather insight on competition and trends / seasonality.
Get a demo today and see why so many restaurants have started using InVine to drive up the success of their beverage program.