LAS VEGAS NIGHTCLUB & BAR SHOW MARCH 2010 Presented By: JACK ROBERTIELLO

1. Successful Beverage Management —Proven Strategies for the On-Premise OperatorPart Two:Increasing Sales In A Down Economy LAS VEGAS NIGHTCLUB & BAR SHOW MARCH 2010 Presented By: JACK ROBERTIELLO Beverage Writer/Former Editor of Cheers Magazine, Drinks Ink ROBERT PLOTKIN Author/Beverage Management Consultant, BarMedia

2. Premium Sales Trending Up — Americans Are Drinking Less But Better Despite the Recession, on-premise sales of premium spirits continue to increase Prevailing attitude in U.S. — life’s too short to drink cheap booze As evidence, on-premise sales of inexpensive value brands are flat or dropping Consumers now have higher expectations about the quality of their drinks

3. Premium Sales Trending Up — Americans Are Drinking Less But Better A recent consumer research study: Conducted August 2009 by NextLevel Marketing and Nightclub & Bar Involved 1250 on-premise consumers — LDA, split 50% male / 50% female Over 80% strongly agreed that cocktails made with premium spirits taste better than those prepared with house brands Consumers said they expect to pay an additional $2.80 for a branded cocktail

4. Premium Sales Trending Up — Americans Are Drinking Less But Better Call Brands Deliver Bigger Profits 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

5. Premium Sales Trending Up — Americans Are Drinking Less But Better Call Brands Deliver Bigger Profits Margarita made with PREMIUM Tequila $ 1.05 drink cost ÷ $6.00 sales price = 17.5% cost percentage $6.00 sales price - $1.05 drink cost = $4.95 gross profit

6. Premium Sales Trending Up — Americans Are Drinking Less But Better Call Brands Deliver Bigger Profits Margarita made with SUPER-PREMIUM Tequila $ 1.72 drink cost ÷ $7.50 sales price = 22.9% cost percentage $7.50 sales price - $1.72 drink cost = $5.78 gross profit

7. Premium Sales Trending Up — Americans Are Drinking Less But Better 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 Tequila $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 Tequila $1.72 drink cost ÷ $7.50 sales price = 22.9% cost percentage $7.50 sales price - $1.72 drink cost = $5.78 gross profit

8. Well Liquors — The Most Important Bottles in the House Well liquor is used in more drinks than any other type of spirits and typically has the highest sales volume As a result, featured brands will significantly impact profitability Bar’s price structure based on the well (e.g. well price plus $1 = call price, etc.) Selection criteria — featured brands need to conform to concept and clientele

9. Pouring Brands in the Well Often featured at operations with a predominantly price-conscious clientele Advantages — low cost per ounce and relatively low carrying cost Disadvantages — low quality, no brand recognition, heightened liability Well Liquors — The Most Important Bottles in the House

10. Example of a Pouring Brands Well Well Liquors — The Most Important Bottles in the House

11. Profit Potential — Pouring Brands Well Liquors — The Most Important Bottles in the House

12. Premium Brands in the Well Well Liquors — The Most Important Bottles in the House Best suited for a value-conscious clientele or brand-conscious clientele Advantages — moderate cost per oz, high quality, enhanced brand recognition Disadvantages — elevated cost per ounce, slightly higher carrying costs

13. Well Liquors — The Most Important Bottles in the House Example of a Premium Brands Well

14. Profit Potential Premium Brands Well Well Liquors — The Most Important Bottles in the House

15. Profit Comparison Well Liquors — The Most Important Bottles in the House

16. Profit Comparison Well Liquors — The Most Important Bottles in the House

17. Backbar Management — Setting the Stage For Success Beverage sales in casual and tablecloth restaurants average nationally around 25% of gross revenue and account for over 50% of average net profits The backbar is an operation’s principal and most effective marketing device It’s essential to assess whether the backbar is stocked with the right product mix

18. Look to reduce inventory levels — frees working capital & lessens exposure to loss Reassess status of underperforming products — those that take 4+ months to deplete Drop dead stock — products that take longer than 9 months to deplete Drop duplicate flavors or repetitive styles Concentric merchandising — bestselling products positioned in center of backbar Backbar Management — Adopting a Marketing Position

19. Vertically extend each category of spirits with at least one above-premium brand Adopt a marketing position — horizontally expand a select category of spirits Staff education crucial to success of the strategy, facilitates server credibility Focus a portion of the bar’s marketing to that spirit: Create a line of specialty cocktails featuring the adopted spirit Devote space in the bar menu to list the name brand spirits stocked Promote tasting flights to showcase nuances between various brands Backbar Management — Adopting a Marketing Position

20. Suggestive selling helps clientele make informed decisions A look at consumer perceptions about suggestive selling: Nearly 70% of the consumers said they walk into a restaurant without knowing beforehand what they were going to drink About two-thirds said they listen to server suggestions and trade-up to a premium brand Only 3% responded of the consumers said they stick with their original order Suggestive Selling — A Small Skill Set that Yields Big Results

21. Three sales tactics — suggesting one, two or no name brands spirits Bar staff should deliver suggestions as if relaying insider information Guest hesitation before ordering is opportunity to present bar menu Of those consumers who typically stop after one drink, almost 25% said they would order another drink if only the server asked or didn’t take the cocktail menu away Suggestive Selling — A Small Skill Set that Yields Big Results

22. Every bar regardless of size should promote using a bar menu While guests will typically spend 2 minutes perusing a food menu — people on average spend 20 seconds looking through a bar menu That makes it essential your bar menu is well-conceived, easy to read in dim lighting and loaded with sensational cocktails On average, consumers want to see 14 beers, 14 wines and 16 cocktails promoted on a bar menu Bar Menus — Proven Sales Drivers

23. Conduct Your Own Market Research Bar Menus — Proven Sales Drivers Test the appeal of specialty drinks before dubbing them your house signatures Create three separate menus each with different specialty drinks Rotate the menus every two months and track the sales results The bestselling drinks should then be combined in one menu

24. Consumers Prefer Stand-Alone Drink Menus Bar Menu Effectiveness — Consumer Research Nearly 90% of consumers read the drink menus at full-service bars and restaurants The majority of consumers surveyed said the bar menu is the most significant choice influencer 58% of the consumers want the bar menu on the table at all times 17% responded that the prefer table top cards to menus Only 11% said they prefer specialty drinks listed in the main food menu

25. Most Consumers Want Drink Prices and Drink Descriptions on Menus Bar Menu Effectiveness — Consumer Research 81% of the consumers want drink prices listed on the menu 68% said they wanted to be able to read descriptions of the drinks 41% responded that they prefer seeing pictures of the drinks 35% of the consumers want brand names listed in descriptions

26. Menu Test #1 — Functional Descriptions Only Bar Menu Effectiveness — Consumer Research Functional descriptions only include mention of the ingredients in a drink Consumers presented a Margarita menu with only functional descriptions 47% of consumers would order house, 31% top-shelf, 22% the ultra-premium

27. Bar Menu Effectiveness — Consumer Research Margarita Menu House Margarita Cuervo Gold Tequila, triple sec and sweet and sour mix. Top Shelf Margarita Sauza Hornitos Tequila, Cointreau and margarita mix. Ultra-Premium, Margarita Patron Silver Tequila, Cointreau, and margarita mix. Source: NextLevel Marketing 2009

28. Menu Test #2 — With Added Romance Copy Adding romance drink copy to menus drives significant drink trade-up Consumer interest in ordering the house Margarita dropped from 47% to 33% Those interested in trading-up to a branded Margarita rose from 53% to 67% Bar Menu Effectiveness — Consumer Research

29. Bar Menu Effectiveness — Consumer Research Margarita Menu House Margarita Cuervo Gold Tequila, triple sec and sweet and sour mix. Top Shelf Margarita Sauza Hornitos Reposado Tequila, Cointreau Orange Liqueur and premium margarita mix served frozen or on the rocks. Ultra-Premium, Margarita Our distinctive, hand-shaken ultimate Margarita made with Patron Silver 100 Agave Tequila, Cointreau, and fresh squeezed lime juice served straight up or on the rocks. Source: NextLevel Marketing 2009

30. Menu Test #3 — With Added Romance Copy and Drink Prices When romance copy and drink prices were included on the menu… … 67% still wanted to order a branded Margarita … However, after seeing the price of the ultra-premium Margarita 5% of the consumers changed their minds and opted for the premium Margarita Bar Menu Effectiveness — Consumer Research

31. Margarita Menu House Margarita $6.00 Cuervo Gold Tequila, triple sec and sweet and sour mix. Top Shelf Margarita $7.00 Sauza Hornitos Reposado Tequila, Cointreau Orange Liqueur and premium margarita mix served frozen or on the rocks. Ultra-Premium, Margarita $8.00 Our distinctive, hand-shaken ultimate Margarita made with Patron Silver 100 Agave Tequila, Cointreau, and fresh squeezed lime juice served straight up or on the rocks. Bar Menu Effectiveness — Consumer Research Source: NextLevel Marketing 2009

32. Summary of Menu Testing Bar Menu Effectiveness — Consumer Research People want to know details about the drinks they’re ordering, just as they want to know about items on a food menu Consumers also want to know in advance how the drinks will look, what the ingredients are and how much they will cost

33. Profit Through Enhanced Mixology Increasing Revenue Through Mixology — Exceeding Guest Expectations Don’t offer your clientele the same uninspired drinks as the competitors Enhanced mixology adds panache and perceived value without adding cost

34. Achieving Sessionability in Your Drinks: Sessionability is the most elusive of all qualities in a drink to achieve Term used to describe a cocktail that people can enjoy throughout an evening Cocktails must taste sufficiently interesting to make guests want another Drinks lacking character are a bore and guaranteed to send people packing Excessively flavorful cocktails quickly overwhelm the palate Alcohol strength a factor — sessionability decreases as potency increases Increasing Revenue Through Mixology — Exceeding Guest Expectations

35. Technique Matters — Handshaking Vigorously handshaking cocktails is an underappreciated mixing technique Shaking a cocktail communicates freshness and quality to your guests Handshaking accomplishes a number of objectives: It thoroughly mixes ingredients into a homogenous cocktail Handshaking chills ingredients to serving temperature, around 37-38˚F Vigorous shaking also aerates the cocktail and produces froth on top Technique adds water; softens the cocktail and melds spirits and modifiers Increasing Revenue Through Mixology — Exceeding Guest Expectations

36. Technique Matters — Muddling Enhanced production sells the sizzle, adds to the guest experience Muddling is a high production value technique It does for a cocktail what high-def does for television Muddling injects cocktails with fresh, vibrant flavors Drinks muddled in service glass — Mojitos, Caipirinhas, Old Fashioneds Increasing Revenue Through Mixology — Exceeding Guest Expectations

37. Successful Beverage Management —Proven Strategies for the On-Premise OperatorPart Two:Increasing Sales In A Down Economy JACK ROBERTIELLO Beverage writer/former editor of CheersMagazine Drinks Ink Brooklyn NY 917.439.8467 applejak@earthlink.net drinksink.blogspot.com/ ROBERT PLOTKIN Author/beverage management consultant BarMedia Tucson AZ 520.747.8131 robert@barmedia.com barmedia.com/barprofits.com