Maximizing Your Beer Sales
Joe Abegg is the Director of Category Management for MillerCoors but he doesn’t believe in having reams and reams of spreadsheets to make a bar, distributors and brands more money. Instead, he keeps things simple yet effective. Joe is a business consultant with a beer merchant mentality who would rather use effective resources to help a bar sell more beer. Joe also believes that guests rule in terms of deciding what brands a bar should carry, he believes in the power of brands over assortment, that more often than not the price is right so bars shouldn’t be afraid to charge whatever a customer will pay, that specials must be special and execution and results matter.
Joe knows what challenges retailers are facing. Bars are seeing a decline in traffic and that customers are spending less. Operations are costing more and there’s an increase in competition. The biggest challenges are remaining relevant, improving on trends and, of course, making more money. To overcome these challenges, Joe keeps his strategy simple and breaks it down to three things.
Understand What Your Customer Wants
If you don’t understand what your guests want, you’ll never succeed. It’s your responsibility to understand they income, age, ethnicity and needs. Beer can make you successful if you understand the people drinking it. Only 7% of beer drinkers are exclusive to craft beer, which only represents 4% of category volume as opposed to the 23% of beer drinkers who are exclusive to premium light, which represents 23% of category volume. According to TNS market research published in 2013, premium light drinkers consume 1.2 more beers on occasion than craft drinkers. The results of a BTS Consumer Survey study released in 2013 show that craft beer drinkers are interested in all styles of beer: 22% of their beer is premium light and 21% are imports. Craft beer drinkers make selection based on occasion and 26% of them select premium while watching sports, according to Scarborough market research published in 2013. A Nielsen Homescan study released in 2012 found that 50% of beer drinkers reported that a seasonal beer was their first craft when they ventured past premium light and domestic regular. This all suggests that you need the right balance of assortment to make the right money. Simply stated, your bar must feature premium lights.
When beer drinkers first start their journey with beer, the majority start with premium lights. They then delve into invitation brands like Blue Moon, Sam Adam’s or Leinenkugel’s. Next, they start exploring other styles that offer more diverse, complex and intense flavor profiles. Naturally, they then experiment with robust, intense and unique flavors. However, those robust beers are consumed in much smaller quantities. Do you know where beer drinkers end their journey with beer? The information available says they go right back into the premium light category.
Understand Your Business
How do you make money? What are your customers like? How old are they? Why are they in your bar? What are they looking for? What’s your environment like? Is your bar a happy hour spot, late-night spot, sports bar or dive bar? What’s your mission and what are your goals? What is your vision? How is your staff incentivized? For what do you want to be famous? Once you’ve answered all of those questions, ask yourself how can beer play a role in meeting your objectives. You need to know your current TAB or total alcohol beverage sales and your current percentages of food, beer, wine and spirits? Know how much your account is making and your current sales. Know that the average TAB should be 75% and food sales should be 25%, with beer making up 60% of TAB, wine making up just 10% and spirits at 30 percent. Beer is going to be the moneymaker in the vast majority of bars.
Build the Right Solution
To make your bar more money, you need to solve problems and strategize correctly and effectively. When deciding on what beer to offer your guests, don’t just leave it up to your bartenders; they’re just going to choose the beers that they prefer. You must have the right assortment of products, building with beer since it’s the most popular segment of TAB. While you may be tempted to categorize your menu by beer style and load up on everything, keep in mind that, according to Joe, consumers choose brands over styles and that premium light is preferred on 52% of occasions. Also, remember that balanced assortments maximize your business. Just because someone identifies as a craft drinker doesn’t mean that they only drink within that category. Craft drinkers drink all categories of beer.
As kegs are costly and don’t last as long as bottles, adopting a bottle strategy in order to experiment with your menu can define assortment effectively and cost you less. You also need to embrace the correct pricing strategy, which is customer-based pricing. If your guests are willing to pay more, charge more. It’s as simple as that. As yourself what your guests are willing to pay and what margin you’d like to achieve and then maintain those margins. Interestingly, craft beer and imports are less price sensitive than their premium light counterparts, meaning that in terms of price and sales, they’re inelastic. Premium lights are elastic, meaning that the more you charge for them, the less you’ll sell.
Once you’ve tackled pricing, look at your promotional strategy. An average weekend day delivers more than 50% more beer revenue than an average weekday. Also, put quite simply, if a special doesn’t feel special it won’t work. You can’t just use pricing to be special because your competition can just lower their pricing to beat your promotion. While price specials may be the number one influencer for venue selection, it doesn’t extend the visit or keep a guest from leaving. The basic thing to understand is that if you’re competition can do it, it isn’t special. So, identify what you unique promotions you can offer guests and implement them effectively. You may not realize that discounting craft beers and imports actually cannibalizes revenue so don’t discount them heavily. Instead, know that brand matters more than price so you’ll be more successful featuring a beer than you will be discounting it. It’s much more effective to differentiate yourself with brand assortment and size offerings, such as offering smaller sizes for high gravity beers, flights and specialty craft sizes. Lastly, it isn’t effective to promote just one beer or spirit. Promote the entirety of TAB in order to avoid alienating a specific segment of your guests. If you only promote one particular beer brand, you won’t capture the dollars of a cocktail drinker.
You'll have the opportunity to learn more about beer, operations, promotions and increasing your revenue from experts like Joe Abegg at the 2016 Nightclub & Bar Convention and Trade Show. Registration will open in October!