Promotions Up, Profits Down?
Competition for on-premise occasions is heating up and operators are touting drink specials to drive traffic and sales. In fact, the incidence of promotions around new adult beverage items and limited-time offers rose 58% among leading restaurant chains in the first eight months of 2014 as compared with the same period a year ago, according to Technomic’s MenuMonitor. Promotion activity rose notably for restaurant original cocktails, Margaritas, craft beer, super-premium and premium domestic beer and imported wine.
This finding indicates savvy operators understand what we’ve seen in much or our research this year, including the soon-to-be released BarTAB Report: while today’s consumers seek variety and new experiences when ordering drinks in a restaurant or bar, cost is the primary driver of the what-to-drink decision.
Chain beverage professionals need to be strategic about theses drink specials. Promotions that highlight a new or unique cocktail, beer or wine at an attractive price point can pique consumer interest and spark purchase; that “unique” element can help retain margin on the promoted beverage. Also, take heed not to over-promote. During and immediately after the recession, many chains discounted food items so deeply that they effectively trained their guests to only order off their “deal” menus. Several now find themselves challenged to transition their guests to more profitable selections. A cycle of ongoing deep discounts on drinks can result in the same scenario, resulting in lower yield on what should be one of the most profitable areas of the restaurant.