PORTFOLIO MANAGEMENT IN THE BAR

With more products out there than ever it can get very confusing about what stock to buy. Business of bars expert, Sean Finter from Barmetrix takes us through his tips on stock management to ensure your bar minimizes losses, boosts profits and delights customers.

A CHANGING MARKETPLACE

Making money in the bar business has never been easy. Every year I work with thousands of operations teams around the world to help them manage their product portfolio so we see the challenges firsthand.

To earn strong profits in this marketplace you must be a strategic retailer. There are a few forces that have ushered in more change over the last decade than the previous three combined.

1. Social media-Consumers are being engaged, educated, and influenced at a rate never imagined. They also now have the ability to determine the right bar at the best price instantly.
2. Product Explosion- There are hundreds of new products hitting the market every month and an army of sales reps eager to get those products listed.
3. Cocktail Explosion- Cocktail lists are everywhere and have become expansive and complicated. More cocktails mean more ingredients.

Bars are holding more stock and carrying more brands than ever before. In fact, too many. The average bar we start working with has 35% too many products. This results in money tied up in dead-stock in the back of house and purchasing paralysis for the consumer at the point of purchase.

THE SIMPLE FORMULA

The best operators in the world follow a simple formula:

1. Right Size Your Portfolio - The Pareto Principle (80/20 Principle) applies to most bars in that 80% of your sales come from 20% of your products. Every product must have a purpose. If it doesn’t bring something to the party, then why was it invited? Use it or lose it.
2. Keep Your Losses to a Minimum - Every bar loses inventory. The question is how much? Many of our clients in Europe were losing 10% of their beverage through shrinkage, while in the USA the average is 20%. Shrinkage needs to be held down to 1-3% and that is typically only accomplished with an outsourced company.
3. Operate inside of strict Retail Guidelines:
   • Brand congruency- never purchase products incongruent with your brand.
   • Desired margin- establish margins by category
   • Number of products per category- ensure that you have 1 in 1 out
   • Portfolio dispersant- it is easy to get caught up in all the trending products but ensure that you lock in core products that customers come to expect (Like Guinness, Tanqueray, etc)

Product placement matters - ensure that products that you want to be known for and/or are driving your best margins from are given prime placement.

REMEMBER

Keep a good eye on the data. A product that was selling out last year could be collecting dust tomorrow. Act on the info monthly.

Finally, it’s not enough to simply have a well-educated management team, you need to educate every member of your team if you hope to optimize your profits. Smart retailing is a team effort.

CHECKLIST:

1. Establish purchasing guidelines
2. Move out deadstock
3. Invest in proper lighting, shelving, and anti-slip paint in stock rooms
4. Set par levels for all storage areas
5. Keep stockroom cardboard free and tidy
6. Label all shelves and speed rails
7. Test bartenders on pricing and product knowledge (should know a minimum of three things)

Review all prices quarterly

KEY TAKEAWAYS

1. The bar industry has changed in recent years due to social media and a dramatic increase in products and cocktails
2. One of the biggest problems bars face is having too much stock.
3. Remember every product must have a purpose. You should also try to keep your losses to a minimum and operate inside of strict retail guidelines.
4. Keep an eye on the data and see if the popularity of products is going up or down.

Ensure all team members are trained in product management.