Beverage Purchase, ReceivingStorage & Issuing

• Licensing Types• Types of Alcoholic Beverages• Purchasing Standards• Receiving Standards & Techniques• Storage Principles• Issuing Practices• Non-Alcoholic Beverages

BEVERAGE COST CONTROL

Alcoholic beverages are one of the highest margin, highest theft items in the foodservice business. They can either make or break a business depending on the level of control you have in place.

TYPES OF LICENSING

LICENSED STATE CONTROLLED STATES (i.e. Nebraska) (i.e. Iowa)

Licensed liquor distribution State controlled distribution points; both wholesale & retail

Taxed at distribution level & State controlled pricingend user level

Competitive pricing Cash only

Credit terms availablePick-up only

Delivery available

Liquor cannot legally be transported across state line for purposes of sale. Franchise states: Brands are sold by one dealer only. Franchising limits competition and competitive

pricing for that brand.

CLASSIFICATION OF ALCOHOLIC BEVERAGESBeer

Beer: Fermented grain and hops

-Lager Most popular beer in the U.S.

-AlesEuropean and Microbreweries

Styles of Beer

Sweet

Ales Lagers

Fruity MaltyBitter

John Palmer, “How to Brew”, www.howtobrew.com

WINE

Flavor profiles depend on varietal, season, terroir and blend.

Terminology:

Appellation The unit of a classification system based on geography.

Terroir wine Terroir refers to the site-specific differences in wines that are caused by factors such as soil types, drainage, local microclimate and sun exposure that has some sort of link to geography – where the grapes were grown and also local cultural influences.

Commodity wine An inexpensive wine purchased in most cases not for its intrinsic qualities but because it serves a purpose, like milk, flour, sugar or instant coffee.

Branded wine A wine that doesn’t come from a strictly defined patch of ground, but is instead marketed

by a brand name or ‘make’. Branded wines are typically made from either brought-in grapes, or grapes from several disparate sources which may include many vineyards owned by the same company.

Estate wine A wine that is made from grapes from a fairly narrowly defined patch of ground, such as a single vineyard, or sometimes several neighboring vineyards.

Wine ParingsChardonnay, Sauvignon Blanc: seafood, rich soup, vegetables,

goat and other strongly flavored cheeses, cream sauces Gewürztraminer, Riesling: ham, pork, mild cheese, Indian, Thai

and Chinese, chicken and turkey Merlot, Cabernet Sauvignon: roast beef or roast fowl, venison,

cheddar, blue cheese

Pinot Noir, Zinfandel: roast beef, turkeyPort, Sauternes: chocolate, pastry, foie gras Shiraz: stew, casserole, ratatouille Sparkling: fancy hors d’oeuvres, sushi, omelets.

www.tasting-wine.com

SPIRITS

Fermented beverages, distilled (heated to steaming point so alcohol separates and is then cooled to condense to liquid), aged in wood to develop character, and diluted with distilled water to reach desired alcohol level.

Proof: Two times the alcohol content of the spirit. (Originally a beverage was “proofed” by setting it on fire. If it would burn, it was said to be 100 proof, which was later found to be 50% alcohol.)

Both proof and aging change the flavor profile of the beverage.

Product can be categorized by brand loyalty/awareness:

Well Brands--less expensive brands used to mix drinks when the customers does not call for a specific brand

Call Brands--nationally recognized, more expensive brands that are ordered by brand name

ALCOHOL PURCHASING STANDARDS

The same three standards that apply to food, apply to beverages. 1. Quality

Brands/LabelsProofVarietals/Vintages

2. Quantity

Case vs. Broken CaseBottle sizePerpetual vs. Periodic Ordering

3. CostMay or may not be negotiable depending on the situation in your area

RECEIVING STANDARDS

CHECK EVERYTHING WHILE THE DRIVER IS

STILL THERE. ONCE HE LEAVES, IT’S TOO LATE!!

IMMEDIATELY MOVE PRODUCT TO IT’S DESIGNATED, SECURE STORAGE AREA!!

Receiving Standards

QualityCheck every bottle in every case vs. purchase orderCheck name, label, vintage and proofCheck corks on wine to make sure they are moistCheck seals on liquorCheck kegs to make sure they are cold (kegs are not pasteurized)Check expiration dates on kegs and some premium bottle beers

Quantity

Weigh all kegsCount every bottle in every caseQuantities on the Purchase Order and Invoice MUST match

Cost standard

Prices on the purchase order MUST match the invoiceAlert the driver and the adjustment the invoice

If alternates have been shipped, check before accepting.

STORAGE STANDARDS

1. Protect the Quality of the Product

Kegs must be kept refrigerated (shelf life of 1 month)Bottles stored at room temperature (shelf life 3 mos.)

Wines must be stored at an angle with the cork downMaintain a constant cool temperatureHumidity levels should be between 70% and 95%Protect your wine from vibrationProtect from ultraviolet lightProtect from odors such as chemicals and paints

Distilled spirits are shelf stable—no refrigeration needed

2. Accessibility

Organize by type, brand, etc

3. SafetyLimit accessMonitor or establish securityEstablish and maintain a stringent issuing policy/system

TURNOVER

Turnover will tell whether Quantity Standards are correct Too Slow Too FastTies up cash Purchasing costs are highIncreased storage costs Out-of-stocks increase customer dissatisfactionEncourages theftProduct spoilage and waste

INVENTORY FORMULAS

$Average Inventory = $OI + $CI 2

Average Turnover = $COGS $Avg. Inv.

Rule of Thumb: Industry Average Turnover, Beer & Spirits 18-24 timesWine varies greatly by location, restaurant concept, wine list (wines kept for aging on site—only about 5% of wine produced)

BEVERAGE COSTS, AVERAGEINVENTORY AND TURNOVER• .

$SALES OI CI PURCH. $COG %COG AI IT

$180,250 15,000 14,280 16,200

$179,330 16,390 16,300 18,300

$391,000 20,120 18,200 17,200

ISSUING STANDARDS

1. Control from Abuse

-Limit the number of people with authority to requisition -Never have same person requisition and stock their own bar -Each bar should have their own requisition form and pars

2. Cost Accountability

-Each bottle charged to a service area when requisitioned -Bottle-for-Bottle (one full for one empty)

-Visually inspect requisitions as they leave storage

NON-ALCOHOLIC BEVERAGES

Much simpler part of the beverage business.

More competitive pricingLower in priceEasier to order and handle (more like dry grocery than beverage)

Forms

Pre-mixed vs post-mixedPost-mixed is less expensive because you aren’t paying for waterRequires less storage spaceMany companies provide mixing/dispensing equipment for brand loyalty

Various sizes available

Size purchased will be dictated by use (i.e. liters used for catering or service bar)“Guns” are becoming the most common form in many bars

CONTROLS IN BEVERAGE PRODUCTION

• Value of Beverage Production• Types of Bars• Production Controls• Inventory• Governmental Controls• Well vs. Call Brands• Inventory Valuation• Wine Service

BEVERAGE PRODUCTION

Because of their high markup and low COG, beverages are key to increasing the profitability of an operation.

Par Levels, Product Mix and Product Form will be determined by the

concept/target audience. Patrons are more loyal to beverages than to food. Most establishments will have more than one type of bar.

Front Bar Service BarClientele can see the entire operation Caters to wait staff serving foodMay or may not be visible to clientele May not be visible to customers

Types of BarsCatering Bars can be Permanent vs. PortableCatering Bars can Vary by type of event

Open Bar: Guest receive drinks gratis; limited brands

Cash Bar: Guests buy drinks; broader product line

Host Bar: Product is agreed on in advance

Club Bar: Concept driven

CONTROLS

Bottle-for-Bottle policy for every bar Standardized Recipes

Consistent product=customer satisfactionAbility to forecast --COGS projections and correct ordering

Automated beverage dispensing machines that produce exact recipe every time Generally not used for Front Bar, although increasing (i.e. frozen margarita machines, etc.) Service Gun for Alcoholic Beverages

Sits BOH and works in conjunction with POS systemBecoming more common in large operationsHelps in inventory and sales reconciliation

Shot glasses, Jiggers, Free Pour

BAR INVENTORY

Typically done more frequently than food inventory Both stockroom and bar must be inventoried. Stockroom—Physical Count Bar Stock—Visual estimates of stock, by bottle Usually by 1/10ths.

GOVERNMENT CONTROLS

Drinking age

Type of outlet—wine & beer only, full license, BYO wine

Dry counties/StatesBlue laws—time/day restrictionsPackage sales in licensed barsLimited # of licenses by area

NOTE: Understand the regulations before you proceed.

DRAM LAWS

Third party liability. If an intoxicated customer hurts or kills someone after leaving your establishment, the owners, bartender and servers can be held liable.

Impact: Insurance rates have climbedNegative publicity for establishments involvedFinancial liability

Training & Support:Alcohol Control Boards or State Patrol offer trainingSome major distributors offer trainingOffer training & set standards that are enforced

TRANSFERS

State and Federal regulations place strict controls on the transfer of

alcoholic beverages between locations, even within the same group.

Monthly reports must be submitted to prove that the amount sold does not exceed the amount purchased.

-Sales tax issues-No purchases at retail level

Transfers internally should be documented

-Wine transferred to the kitchen-Liqueurs used in desserts/sauces -All beverages for catering or room service

MONITORING BEVERAGE OPERATIONS

Three methods of cost control: 1. Cost Approach—COGS usually reveal deviations

when compared to the Operating Budget

$COGS = O.I. + Purchases + Transfers In – Transfers Out –C.I.

Methods of Beverage Cost Control

2. Ounce Control Method—daily revenue/ inventory by ounce compared to ounces sold

-Time consuming and tedious

-Used in large establishments where POS systems are tied to automatic dispensers

Methods of Beverage Cost Control

3. Sales Value Approach—the value of each bottle is calculated based on standardized pour/recipes and retail prices

Liter = 33 1oz. drinks

Complicated by mixed drinks where 1 oz. is not the measure

Historic data can be used to develop a “beverage differential”that identifies how much actual sales differ from the “per oz. sale”

BEVERAGE MIXPOPULARITY &PROFITABILITY

• , UNIT UNIT TOTAL UNIT TOTAL TOTAL POPWINE SALES COST $COGS PRICE %COGS SALES CR CM INDEX

1 500 $1.50 $5.002 140 $4.00 $13.503 120 $5.50 $22.004 100 $7.00 $28.005 100 $10.75 $13.756 85 $12.00 $48.007 32 $15.00 $75.00

TOTAL/AVG.

BEVERAGE MIXPOPULARITY &PROFITABILITY

• UNIT UNIT TOTAL UNIT TOTAL TOTAL POPWINE SALES COST $COGS PRICE %COGS SALES CR CM INDEX

1 500 $1.50 750 $5.00 30% $2,500.00 70% $1,750.00 13%2 140 $4.00 560 $13.50 30% $1,890.00 70% $1,330.00 10%3 120 $5.50 660 $22.00 25% $2,640.00 75% $1,980.00 14%4 100 $7.00 700 $28.00 25% $2,800.00 75% $2,100.00 14%5 100 $10.75 1,075 $30.75 35% $3,075.00 65% $2,000.00 16%6 85 $12.00 1,020 $48.00 25% $4,080.00 75% $3,060.00 21%7 32 $15.00 480 $75.00 20% $2,400.00 80% $1,920.00 12%

TOTAL/AVG. 5,245 27% ####### 73% $14,140.00

Popularity Index = 1/7 * .7 10 10%