Beverage costs can be your best friend or your downfall. Understanding what your club is looking for financially when running a beverage program is the most important first step any sommelier or beverage director can take soon after walking in the door.
First, determine what percentage the board and CFO want to run the beer, wine, and liquor costs?
Most clubs I have worked for and other F&B managers I have spoken to typically have around the same answer—give or take, depending on the size of club and assuming they are a member-owned, not-for-profit club.
Liquor runs a 30% to 35% cost. Wine runs between 40% and 48%. And beer lands between 25% and 30%. These numbers vary slightly depending on many things, but they are by no means trying to hit numbers like a restaurant would.
Next, it’s important to look at all the F&B outlets where you are serving alcohol. How many areas do you have to manage that contribute to beverage sales? Also, do you have different wine, cocktail, and beer menus at each outlet, or are they the same? This will dictate your inventory, how many items and dollars you have in each outlet, and can make inventory every month very easy or a nightmare.
Next, does your club have a retail side where you can sell wine and/or liquor to your members? If your club does this, is it its own line item/sales category in your budget or does your retail sales cost of goods (COGS) get rolled into your by-the-glass (BTG)/a la carte COGS every month? Most of the time your retail COGS percentage will be around 72%-80%.
I believe one of the largest contributions to the bottom line is how you are pricing your BTG list, bottle list, cocktails, beers, and spirits. (It also helps to evaluate how your predecessor operated the beverage program.) I have seen some interesting ways of formulating prices, but none of them beat the most simple and old-school formula: Cost divided by the percentage you want to run your item at will give you your price. If you need to go up or down a little, you can. But at least you are hitting around the same COGS every single time.
Also, what are your best-selling items in each sales category? Are they hitting the COGS you want them to? If they aren’t, the numbers at the end of every month are going to be off or high.
More advice I always tell managers is to build great relationships with their reps. Search far and wide for all the deals possible. Get those low special prices on items that the members love and are practical to your operation so you can pass those deals along to the membership while keeping your numbers solid. Remember, the goal for membership in clubs is always luxury service plus convenience plus value.
Most of the time, liquor, beer and wine don’t have much intermingling with the chef and the culinary food cost. That said, there will be times when you might have to buy certain wines and liquors for the chef to use for cooking. It’s always very important to know where those items get coded or transferred, so it doesn’t hurt your cost. It’s equally important when the chef and the social events director are coming up with an all-inclusive price for a dinner that includes wine pairings, cocktails or beer. Make sure both parties are on the same page about what product is being used on each end, what the ticket price is, and what dollar amount is getting allocated to what items.
Last but not least is waste and all the obstacles associated with waste, comps and even theft.
It’s important to start with strong operating procedures so that all of your bartenders, managers and other staff know how to log any type of waste or comps for the beverage director to transfer or let accounting be aware of at the end of the month.
Theft is another big piece of the puzzle regarding your bottom line. Strong operating procedures help, but ensuring you are always aware of your inventory is extremely important. As a director are you making a walk-through of your storage areas every day to see if there are any noticeable discrepancies? If not, you should be. Do you keep all your records of invoices properly to look back for help with discrepancies?
Many things can go wrong and mess up your numbers regarding beverages. You always want to ensure you are in front of the many challenges by having solid daily operating procedures rather than chasing those challenges.