Liquid assets: when a gallon of beverage alcohol can represent $300 worth of sales, it pays to keep an eye peeled

Cheers, June, 2005 by Cheryl Ursin

according to a survey done by the California Restaurant Association, the average bar or restaurant loses--simply loses--25 percent of its beverage alcohol. One-quarter of the wine, beer and spirits in the average restaurant or bar simply disappears, due to spillage, over pouring, mistakes and outright theft.

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"Most people seem to think, 'There's nothing I can do, 25 percent of my booze is going to go down the drain,'" says Dave Grimm, partner at Accubar, a company that produces an automated system for keeping track of a bar or restaurant's beverage inventory.

Jim Cantrell, ceo of CS Technologies, maker of the Azbar America system, agrees. "Even the water going into the restaurant is on a meter," he says. "Everyone is up in arms about gas being $2.29 per gallon, but here's alcohol at $300 per gallon, at $5 to $6 a drink. People are free-pouring it and want to know why they're not making any money."

According to makers of inventory-management systems, the restaurant industry has been one of the last to embrace current technology designed to make their businesses more profitable. Part of the reason is that inventory management is so difficult in restaurants and bars. It's not like at retail, where doing a physical inventory might mean counting pairs of socks. Every head of lettuce is a different size. Those eggs are perishable. How many ounces of liquor are left in that open bottle of vodka or rum? In the meantime, the establishment might receive ten to 15 deliveries of multiple items each day, while making hundreds of sales, all of which need to be accounted for: deliveries added to inventory, sales subtracted and everything matched up.

COUNTING BOTTLES

When it comes to the beverage side of the business, establishments need to account for open bottles of liquor and wine and for the amount of beer in its draft system. It can easily stock hundreds of different spirits, each one of which has a different cost and retail price, and use them in varying amounts in different cocktails.

On top of that, the bar business is notorious for loss and theft. It's a cash business involving an expensive, desirable product, handled by high-turnover employees who are working for tips. Losses can range from the delivery guy stealing entire kegs of beer to bartenders over pouring every drink they make. And then there's the problem of making sure the money for each drink sale actually makes it into the cash register. "That's what really costs: when it doesn't get rung up," says Azbar's Cantrell.

It is little wonder that, faced with the prospect of trying to track their beverage business with paper and pencil, many operators throw up their hands and hope for the best.

Yet, now, with the advent and acceptance of new technologies, especially handheld computers such as Palms and Pocket PCs, which can be equipped with scanners, and wireless communication between devices, the inventory management of beverages can be easier than it has ever been before.

EASIER SAID THAN DONE

Inventory management experts say that one figure most bar and restaurant operators depend on--pour cost--does not give them a complete picture of their business. Pour cost, the cost of the beverages used divided by how much they sold for, may tell operators how much they made, but not how much they should have made. The figure, in essence, factors in waste and theft.

Inventory management--knowing exactly what you've got in inventory, what's been sold, what's been poured and matching all those figures up--pinpoints where losses are occurring and helps operators weed those losses out.

"It's a real simple concept," says Paul Barnes, president of iBar Controls, an inventory software company, "but it's hard to put into practice."

Indeed, at least one company, Bevinco, started out selling a beverage-inventory software system for operators to use themselves, but switched, in 1991, to offering a service in which Bevinco franchise owners, using the Bevinco software, visit a bar or restaurant weekly to take the inventory for the operator.

When it comes to the inventory management of beverages, there are two main areas that systems focus on. One aids operators doing physical inventories, including checking that they receive what they have ordered. The other tracks what is sometimes called "perpetual" or "virtual" inventory, knowing what was poured so that it can be matched up with what was sold.

Doing a physical inventory can be a time-consuming task. Some operators report spending as much as eight or nine hours simply trying to count what they have. Because it is so daunting, many operations don't do physical inventories as often as they should.

This is where a system like Accubar, Scannabar or iBar-Control, comes in. These systems use handheld devices, such as Palms or Pocket PCs, equipped with scanners to make taking inventory easier and quicker.

"We believe that you should count your stock at least once a week," says iBarControl's Barnes. "Using [our system,] you can take inventory and generate all your reports in about one hour for an average-sized establishment."