Managing The Cost Of Beverages

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This article begins with an overview of the special responsibilities you assume when your operation serves
alcoholic beverages. It then details the various types of beverage products you might sell and the techniques
used to purchase them, as well as the specific knowledge you must have to store them properly. Important
topics in this article include the use of standardized drink recipes and the procedures used to monitor and
forecast beverage sales. Lastly, the article explains how your guests’ beverage choices influence the beverage
cost percentages that you will compute as you evaluate the cost efficiency of your beverage unit.
Serving Alcoholic Beverages
* Forecasting Beverage Sales
* Standardized Drink Recipes and Portions
* Purchasing Beverage Products
* Receiving Beverage Products
* Storing Beverage Products
* Bar Transfers
* Computing Cost of Beverages
* Special Features of Liquor Inventory
* Sales Mix
* Technology Tools
* Apply What You Have Learned
* Key Terms and Concepts
* Test Your Skills

SERVING ALCOHOLIC BEVERAGES
It might seem unusual that a book about cost management would have to separate
the study of cost control into a segment dealing with food and another
one dealing with alcoholic beverage products. In fact, it might seem unusual that
the very term “beverages” in this article will always refer to those beverages
with an alcoholic content. In fact, if you have the skill to serve alcoholic beverages
responsibly and can properly account for the cost of serving these beverages,
you are better prepared to manage a variety of foodservice operations
than those managers who do not have those skills. The reason is simple. Many
operations include alcohol as a major component of the products they offer to
guests. There are three types of operations that serve alcoholic beverages. These
can be grouped as:
1. Beverage only
2. Beverage and food
3. Beverage and entertainment/activity

BEVERAGE ONLY
The beverage-only operation has been in existence in the United States for a
little more than a hundred years. Prior to that, alcohol was generally sold only
in conjunction with food and lodging services. Actually, in these facilities,
snacks such as pretzels, chips, and nuts are often served, but beverage service
is clearly most important. Beverage-only bars are often neighborhood gathering
places. Some are frequented by businesspeople who work in the vicinity,
while travelers may drop in when they are in the area. Decor can be anything
from comfortably casual to upscale. When provided, entertainment may include
television, recorded music, a pool table, pinball, trivia, Internet-delivered juke
box music and videos, lottery games, and, increasingly, sophisticated video
games. In some cases, an outdoor setting may also be an attractive customer
draw.

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Beverage-only bars usually have a predictable traffic flow. Because they dealonly in beverages, these are usually the easiest service operations to manage. Beverage-only operations can include:1. Neighborhood bars2. Taverns3. Hotel bars4. Airport bars5. Bus terminal bars6. Breweries7. WineriesBEVERAGE AND FOODBeverage and food operations are the predominant type of beverage operation inthe United States, and a major industry in the world today. Restaurants servingwine, beer, and liquor as well as bars that serve light meals are examples of thistype of service.It is important to remember that the profit margins on alcoholic beverages aregenerally much higher than that of food; thus, it just makes good business sense toadd the service of alcoholic beverages to the service of providing food wheneverpossible. While it is impossible to state the appropriate profit levels for alcoholicbeverages, profits are generally two to five times greater for beverage products thanfor food products. Thus, it is highly likely that the profit in the pitcher of beer thatyou may sell in a pizza restaurant you own will exceed that of its accompanyingpizza by a great deal, even though the beer may be sold for half the price of thepizza.Many alcoholic beverages were created because they are enjoyed most whencombined with food; thus, it is only natural for professional food and beveragemanagers to seek out and promote these combinations. Beverage and food operationscan include:1. Quick-service restaurants2. Full-service restaurants3. Self-service and cafeterias4. Airport bars5. Sports complexes such as areas and stadiums6. Grocery store carryout7. Brew pubs8. Hotel room service9. Banquet halls10. Country clubsBEVERAGE AND ENTERTAINMENT/ACTIVITYBeverage and entertainment/activity operations exist because many people want todo something while they consume their favorite alcoholic beverage. As discussedearlier, eating is one of those favorite activities. This segment of the beverage business,however, can offer even more.There is enormous variety in the types of entertainment and activities that canaccompany beverage service, ranging from dartboards and pool tables to elaboratestage shows in nightclubs and cabarets. Dance clubs can provide live or recordedmusic while your guests enjoy dancing. Piano bars and small clubs provide quiet,intimate places to enjoy music and conversation.

There are high-tech clubs where the entertainment comes from giant video screensand computerized toys, and oldfashioned ballparks where your guests can enjoy a game. Beverage and entertainment/ activity operations can include:1. Comedy clubs2. Taverns3. Entertainment clubs4. Full-service restaurants5. Sports complexes6. Brew pubs7. Nightclubs8. Country clubs9. Dance/ Music clubs10. Bowling alleysCLASSIFICATIONS OF ALCOHOLIC BEVERAGESAlcoholic beverages are simply those products that are meant for consumption asa beverage and that contain a significant amount of ethyl alcohol. These productsare generally classified as:1. Beer: a fermented beverage made from grain and flavored with hops2. Wine: a fermented beverage made from grapes, fruits, or berries3. Spirits: fermented beverages that are distilled to increase the alcoholcontent of the productWhen you combine the sale of food products with that of beverages or if youmanage a facility that sells beverages exclusively, you face a set of challenges that deservespecial attention. In many ways, you will treat beverage products in a mannersimilar to that of food products. The beverage products you buy will be specified, ordered,received, and stored in a fashion that is very close to that of food products. Inother ways, however, when you are the one responsible for the sale and service of alcohol,you take on a responsibility that society views as extremely critical.RESPONSIBLE ALCOHOLIC BEVERAGE SERVICEPeople have long been fond of alcoholic beverages regardless of where they are consumedfor they add greatly to the enjoyment of food and friends. In moderate doses,ethyl alcohol, the type found in beverage products, acts as a mild tranquilizer. Inexcessive doses, it can become toxic, causing impaired judgment and, in some cases,death. Clearly, a foodservice manager whose establishment serves alcoholic beveragesmust take great care in the serving and monitoring of guests’ alcohol intake.Many states have now enacted third-party liability legislation, which, undercertain conditions, holds your business and, in some cases, you, personally, responsiblefor the actions of your guests who consume excessive amounts of alcoholicbeverages. This series of legislative acts, commonly called dramshop laws,shifts the liability for acts committed by an individual under the influence of alcoholfrom that individual to the server or operation that supplied the intoxicatingbeverage. (Dramshop is derived from the word dram, which refers to a small drink,and shop, where such a drink was sold.)Because of these laws, managers are becoming increasingly concerned about alcoholawareness and the importance of safely serving their guests. In addition, asstates continue to move to lower the allowable blood alcohol content (BAC) of motorvehicle drivers, good managers simply want to help guests obey the law. Thismeans training employees to serve alcoholic beverages properly and to notice telltalesigns of guest intoxication.

Through passage of dramshop and related laws, it is very clear that societyholds the seller of alcoholic beverages to a very high standard. In all states, the saleof these products is regulated either by the licensing of establishments that are allowedto sell alcoholic beverages (license states) or by direct control and sale of theproducts by the state (control states).While the special requirements involved in serving alcoholic beverages aremany—including licensing, age restrictions, promotional limitations, drinking anddriving issues, and social responsibility, to name just a few—the control of beveragecosts is similar, in many respects, to the control of food-related costs.This article details the unique aspects of sales forecasting, purchasing, receiving,and storage of beverage products. In some areas, beverage control is no differentfrom that of nonalcoholic food products reviewed in the last article. In others,the differences are pronounced.FORECASTING BEVERAGE SALESThe number of possible “menu items” in the average bar or lounge is staggering.Human imagination has few limits; thus, the number of different mixtures a skilledbartender can concoct makes forecasting guest item selection a difficult process, in-deed. Of course, you now know how to track the number of guests served and theitems these guests will buy. This is done exactly as previously discussed.Percent selecting—the proportion of people who will buy a particular drink, given achoice of many different drink types—must be modified somewhat if it is to be appliedto forecasting beverage sales. In fact, beverage sales forecasting varies also bythe type of beverage sold.FORECASTING BEER SALESForecasting beer sales is essentially the same as forecasting any regular menu item.That is, given a choice of beverage products, some percentage of your guests willlikely choose beer. However, the questions you must answer to effectively manageyour costs are, “What percentage of my guests will choose beer?” and “Which kindof beer?” and “In what packaging format will they choose that beer?”To illustrate, assume that you are the owner of LeRae, a small bar in a trendysection of a large West Coast city. Your clientele generally consists of upscale officeand managerial professionals. For the time period 1/1 to 1/8, you served an alcoholicbeverage to a total of 1,600 guests: 400, or 25 percent, selected a beer product;160, or 10 percent, selected a wine product; and 1,040, or 65 percent, selectedsome type of spirit-based drink.Using your sales history, you have a good idea of how many people will becoming to your bar on any given day. You have monitored your percent selectingdata and found that one out of four guests coming to LeRae’s will orderbeer. You need to determine, however, which specific brand of beer yourguests will buy, given the several brands of beer that you do, or can, carry. Inaddition, it is very likely that at least some of the beer you serve will come packagedin more than one form. That is, a specific beer brand might be sold in individualcans or bottles or in kegs. Keg beer is also known as draft beer, or beerin a form of packaging in which the beer is shipped to you in multigallon unitsfor bulk sale. By charting current beer sales, you can know what your guests’beer preferences are. Figure 4.1 demonstrates that, for the period 1/1 to 1/8,LeRae’s served 400 beers to guests. It also details which specific beer your guestsordered.

By either manual tracking or the use of your point of sales (POS) system,you will know exactly which beers, by brand and packaging form, you have soldin the bar on a daily basis. A tally of guest checks would also furnish you withthe same information, but such a system is labor intensive, time consuming, andsubject to inaccuracy. Regardless of the tracking method used, the goal is thesame as that of tracking a food item sale. That is, with a good idea of whatguests have purchased in the past, we are better prepared to order the products,in their proper packaging form, that we believe these guests will purchase in thefuture.FIGURE 4.1 LeRae’s Bar Beer Sales___________________________________________________________________________Beverage Sales                                         Date: 1/1–1/8___________________________________________________________________________Product: Beer                Number Sold               Percentage SoldBudweiser Bottles                 45                        11.25%Coors Bottles                     18                         4.50Miller Cans                       61                        15.25Coors Cans                        68                        17.00Budweiser Draft                   115                       28.75Harp’s Draft                     93                        23.25Total                             400                      100.00___________________________________________________________________________FORECASTING WINE SALESThe forecasting of wine sales is similar to that of beer sales in that it must be dividedinto more than one part. For most managers, forecasting wine sales is a processthat must be divided into two main parts:1. Forecasting bottled-wine sales2. Forecasting wine-by-the-glass salesFORECASTING BOTTLED-WINE SALESWhen forecasting wine sales by the bottle, you treat an individual type of bottledwine exactly as you would treat a menu item. A wine list or wine menu detailingthe selections of wines available can be presented to the guest, who thenmakes a choice. Percent selecting figures are computed exactly as they would bewhen analyzing food item sales. You may find, however, that it is possible andquite desirable to offer wines with very small percent selecting figures becausewines in a bottle are not highly perishable. Thus, many operators develop extensivewine lists consisting of a large number of wines, many of which sell onlyrarely. While this selling strategy has its place because some restaurants consideran extensive wine list as an integral part of their marketing strategy, it must beremembered that excessive product inventory, whether food or beverage, mustbe avoided. Dollars invested in extravagant inventory are not available for usein other areas of the foodservice organization. While bottled wine is not highlyperishable, all wine products are perishable to some degree; thus, excessive inventoryof some wine types can result in increased product loss through oxidation(deterioration), theft, or both.FORECASTING WINE-BY-THE-GLASS SALES

Generally, forecasting the sale of house wines, wine served to a guest who does notstipulate a specific brand when ordering, or any wine sold by the glass is done ina manner similar to that used in forecasting beer sales. Once you have estimatedthe number of guests who will select wine, the type of wine they will select can beforecasted. The popularity of different wine types changes frequently, as newer stylesand varieties gain in popularity and newer wine producing regions (such as Argentina,Australia, and South Africa) improve the quality and marketing of theirlocally produced wines. As a result, you must continually monitor the wines yourguests prefer to drink “now,” rather than attempt to sell what they preferred back“then”!Figure 4.2 details the by-the-glass sales of wine at LeRae’s for the period 1/1to 1/8. From the data, you know that one out of ten guests will buy wine by theglass. Thus, 160 (from a total of 1,600 guests) will select this beverage.If your guests remain consistent in their buying habits, you will have a goodidea of the total demand for your wine-by-the-glass products and will be better ableto ascertain the amount that must be on hand on any given day.FIGURE 4.2 LeRae’s Bar Wine-by-the-Glass Sales__________________________________________________________________________Beverage Sales                                           Date: 1/1–1/8__________________________________________________________________________Product:Wine by the Glass               Number Sold              Percentage SoldChardonnay                           30                        18.75%Merlot                               16                        10.00Zinfandel                            62                        38.75House Zinfandel                      52                        32.50Total                               160                       100.00__________________________________________________________________________FORECASTING SPIRIT SALESLike beer and wine, the number of guests who order a mixed drink can betracked. Unlike beer and wine, however, the exact item the guests will requestis very difficult to determine. When ordering spirits, tracking sales can becomesomewhat complicated. For example, assume that two guests order bourbon andsoda; one guest specifies Jack Daniel’s brand of bourbon, whereas the other oneprefers Heaven Hill brand. From the guests’ point of view, they both orderedbourbon and soda. From the operator’s point of view, two distinct items wereselected. To make matters a bit more complicated, a third guest arrives and ordersbourbon and soda without preference as to the type of bourbon used. Obviously,a different method of sales forecasting is necessary in a situation suchas this, and, in fact, several are available. One method requires that the operatorview guest selection not in terms of the drink requested, such as bourbonand water, gin and tonic, Sea Breeze, and so on, but rather in terms of the particularspirit that forms the base of the drink. Consider a table of four guestswho order the following:1. Kahlua on the rocks2. Kahlua and coffee3. Kahlua and cream4. Kahlua and Coke

Each guest could be considered as having ordered the same item: a drink inwhich Kahlua, a coffee-flavored liqueur from Mexico, forms the base of the drink.The purpose of this method is, of course, to simplify the process of recording guests’preferences.Depending on the degree of accuracy desired by the operator, tracking spiritsales can be done by any of the following methods:1. Generic product name:a. Coffee liqueurb. Bourbonc. Vodkad. Gin2. Specific product name:a. Kahluab. Jack Daniel’s Black Labelc. Absolutd. Bombay3. Specific drink requested:a. Kahlua on the rocksb. Kahlua and coffeec. Kahlua and creamd. Kahlua and CokeFigure 4.3 demonstrates the system you would use to track spirit sales usingthe generic product method illustrated previously. It also is an excellent exampleof the power of an effective beverage POS system to help track sales in a mannerthat is far more effective than can be done manually. The number of different spiritdrinks that can be made numbers in the hundreds. A POS system programmedspecifically for your operation can be a great asset in helping you develop the saleshistories you need to purchase spirit products effectively because it can easily trackthis large number of drink combinations.As the amount of time and effort required to track specific drink sales increases,so does accuracy. Each operator must determine the level of control appropriatefor his or her own operation. This is due to the simple fact that there must be arelationship between the time, money, and effort required to maintain a controlsystem and its cost effectiveness.STANDARDIZED DRINK RECIPES AND PORTIONSIf a beverage operation is even moderately busy, it is simply unrealistic to assumethat the bartender can stop each time an order comes in, consult a writtenstandardized recipe as discussed in last article, and then prepare the drinkrequested. Imagine the resulting confusion, chaos, and time delay if such a systemwere in place! The demand for control in the bar, however, is even greaterthan that required in the kitchen. The reason is simple. The potential for employeetheft and waste is greater in the bar than in the kitchen. Also, the asFIGURE 4.3 LeRae’s Bar Spirit Sales___________________________________________________________________________Beverage Sales                                             Date: 1/1–1/8___________________________________________________________________________Product: Spirits                Number Sold                Percentage SoldScotch                              210                           13.1%Bourbon                             175                           10.9Vodka                               580                           36.3Gin                                 375                           23.4Kahlua                              175                           10.9Tequila                              85                            5.3Total                              1,600                         100.0___________________________________________________________________________

purchased price of beverages is, in many cases, higher than that of food. Consider,for a moment, just a few of the unique aspects of beverage operationsthat require strict adherence to control procedures:1. Beverage operations are subject to tax audits to verify sales revenue. Insome states, these audits can be unannounced.2. Beverage operations can be closed down “on the spot” for the violation ofa liquor law.3. Employees in a bar may attempt to become operational “partners” by bringingin their own products to sell and then keeping sales revenue.4. Detecting the disappearance of small amounts of beverage products is extremelydifficult, as, for example, the loss of 8 ounces of beer from a multigallonkeg.For these reasons and others, using standardized recipes is an absolute mustfor the beverage operation, even if using written standardized recipes for each drinkis not a viable option. Consider the case of Paul, the bar manager at a full-servicerestaurant. He knows that each bourbon and water he produces should consist of95 cents in product cost. His selling price is $4.75. He uses the beverage cost percentformula to determine his beverage cost percentage. The following beveragecost percent formula, as you can easily see, is nearly identical to the food cost percentformula presented in last article:       Cost of Beverage Sold / Beverage Sales = Beverage Cost %Thus, Paul’s beverage cost percent should be as follows:                 $0.95 / $4.75 = 20.0%Yet, his actual beverage cost percent on this item is much higher. How canthis be, on an item as uncomplicated as bourbon and water? The answer is simple.The bartender did not follow the standardized recipe. Even on an item as ordinaryas bourbon and water, the bartender must know exactly the amount ofproduct to use. It is not simply a matter of bourbon and water, but rather a matterof how much bourbon with how much water. Figure 4.4 shows the beveragecost that would be achieved with different drink sizes and a standard 1-liter bottleof spirits.FIGURE 4.4 Beverage Cost Competition___________________________________________________________________________Beverage: Bourbon                     Container Size: One liter (33.8 oz.)Product Cost: $24.80/liter___________________________________________________________________________Portion   Number of   Liter   Portion   Selling  Total Beverage   BeverageSize      Portions    Cost    Cost      Price    Sales            Cost %1.00 oz.     33      $24.80   $0.75      $4.75     $156.75         15.8%1.25 oz.     26       24.80    0.95       4.75      123.50         20.11.50 oz.     22       24.80    1.13       4.75      104.50         23.71.75 oz.     19       24.80    1.31       4.75       90.25         27.5___________________________________________________________________________As shown, the difference in the drink recipe can make a big difference intotal beverage cost percent. For purposes of accuracy, assume approximately a0.8-ounce-per-liter evaporation loss, thus leaving Paul with 33 ounces of usableproduct from this liter of bourbon. Also, assume a product cost of $24.80 perliter, with a $4.75 per drink selling price and a normal portion size of 1 ounceof bourbon. Obviously, the quantity of alcohol actually used makes the liquorcost percent vary greatly.

Stated in another way, assume that you manage a large convention hotel thathas a beverage sales volume in spirit drinks of $2,000,000 per year. If your bartendersconsistently pour 1 1/2-ounce drinks rather than 1-ounce drinks, and youassume average costs and selling prices as shown in Figure 4.4, then beverage costswill be 23.7 percent rather than the planned 15.8 percent. The difference is 7.9 percent(23.7 - 15.8 = 7.9). The loss represents $2,000,000 x 0.079 = $158,000 forthis one operation in just one year! A loss as sizable as this is certainly career threateningfor any manager!While standardized recipes, which include step-by-step methods of preparation,may be necessary for only a few types of drinks, standardized recipes that detailthe quantity of product management has predetermined as appropriate should bestrictly adhered to. That is, if management has determined that bourbon and watershould be a 1-ounce portion of bourbon and a 2-ounce portion of water, thenboth items should be measured by a jigger, a tool for measuring liquid, or an automateddevice. Some mechanized/computerized bar systems on the market todaywill premeasure both items simultaneously. The capabilities of such systems aremany and these improve continually.Regardless of method of measurement (manual or automated), both bourbonand water, in this case, must be delivered to the guest in the proper ratio ifproduct quality is to be maintained. Consider, for a moment, the case of a managerwho determines that a particular blend of bourbon, while expensive, can besold at a premium price. The manager sets the drink price and instructs the bartenderthat the portion size is to be 1 ounce of spirit with 2 ounces of water.Consider the following guest reactions when the bartender varies the quantity ofwater added to the bourbon:Drink Ratio                 Possible Guest Response____________________________________________________________________________A. 1 oz. bourbon            1. Gee, the drinks sure are small here!   1 oz. water              2. Gee, this sure is strong! Can you add a splash                               of water?B. 1 oz. bourbon            1. Gee, this sure tastes good! It’s just right!   2 oz. waterC. 1 oz. bourbon            1. Gee, this tastes watered down. Can you add                               a splash of bourbon?3 oz. water                 2. Gee, these drinks cost a lot for such a small                               amount of alcohol!Remember that the quantity of spirit used and, thus, the product cost percentage,did not change under scenario A, B, or C. In this case, the bartender was verycareful not to use more product than he or she had been instructed to do. In effect,the bartender put the profitability of the operation before guest satisfaction.It is important to remember that happy guests provide profits; profits do not providehappy guests. The manager of this operation might be pleased with the bartender’sprecise product control, since the cost of 1 ounce versus 3 ounces of wateris minuscule. Guests, however, will react to sloppy drink preparation in the sameway they do to sloppy food preparation.In summary, each drink in the bar must have a standardized recipe or, if thepreparation of the drink is simple, a standardized portion size. These recipes willaffect the planned profitability of the operation as well as guest satisfaction.

Since it is necessary to cost beverage recipes just as it is necessary to cost fooditem recipes, a standardized recipe sheet should be prepared foreach drink item to be sold. A record of these recipes should be available at eachbeverage outlet. If questions about portion size or preparation arise, the standardizedrecipe should be referred to.PURCHASING BEVERAGE PRODUCTSMost foodservice operators select only one quality level for food products. Once adetermination on necessary quality level has been made and a product specificationwritten, then only that quality of egg, lettuce, milk, bread, and so on is selected. Inthe area of alcoholic beverage products, however, several levels of quality are generallychosen. This ensures that a beverage product is available for those guests whowish to purchase the very best, while a product is also offered for those guests whoprefer to spend less. Thus, the beverage manager is faced with deciding not only whetherto carry wine on the menu, but also how many different kinds of wine and their qualitylevels. The same process is necessary for spirits and, to a lesser degree, for beers.DETERMINING BEER PRODUCTS TO CARRYBeer is the most highly perishable of beverage products. The pull date, or expirationdate, on these products can be as short as a few months. Because of this, it isimportant that the beverage operator only stock those items that will sell relativelywell. This generally means selecting both brand and packaging methods.BRAND SELECTIONBeverage operators typically carry between three and ten types of beer. Someoperations, however, stock as many as 50 or more! Generally speaking, geographiclocation, clientele, ambiance, and menu help determine the beer productthat will be selected. Obviously, we would not expect to see the same beerproducts at Hunan Gardens Chinese Restaurant that we would at Three PesosMexican Restaurant. Most foodservice operators find that one or two brandsof light beer, two or three national domestic brands, and one or two quality importbeers meet the great majority of their guests’ demand. One must be verycareful in this area not to stock excessive amounts of products that sell poorly.Again, beer is perishable, and great care must be taken to ensure proper productmovement. It is important, however, to train bartenders to make a notationon a product request log (see Figure 4.5) so that guest requests that cannot befilled are noted and monitored by management. This log should be easily accessibleto service personnel. Its purpose is to maintain a record of guest productrequests that are not currently available. In the case of beverages, those itemsthat guests wish to purchase that are not available are nearly as important totrack as the sales of the items that are available.If you were managing the operation that generated the requests documented inFigure 4.5, you might, for example, wish to investigate the possibility of stockingLowenbrau beer.FIGURE 4.5 Beverage Product Request Log___________________________________________________________________________Date                   Item Requested                           Entry By___________________________________________________________________________1/1                    Lowenbrau Beer                           P. J.1/1                    Cherry Schnapps                          L. T.1/2                    Rolling Rock Beer on Draft               T. R.1/4                    Lowenbrau Beer                           P. J.1/5                    Soave Wine                               L. D.1/6                    Any Texas Wine                           S. H.1/6                    Lowenbrau Beer                           T. R.___________________________________________________________________________

It is important to realize that some bar-related software may be dependent on specific and sometimesexpensive automated beverage dispensing systems. Other software is either stand-alone or designedto operate in conjunction with many of the basic POS systems currently on the market.Key Terms and ConceptsAlcoholic beveragesBeerWineSpiritsDramshop lawsBlood alcohol content(BAC)License statesControl statesPercent selectingKeg beer/draft beerHouse wineJiggerPull dateProduct request logTapped kegWine listVintnerWell liquorsCall liquorsPremium liquorsBroken caseFresh datedTwo-key systemRecodable electroniclocksHalf-bottle or splitOxidationSales mix

Beverage-only bars usually have a predictable traffic flow. Because they dealonly in beverages, these are usually the easiest service operations to manage. Beverage-only operations can include:1. Neighborhood bars2. Taverns3. Hotel bars4. Airport bars5. Bus terminal bars6. Breweries7. WineriesBEVERAGE AND FOODBeverage and food operations are the predominant type of beverage operation inthe United States, and a major industry in the world today. Restaurants servingwine, beer, and liquor as well as bars that serve light meals are examples of thistype of service.It is important to remember that the profit margins on alcoholic beverages aregenerally much higher than that of food; thus, it just makes good business sense toadd the service of alcoholic beverages to the service of providing food wheneverpossible. While it is impossible to state the appropriate profit levels for alcoholicbeverages, profits are generally two to five times greater for beverage products thanfor food products. Thus, it is highly likely that the profit in the pitcher of beer thatyou may sell in a pizza restaurant you own will exceed that of its accompanyingpizza by a great deal, even though the beer may be sold for half the price of thepizza.Many alcoholic beverages were created because they are enjoyed most whencombined with food; thus, it is only natural for professional food and beveragemanagers to seek out and promote these combinations. Beverage and food operationscan include:1. Quick-service restaurants2. Full-service restaurants3. Self-service and cafeterias4. Airport bars5. Sports complexes such as areas and stadiums6. Grocery store carryout7. Brew pubs8. Hotel room service9. Banquet halls10. Country clubsBEVERAGE AND ENTERTAINMENT/ACTIVITYBeverage and entertainment/activity operations exist because many people want todo something while they consume their favorite alcoholic beverage. As discussedearlier, eating is one of those favorite activities. This segment of the beverage business,however, can offer even more.There is enormous variety in the types of entertainment and activities that canaccompany beverage service, ranging from dartboards and pool tables to elaboratestage shows in nightclubs and cabarets. Dance clubs can provide live or recordedmusic while your guests enjoy dancing. Piano bars and small clubs provide quiet,intimate places to enjoy music and conversation.

There are high-tech clubs where the entertainment comes from giant video screensand computerized toys, and oldfashioned ballparks where your guests can enjoy a game. Beverage and entertainment/ activity operations can include:1. Comedy clubs2. Taverns3. Entertainment clubs4. Full-service restaurants5. Sports complexes6. Brew pubs7. Nightclubs8. Country clubs9. Dance/ Music clubs10. Bowling alleysCLASSIFICATIONS OF ALCOHOLIC BEVERAGESAlcoholic beverages are simply those products that are meant for consumption asa beverage and that contain a significant amount of ethyl alcohol. These productsare generally classified as:1. Beer: a fermented beverage made from grain and flavored with hops2. Wine: a fermented beverage made from grapes, fruits, or berries3. Spirits: fermented beverages that are distilled to increase the alcoholcontent of the productWhen you combine the sale of food products with that of beverages or if youmanage a facility that sells beverages exclusively, you face a set of challenges that deservespecial attention. In many ways, you will treat beverage products in a mannersimilar to that of food products. The beverage products you buy will be specified, ordered,received, and stored in a fashion that is very close to that of food products. Inother ways, however, when you are the one responsible for the sale and service of alcohol,you take on a responsibility that society views as extremely critical.RESPONSIBLE ALCOHOLIC BEVERAGE SERVICEPeople have long been fond of alcoholic beverages regardless of where they are consumedfor they add greatly to the enjoyment of food and friends. In moderate doses,ethyl alcohol, the type found in beverage products, acts as a mild tranquilizer. Inexcessive doses, it can become toxic, causing impaired judgment and, in some cases,death. Clearly, a foodservice manager whose establishment serves alcoholic beveragesmust take great care in the serving and monitoring of guests’ alcohol intake.Many states have now enacted third-party liability legislation, which, undercertain conditions, holds your business and, in some cases, you, personally, responsiblefor the actions of your guests who consume excessive amounts of alcoholicbeverages. This series of legislative acts, commonly called dramshop laws,shifts the liability for acts committed by an individual under the influence of alcoholfrom that individual to the server or operation that supplied the intoxicatingbeverage. (Dramshop is derived from the word dram, which refers to a small drink,and shop, where such a drink was sold.)Because of these laws, managers are becoming increasingly concerned about alcoholawareness and the importance of safely serving their guests. In addition, asstates continue to move to lower the allowable blood alcohol content (BAC) of motorvehicle drivers, good managers simply want to help guests obey the law. Thismeans training employees to serve alcoholic beverages properly and to notice telltalesigns of guest intoxication.

PACKAGINGBeer typically is sold to foodservice operators in cans, bottles, or kegs. While eachof these containers has its advantages and disadvantages, most foodservice operatorswith active beverage operations will select some of each of these packagingmethods. It makes little sense to carry the same beer product in both bottles andcans; however, many operators choose to serve some brands of their bottled orcanned beer in draft form as well.Many beer drinkers prefer draft beer (beer from kegs) over bottled or cannedbeer, and the cost to you per glass served is lower with beer from a keg. Specialequipment and serving techniques are, however, required if quality draftbeer is to be sold to guests. Also, the shelf life of keg beer is the shortest of allpackaging types, ranging from 30 to 45 days for an untapped keg, that is, onethat has not yet been opened by the bartender, and even fewer days for a kegthat has been tapped (opened). Full kegs can be difficult to handle because oftheir weight, and it is hard to keep an exact count of the product servedwithout special metering equipment. Despite these drawbacks, many operatorsserve draft beer. Draft beer is sold in a variety of keg and barrel sizes as listedin Figure 4.6.FIGURE 4.6 Draft Beer Containers____________________________________________________________________________Container                         Ounces                       Liters____________________________________________________________________________Barrel                            3,968                        117.331/2 Barrel (keg)                  1,984                         58.671/4 Barrel (1/2 keg)                992                         29.331/8 Barrel (1/4 keg)                496                         14.67____________________________________________________________________________DETERMINING WINE PRODUCTS TO CARRYDetermining which wines to carry is, like beer, a matter of your selecting both productand packaging. Typically, you must determine if you will sell wine by the:1. Glass2. Split or half-bottle3. Carafe4. BottleWines sold by the glass or carafe can be served from bottles opened specificallyfor that purpose or they can be drawn from specially boxed wine containers. Winesin a box typically are house wines sold to the beverage manager in multiliter-sizedboxes to ease handling, speed, and service and to reduce packaging costs. Bottledwines of many sizes and varieties can, of course, also be purchased.In addition, you may find that wine for cooking must also be purchased. Ingeneral, these products will be secured from your beverage wholesaler rather thanthe grocery wholesaler. It makes little sense to use extraordinarily fine wine in cooking.Again, the guiding principle for you should be to select the appropriate qualityfood or beverage product for its intended use. Some operators add salt to theircooking wines in an effort to discourage the kitchen staff from drinking them. Thismethod, if used, should be clearly communicated to kitchen personnel if the operatoris to avoid possible liability.

Through passage of dramshop and related laws, it is very clear that societyholds the seller of alcoholic beverages to a very high standard. In all states, the saleof these products is regulated either by the licensing of establishments that are allowedto sell alcoholic beverages (license states) or by direct control and sale of theproducts by the state (control states).While the special requirements involved in serving alcoholic beverages aremany—including licensing, age restrictions, promotional limitations, drinking anddriving issues, and social responsibility, to name just a few—the control of beveragecosts is similar, in many respects, to the control of food-related costs.This article details the unique aspects of sales forecasting, purchasing, receiving,and storage of beverage products. In some areas, beverage control is no differentfrom that of nonalcoholic food products reviewed in the last article. In others,the differences are pronounced.FORECASTING BEVERAGE SALESThe number of possible “menu items” in the average bar or lounge is staggering.Human imagination has few limits; thus, the number of different mixtures a skilledbartender can concoct makes forecasting guest item selection a difficult process, in-deed. Of course, you now know how to track the number of guests served and theitems these guests will buy. This is done exactly as previously discussed.Percent selecting—the proportion of people who will buy a particular drink, given achoice of many different drink types—must be modified somewhat if it is to be appliedto forecasting beverage sales. In fact, beverage sales forecasting varies also bythe type of beverage sold.FORECASTING BEER SALESForecasting beer sales is essentially the same as forecasting any regular menu item.That is, given a choice of beverage products, some percentage of your guests willlikely choose beer. However, the questions you must answer to effectively manageyour costs are, “What percentage of my guests will choose beer?” and “Which kindof beer?” and “In what packaging format will they choose that beer?”To illustrate, assume that you are the owner of LeRae, a small bar in a trendysection of a large West Coast city. Your clientele generally consists of upscale officeand managerial professionals. For the time period 1/1 to 1/8, you served an alcoholicbeverage to a total of 1,600 guests: 400, or 25 percent, selected a beer product;160, or 10 percent, selected a wine product; and 1,040, or 65 percent, selectedsome type of spirit-based drink.Using your sales history, you have a good idea of how many people will becoming to your bar on any given day. You have monitored your percent selectingdata and found that one out of four guests coming to LeRae’s will orderbeer. You need to determine, however, which specific brand of beer yourguests will buy, given the several brands of beer that you do, or can, carry. Inaddition, it is very likely that at least some of the beer you serve will come packagedin more than one form. That is, a specific beer brand might be sold in individualcans or bottles or in kegs. Keg beer is also known as draft beer, or beerin a form of packaging in which the beer is shipped to you in multigallon unitsfor bulk sale. By charting current beer sales, you can know what your guests’beer preferences are. Figure 4.1 demonstrates that, for the period 1/1 to 1/8,LeRae’s served 400 beers to guests. It also details which specific beer your guestsordered.

WINE LISTSAs a good manager, you will build a wine list, the term used to describe your menuof wine offerings that fits your own particular operation and guest expectations. Figure4.7 is an example of a wine list that might be used at a mid-priced restaurant.At Toliver’s Terrace, the wine list is first divided by types of wines/grape varietals:Sparkling Wine and Champagne, Chardonnay, Other White Wines, Cabernet Sauvignon,Merlot, and Pinot Noir. Each category of wines is then numbered as follows:100s for sparkling wine and champagne, 200s for white wines (Chardonnay and otherwhite wines), and 300s for red wines (Cabernet Sauvignon, Merlot, and Pinot Noir).The numbering system is used to assist the guest in ordering and to help the serverFIGURE 4.7 Sample Wine List_____________________________________________________________________________Toliver’s Terrace_____________________________________________________________________________                                                          Dollars per Glass/                 Sparkling Wine and Champagne             Dollars per Bottle_____________________________________________________________________________101              Gloria Ferrer, Brut, Sonoma County          $7.00/$26.00102              Pommery, Reims, France                      $43.00103              Jordan “J”, Sonoma                        $48.00104              Moët & Chandon, Epernay, France             $55.00105              Dom Perignon, Epernay, France               $125.00                 Chardonnay201              Kendall-Jackson, California                 $5.00/$20.00202              Camelot, California                         $6.00/$22.00203              St. Francis, Sonoma                         $7.00/$26.00204              Cartlidge & Browne, California              $30.00205              Stag’s Leap, Napa Valley                   $52.00                 Other White Wines206              Fall Creek, Chenin Blanc, Texas             $5.00/$18.00207              Max Richter, Riesling, Germany              $6.00/$22.00208              Honig, Sauvignon Blanc, Napa Valley         $7.00/$25.00209              Tommasi, Pinot Grigio, Italy                $7.00/$25.00210              Santa Margherita, Pinot Grigio, Italy       $34.00                 Cabernet Sauvignon301              Tessera, California                         $5.00/$20.00302              Guenoc, California                          $7.00/$27.00303              Sebastiani Cask, Sonoma                     $35.00304              Franciscan, Napa Valley                     $38.00305              Chateau Ste. Michelle, Cold Creek, Washington $45.00                 Merlot306              Talus, California                           $5.00/$20.00307              Tapiz, Argentina                            $6.00/$22.00308              Ironstone, Sierra Foothills                 $7.00/$26.00309              Solis, Santa Clara County                   $35.00                 Pinot Noir310              Firesteed, Oregon                           $6.00/$23.00311              Carneros Creek, Carneros                    $31.00312              Iron Horse, Sonoma                          $39.00313              Domain Drouhin, Willamette Valley, Oregon   $55.00_____________________________________________________________________________

By either manual tracking or the use of your point of sales (POS) system,you will know exactly which beers, by brand and packaging form, you have soldin the bar on a daily basis. A tally of guest checks would also furnish you withthe same information, but such a system is labor intensive, time consuming, andsubject to inaccuracy. Regardless of the tracking method used, the goal is thesame as that of tracking a food item sale. That is, with a good idea of whatguests have purchased in the past, we are better prepared to order the products,in their proper packaging form, that we believe these guests will purchase in thefuture.FIGURE 4.1 LeRae’s Bar Beer Sales___________________________________________________________________________Beverage Sales                                         Date: 1/1–1/8___________________________________________________________________________Product: Beer                Number Sold               Percentage SoldBudweiser Bottles                 45                        11.25%Coors Bottles                     18                         4.50Miller Cans                       61                        15.25Coors Cans                        68                        17.00Budweiser Draft                   115                       28.75Harp’s Draft                     93                        23.25Total                             400                      100.00___________________________________________________________________________FORECASTING WINE SALESThe forecasting of wine sales is similar to that of beer sales in that it must be dividedinto more than one part. For most managers, forecasting wine sales is a processthat must be divided into two main parts:1. Forecasting bottled-wine sales2. Forecasting wine-by-the-glass salesFORECASTING BOTTLED-WINE SALESWhen forecasting wine sales by the bottle, you treat an individual type of bottledwine exactly as you would treat a menu item. A wine list or wine menu detailingthe selections of wines available can be presented to the guest, who thenmakes a choice. Percent selecting figures are computed exactly as they would bewhen analyzing food item sales. You may find, however, that it is possible andquite desirable to offer wines with very small percent selecting figures becausewines in a bottle are not highly perishable. Thus, many operators develop extensivewine lists consisting of a large number of wines, many of which sell onlyrarely. While this selling strategy has its place because some restaurants consideran extensive wine list as an integral part of their marketing strategy, it must beremembered that excessive product inventory, whether food or beverage, mustbe avoided. Dollars invested in extravagant inventory are not available for usein other areas of the foodservice organization. While bottled wine is not highlyperishable, all wine products are perishable to some degree; thus, excessive inventoryof some wine types can result in increased product loss through oxidation(deterioration), theft, or both.FORECASTING WINE-BY-THE-GLASS SALES

identify the correct wine in storage. Guests may feel intimidated by the French, Italian,or German names of wines and, thus, might not order them for fear of pronouncingthe words incorrectly. A numbering system allows guests to choose a number ratherthan a name, and so reduces the amount of anxiety they may have in ordering.The second column in Figure 4.7 lists the name and place of the vintner, orwine producer. The third column lists the price by the glass and/or the price perbottle. Usually, it is the less expensive wines that are available by the glass becausemore people are likely to order the less expensive wines than the most expensivewines, especially at a mid-priced restaurant. It is much more cost effective to offerwine by the glass from a $20.00 bottle of wine than from an $80.00 bottle of winebecause, once the bottle is opened, it has a relatively short shelf life.In wine list development, several points must be kept in mind. First, you mustseek to provide alternatives for the guest who wants the best, as well as for thosewho prefer to spend less. Second, wines that either complement the food or, in thecase of a bar, are popular with the guests must be available. Tastes in wines change,and you must keep up with these changes. Subscribing to at least one wine journalin the hospitality field is a good way to do so. You must also avoid the temptationto offer too many wines on a wine list. Excess inventory and use of valuable storagespace make this a poor idea. In addition, when selling wine by the glass, thoseitems that sell poorly can lose quality and flavor rapidly. Third, wine sales can bediminished due to the complexity of the product itself. You should strive to makethe purchase of wine by the bottle a pleasant, nonthreatening experience. Waitstaff,who help in selling wine, should be knowledgeable but not pretentious.In general, when foodservice managers have trouble selling wine (the world’smost popular beverage), the difficulty lies in the delivery of the product rather thanwith the product selected. It would almost appear as if some operators go out oftheir way to make the ordering, presentation, and service of wine so pretentious asto intimidate many guests into not purchasing wine at all. This is unfortunate sincewine is perceived as a beverage of moderation and is enjoyed the world over by somany guests. You can enlist the aid of your own wine supplier to help you trainyour staff in the effective marketing of wine, either by the bottle or by the glass.Far too few operators use this valuable resource to their advantage.DETERMINING SPIRIT PRODUCTS TO CARRYDistilled spirits have an extremely long shelf life. Thus, you can make a “mistake”and purchase the wrong spirit product without disastrous results, if that productcan be sold over a reasonable period of time. Guest preference will dictate the typesof liquors that are appropriate for a given operation, but it is your responsibilityto determine product quality levels in the beverage area. Nowhere is this more importantthan in the area of distilled spirits.Consumer preferences concerning alcoholic beverages can change rapidly. Thewise beverage manager stays abreast of changing consumption trends by readingprofessional journals and staying active in his or her professional associations. Theseassociations can be major providers of information related to changes in consumerbuying behavior as far as beer, wine, and spirits are concerned. What is extremelypopular one year may be out of fashion the next! It is important to spot these trendsand respond to them quickly.Packaging is not a particular issue, as it is for beer and wine, in the selectionof spirits for an establishment’s use. In the United States, as in most parts of theworld, bottle sizes for spirits are standard. Since the early 1980s, the bottle sizesshown in Figure 4.8 represent those most commonly offered for sale to the hospitalitymarket.

Generally, forecasting the sale of house wines, wine served to a guest who does notstipulate a specific brand when ordering, or any wine sold by the glass is done ina manner similar to that used in forecasting beer sales. Once you have estimatedthe number of guests who will select wine, the type of wine they will select can beforecasted. The popularity of different wine types changes frequently, as newer stylesand varieties gain in popularity and newer wine producing regions (such as Argentina,Australia, and South Africa) improve the quality and marketing of theirlocally produced wines. As a result, you must continually monitor the wines yourguests prefer to drink “now,” rather than attempt to sell what they preferred back“then”!Figure 4.2 details the by-the-glass sales of wine at LeRae’s for the period 1/1to 1/8. From the data, you know that one out of ten guests will buy wine by theglass. Thus, 160 (from a total of 1,600 guests) will select this beverage.If your guests remain consistent in their buying habits, you will have a goodidea of the total demand for your wine-by-the-glass products and will be better ableto ascertain the amount that must be on hand on any given day.FIGURE 4.2 LeRae’s Bar Wine-by-the-Glass Sales__________________________________________________________________________Beverage Sales                                           Date: 1/1–1/8__________________________________________________________________________Product:Wine by the Glass               Number Sold              Percentage SoldChardonnay                           30                        18.75%Merlot                               16                        10.00Zinfandel                            62                        38.75House Zinfandel                      52                        32.50Total                               160                       100.00__________________________________________________________________________FORECASTING SPIRIT SALESLike beer and wine, the number of guests who order a mixed drink can betracked. Unlike beer and wine, however, the exact item the guests will requestis very difficult to determine. When ordering spirits, tracking sales can becomesomewhat complicated. For example, assume that two guests order bourbon andsoda; one guest specifies Jack Daniel’s brand of bourbon, whereas the other oneprefers Heaven Hill brand. From the guests’ point of view, they both orderedbourbon and soda. From the operator’s point of view, two distinct items wereselected. To make matters a bit more complicated, a third guest arrives and ordersbourbon and soda without preference as to the type of bourbon used. Obviously,a different method of sales forecasting is necessary in a situation suchas this, and, in fact, several are available. One method requires that the operatorview guest selection not in terms of the drink requested, such as bourbonand water, gin and tonic, Sea Breeze, and so on, but rather in terms of the particularspirit that forms the base of the drink. Consider a table of four guestswho order the following:1. Kahlua on the rocks2. Kahlua and coffee3. Kahlua and cream4. Kahlua and Coke

FIGURE 4.8 Spirit Bottle Sizes and Capacities____________________________________________________________________________Common Bottle Name             Metric Capacity          Fluid Ounce CapacityMiniature                          50 ml                          1.7Half-pint                         200 ml                          6.8Pint                              500 ml                         16.9Fifth                             750 ml                         25.4Quart                             1.0 Liter                      33.8Half-gallon                      1.75 Liters                     59.21 Liter equals 1000 milliliters____________________________________________________________________________The miniature, or “mini-bottle” (50 ml) is typically offered for sale on airlinesand in some situations, such as in-room minibars and room service, in the hotelsegment of the hospitality industry. In some areas of the country, it can even bepurchased singularly in bars. By far the most common bottle size used in the hospitalityindustry is the 1-liter size.While packaging is not a major concern of the operator selecting a spirit product,brand quality is crucial. As a comparison, consider a product such as BudweiserLight beer, a standard product, which tastes the same from coast to coast.An operator who chooses to carry that beer need only decide whether it will besold in bottles, in cans, or on draft. Should that same operator elect to carry scotch,however, an extremely wide selection of products at widely varying prices is availablefor purchase. In general, restaurant operators will select spirits in two majorcategories. These are well liquors and call liquors.WELL LIQUORSWell liquors are those spirits that are poured when the guest does not specify a particularbrand name when ordering. The name stems from the concept of “well,” orthe bottle holding area in the bar. The wise operator will choose well liquors verycarefully. Guests who order well liquors may be price conscious, but that does notmean they are not quality conscious also. It is fairly easy to tell the difference betweena well liquor of average quality and one of very poor quality. Managers whoshop for well liquors considering only price as a criterion for selection will find thatguest reaction is extremely negative. Conversely, if exceptionally high quality productsare chosen as well items, liquor costs may be excessive unless an adequate pricestructure is maintained.CALL LIQUORSCall liquors are those spirits that are requested by name, such as Jack Daniel’s,Kahlua, and Chivas Regal. Extremely expensive call liquors are sometimes referredto as premium liquors.You will generally charge a higher price for those drinks prepared with call orpremium liquors. Guests understand this and, in fact, by specifying call liquors indicatetheir preference to pay the price required for these special products.Figures 4.9 and 4.10 illustrate the effect of changes in the selection of wellliquors. In Figure 4.9, 50 well drinks and 50 call drinks are sold. Total beveragecost percentage, in this example, equals 19.1 percent.

Each guest could be considered as having ordered the same item: a drink inwhich Kahlua, a coffee-flavored liqueur from Mexico, forms the base of the drink.The purpose of this method is, of course, to simplify the process of recording guests’preferences.Depending on the degree of accuracy desired by the operator, tracking spiritsales can be done by any of the following methods:1. Generic product name:a. Coffee liqueurb. Bourbonc. Vodkad. Gin2. Specific product name:a. Kahluab. Jack Daniel’s Black Labelc. Absolutd. Bombay3. Specific drink requested:a. Kahlua on the rocksb. Kahlua and coffeec. Kahlua and creamd. Kahlua and CokeFigure 4.3 demonstrates the system you would use to track spirit sales usingthe generic product method illustrated previously. It also is an excellent exampleof the power of an effective beverage POS system to help track sales in a mannerthat is far more effective than can be done manually. The number of different spiritdrinks that can be made numbers in the hundreds. A POS system programmedspecifically for your operation can be a great asset in helping you develop the saleshistories you need to purchase spirit products effectively because it can easily trackthis large number of drink combinations.As the amount of time and effort required to track specific drink sales increases,so does accuracy. Each operator must determine the level of control appropriatefor his or her own operation. This is due to the simple fact that there must be arelationship between the time, money, and effort required to maintain a controlsystem and its cost effectiveness.STANDARDIZED DRINK RECIPES AND PORTIONSIf a beverage operation is even moderately busy, it is simply unrealistic to assumethat the bartender can stop each time an order comes in, consult a writtenstandardized recipe as discussed in last article, and then prepare the drinkrequested. Imagine the resulting confusion, chaos, and time delay if such a systemwere in place! The demand for control in the bar, however, is even greaterthan that required in the kitchen. The reason is simple. The potential for employeetheft and waste is greater in the bar than in the kitchen. Also, the asFIGURE 4.3 LeRae’s Bar Spirit Sales___________________________________________________________________________Beverage Sales                                             Date: 1/1–1/8___________________________________________________________________________Product: Spirits                Number Sold                Percentage SoldScotch                              210                           13.1%Bourbon                             175                           10.9Vodka                               580                           36.3Gin                                 375                           23.4Kahlua                              175                           10.9Tequila                              85                            5.3Total                              1,600                         100.0___________________________________________________________________________

FIGURE 4.9 Spirit Cost Percentage_____________________________________________________________________________Original Portion Cost_____________________________________________________________________________          Number    Portion    Total     Selling     Total     BeverageSpirit    Sold      Cost       Cost      Price       Sales     Cost %Well       50       $0.90      $ 45       $5          $250      18.0%Call       50        1.20        60        6           300      20.0Total     100                   105                    550      19.1_____________________________________________________________________________FIGURE 4.10 Spirit Cost Percentage_____________________________________________________________________________Reduced Portion Cost_____________________________________________________________________________           Number     Portion     Total     Selling     Total     BeverageSpirit     Sold       Cost        Cost      Price       Sales     Cost %Well        50         $0.60       $30        $5         $250      12.0%Call        50          1.20        60         6          300      20.0Total      100                      90                    550      16.4_____________________________________________________________________________In Figure 4.10, the portion cost of our well brand is reduced from 90 cents to60 cents, due to a reduction in the quality of product selected for this purpose. Thisresults in a decrease in beverage cost percentage to 16.4 percent.While the decision to lower the quality of well liquor used did, in this case, reduceoverall liquor cost percentage, the question of the long-term effect on guestsatisfaction and loyalty is not addressed. In fact, changes in guest behavior mayseem negligible in the short run. Successful foodservice operators, however, rememberthat you cannot fool all of the people all of the time. Quality products atfair prices build guest loyalty. Because that is true, you are wise to select well productsthat are in keeping with your clientele, price structure, and desired image. Anythingless cheats both you and your guests.BEVERAGE PURCHASE ORDERSThe form in Figure 3.13 can be used to document the beverage purchase order inthe same way it is used for food purchases. Special laws, depending on the stateand county, may influence how beverage purchases are to be made or paid for. Oneof the first responsibilities you have is to become familiar with all applicable stateand local laws regarding beverage purchases. As with food, the goal in purchasingis to have an adequate, but not excessive amount of product on hand at all times.Unlike most food products, however, beverage distributors will sometimes sell productsin less than one-case lots. This is called a broken case and occurs when severaldifferent brands or products are used to completely fill the case. Take, for example,the operator who orders a case of scotch, consisting of 12 bottles. The case,however, might contain four bottles of Scotch Brand A, four bottles of Brand B,and four bottles of Brand C.As a general rule, wine, beer, and spirits are purchased by the case. Beer, ofcourse, may also be bought by full- or reduced-size kegs. As with food products,smaller container size usually results in higher cost per ounce. It is important to rememberthat both product quality and container size are critical when determiningwhat to buy.

purchased price of beverages is, in many cases, higher than that of food. Consider,for a moment, just a few of the unique aspects of beverage operationsthat require strict adherence to control procedures:1. Beverage operations are subject to tax audits to verify sales revenue. Insome states, these audits can be unannounced.2. Beverage operations can be closed down “on the spot” for the violation ofa liquor law.3. Employees in a bar may attempt to become operational “partners” by bringingin their own products to sell and then keeping sales revenue.4. Detecting the disappearance of small amounts of beverage products is extremelydifficult, as, for example, the loss of 8 ounces of beer from a multigallonkeg.For these reasons and others, using standardized recipes is an absolute mustfor the beverage operation, even if using written standardized recipes for each drinkis not a viable option. Consider the case of Paul, the bar manager at a full-servicerestaurant. He knows that each bourbon and water he produces should consist of95 cents in product cost. His selling price is $4.75. He uses the beverage cost percentformula to determine his beverage cost percentage. The following beveragecost percent formula, as you can easily see, is nearly identical to the food cost percentformula presented in last article:       Cost of Beverage Sold / Beverage Sales = Beverage Cost %Thus, Paul’s beverage cost percent should be as follows:                 $0.95 / $4.75 = 20.0%Yet, his actual beverage cost percent on this item is much higher. How canthis be, on an item as uncomplicated as bourbon and water? The answer is simple.The bartender did not follow the standardized recipe. Even on an item as ordinaryas bourbon and water, the bartender must know exactly the amount ofproduct to use. It is not simply a matter of bourbon and water, but rather a matterof how much bourbon with how much water. Figure 4.4 shows the beveragecost that would be achieved with different drink sizes and a standard 1-liter bottleof spirits.FIGURE 4.4 Beverage Cost Competition___________________________________________________________________________Beverage: Bourbon                     Container Size: One liter (33.8 oz.)Product Cost: $24.80/liter___________________________________________________________________________Portion   Number of   Liter   Portion   Selling  Total Beverage   BeverageSize      Portions    Cost    Cost      Price    Sales            Cost %1.00 oz.     33      $24.80   $0.75      $4.75     $156.75         15.8%1.25 oz.     26       24.80    0.95       4.75      123.50         20.11.50 oz.     22       24.80    1.13       4.75      104.50         23.71.75 oz.     19       24.80    1.31       4.75       90.25         27.5___________________________________________________________________________As shown, the difference in the drink recipe can make a big difference intotal beverage cost percent. For purposes of accuracy, assume approximately a0.8-ounce-per-liter evaporation loss, thus leaving Paul with 33 ounces of usableproduct from this liter of bourbon. Also, assume a product cost of $24.80 perliter, with a $4.75 per drink selling price and a normal portion size of 1 ounceof bourbon. Obviously, the quantity of alcohol actually used makes the liquorcost percent vary greatly.

RECEIVING BEVERAGE PRODUCTSThe skill required to receive beverage products is somewhat less than what is neededfor receiving food. The reason is that beverage products do not vary in quality inthe same manner food products do. As with food, the receiving clerk needs a properlocation, tools, and equipment. In addition, proper delivery schedules must be maintained.The training required in beverage receiving, however, is reduced due to theconsistent nature of the product received. A case of freshly produced Coors beer,for example, will be consistent in quality regardless of the vendor. And if the productis fresh dated, that is, a date is stamped on the product to indicate its freshness,very little inspection is required to ensure that the product is exactly what wasordered. In fact, when matching the purchase order to the vendor invoice, onlyquantity ordered and price must be verified, unlike food deliveries that require theverification of weight, quantity, quality, and price.It is possible, however, that the goods delivered will not match those ordered.Or, in fact, the goods delivered are defective in some manner. Thus, appropriatereceiving procedures must be in place.When receiving beverage products, the following items are of concern andshould be verified:Key Beverage Receiving Checkpoints1. Correct brand2. Correct bottle size3. No broken bottles or bottle seals4. Freshness dates (beer)5. Correct vintage, or year produced (wine)6. Refrigerated state (if appropriate)7. Correct unit price8. Correct price extension9. Correct invoice totalIf errors are detected, a credit memo (see Figure 3.17) should be filled out andsigned by both the delivery person and the receiving clerk.STORING BEVERAGE PRODUCTSWhile the shelf life of most beverage products is relatively long, alcoholic beverages,especially wine, must be treated in a very careful manner. Beverage storagerooms should be easily secured since beverages are often expensive items and area favorite target for both employee and guest theft. These storage areas should, ofcourse, be kept clean and free of insect or rodent infestations, and they should belarge enough to allow for easy rotation of stock. Many beverage managers use atwo-key system to control access to beverage storage areas. In this system, one key(or, in the case of electronic locks, one pre-programmed, coded key) is in the possessionof the individual responsible for the beverage area. The other key, usedwhen the beverage manager is not readily available, is kept in a sealed envelope inthe safe or other secured area of the operation. Should this key be needed, managementwill be aware of its use since the envelope will be opened. Of course, it isup to management to ascertain the validity of the use of this key should the envelopebe opened. Recodable electronic locks (which are highly recommended) includefeatures that allow management to issue multiple keys and to identify preciselythe time an issued key was used to access the lock, as well as to whom thatkey was issued.

Stated in another way, assume that you manage a large convention hotel thathas a beverage sales volume in spirit drinks of $2,000,000 per year. If your bartendersconsistently pour 1 1/2-ounce drinks rather than 1-ounce drinks, and youassume average costs and selling prices as shown in Figure 4.4, then beverage costswill be 23.7 percent rather than the planned 15.8 percent. The difference is 7.9 percent(23.7 - 15.8 = 7.9). The loss represents $2,000,000 x 0.079 = $158,000 forthis one operation in just one year! A loss as sizable as this is certainly career threateningfor any manager!While standardized recipes, which include step-by-step methods of preparation,may be necessary for only a few types of drinks, standardized recipes that detailthe quantity of product management has predetermined as appropriate should bestrictly adhered to. That is, if management has determined that bourbon and watershould be a 1-ounce portion of bourbon and a 2-ounce portion of water, thenboth items should be measured by a jigger, a tool for measuring liquid, or an automateddevice. Some mechanized/computerized bar systems on the market todaywill premeasure both items simultaneously. The capabilities of such systems aremany and these improve continually.Regardless of method of measurement (manual or automated), both bourbonand water, in this case, must be delivered to the guest in the proper ratio ifproduct quality is to be maintained. Consider, for a moment, the case of a managerwho determines that a particular blend of bourbon, while expensive, can besold at a premium price. The manager sets the drink price and instructs the bartenderthat the portion size is to be 1 ounce of spirit with 2 ounces of water.Consider the following guest reactions when the bartender varies the quantity ofwater added to the bourbon:Drink Ratio                 Possible Guest Response____________________________________________________________________________A. 1 oz. bourbon            1. Gee, the drinks sure are small here!   1 oz. water              2. Gee, this sure is strong! Can you add a splash                               of water?B. 1 oz. bourbon            1. Gee, this sure tastes good! It’s just right!   2 oz. waterC. 1 oz. bourbon            1. Gee, this tastes watered down. Can you add                               a splash of bourbon?3 oz. water                 2. Gee, these drinks cost a lot for such a small                               amount of alcohol!Remember that the quantity of spirit used and, thus, the product cost percentage,did not change under scenario A, B, or C. In this case, the bartender was verycareful not to use more product than he or she had been instructed to do. In effect,the bartender put the profitability of the operation before guest satisfaction.It is important to remember that happy guests provide profits; profits do not providehappy guests. The manager of this operation might be pleased with the bartender’sprecise product control, since the cost of 1 ounce versus 3 ounces of wateris minuscule. Guests, however, will react to sloppy drink preparation in the sameway they do to sloppy food preparation.In summary, each drink in the bar must have a standardized recipe or, if thepreparation of the drink is simple, a standardized portion size. These recipes willaffect the planned profitability of the operation as well as guest satisfaction.

LIQUOR STORAGESpirits should be stored in a relatively dry storage area between 70 and 80°F (21to 27°C). Since these products do not generally require refrigeration, they may bestored along with food products, if necessary. An organized, well-maintained areafor spirits will also ensure that purchasing decisions will be simplified since no productis likely to be overlooked or lost. In addition, care should be taken that accessto liquor storage areas is strictly limited.BEER STORAGEBeer in kegs should be stored at refrigeration temperatures of 36 to 38°F (2 to3°C) because keg beer is unpasteurized and, thus, must be handled carefully toavoid excessive bacteria. When receiving and storing canned and bottled beer, itis also important to examine freshness dates. If these dates are not easily discernible,you should demand that the vendor explain to you the coding systemthat is being used. Pasteurized beer in either cans or bottles should be stored ina cool, dark room at 50 to 70°F (10 to 21°C) but does not, of course, requirerefrigeration.Storage areas should be kept clean and dust free. Canned beer, especially, shouldbe covered when stored to eliminate the chance of dust or dirt settling on the rimsof the cans. Nothing is quite as disturbing to a beer drinker than to find the top ofa cold beer can covered with dust, dirt, or other foreign material that cannot be removed.Because that is true, it is a good idea for the individual issuing canned beerto the bar to thoroughly rinse beer can tops prior to delivering these products foruse in the bar.Product rotation is critical if beer is to be served at its maximum freshness, and itis important that you and your team devise a system to ensure that this happens. Thebest method is to date each case or six-pack as it comes in. In this manner, you can,at a glance, determine whether proper FIFO product rotation hasoccurred.WINE STORAGEWine storage is the most complex and time-consuming activity required of beveragestoreroom personnel. Depending on the type and volume of the restaurant, extremelylarge quantities of wine may be stored.In general, the finer wines in the United States are sold in bottles of 750 ml.Foreign wines are generally sold in bottles of approximately this size, but the contentsmay vary by a few milliliters more or less. Sometimes, larger bottle sizes maybe sold, especially of sparkling wine, such as champagne. A tremendously underutilizedbottle size that may also be purchased and stored is the half-bottle or split,which is about half the size of the 750-ml bottle. If you find that large numbers ofcouples or two-person groups are coming to your restaurant, it is simply unrealisticto assume that they will have before-dinner drinks, a full 750-ml bottle of winewith dinner, and then finish the meal with coffee and after-dinner drinks. In today’sage of caution about drinking and driving, the trend is away from this kindof consumption, and if wine sales are to be maintained at their current levels, operatorswould do well to provide the option of the half-bottle to their guests.Regardless of bottle size stored, the techniques for proper wine storage mustbe followed in all circumstances if the quality of the product is to be maintainedand product losses are to be kept at a minimum. Despite the mystery associatedwith wine storage, the effective manager will find that proper wine storage can beachieved if the following factors are monitored:

FIGURE 4.16 Raider Resort___________________________________________________________________________Beverage Sales Percentage Recap___________________________________________________________________________Unit                Beer        Wine       Spirits            Total SalesBanquets            12.5%       50.0%       37.5%                100%Starlight Bar       33.0%       11.0%       56.0%                100%Harry O’s          67.0%       10.5%       22.5%                100%___________________________________________________________________________As indicated, each beverage outlet operates with a unique sales mix. Figure 4.16shows that, in the banquet area, the mix is heavy in wines and spirits, the choiceof many guests when they are at a reception or dining out. The Starlight Bar clienteleis older, and their preferred drink tends to be spirits. Harry O’s, on the otherhand, caters to a younger crowd that prefers beer. It is important to remember that,despite controls that are in place, costs that are in line, and effective managementpolicies, variations in beverage cost percentages can still occur due to sales mix,rather than other confounding factors. Experienced managers recognize this factand as a result, they monitor sales mix carefully.Beverages are, and will remain, an important part of the hospitality industry.Marketed and consumed properly, they enhance many an occasion. In the handsof the thoughtful and conscientious manager, they are a powerful profit center.Now that we know who is coming and we have enough food (last article) and beverages (next article) available to be served, we turn to one of the mostchallenging aspects of foodservice management, namely managing the food and beverageproduction process.Technology ToolsIn this article you learned about cost control concepts related to the service of alcoholic beverages.For those operations that sell a significant amount of alcoholic beverage products, there area variety of programs designed to discourage theft and carefully monitor product sales and expenses.In fact, the software and hardware available to help you in the beverage service area isgenerally more sophisticated than that found in most food-related areas. Programs available includethose that can help you:1. Monitor product sales.2. Monitor product (inventory) usage.3. Calculate actual and targeted pour percentages.4. Adjust product costs for happy hours and specials, as well as product transfers toand from the kitchen.5. Maintain adequate levels of product inventory.6. Establish par stock quantities and values.7. Generate purchase orders.8. Schedule employees based on forecasted sales levels.9. Create and print customized wine lists and specials menus.10. Maintain sales histories.11. Maintain drink recipe files.12. Project the impact of sales mix on beverage cost percentages

1. Temperature2. Light3. Cork conditionTEMPERATUREA great deal of debate has centered around the proper temperature at which tostore wine. All can agree that red wine should be served at cellar temperature. Thereis, however, less agreement about what exactly is meant by “cellar temperature.”When serving white wine by the glass, we may find that the proper storage temperature,at least for the containers currently being used, is refrigerator temperature.Obviously, this would not do for a case of fine red wine. But, generally speaking,most experts would agree that wines should be stored at a temperature of 50to 65°F (10 to 18°C). If you find, however, that wines must be stored at highertemperatures than this, the wine storage area should be as cool as can reasonablybe achieved, and it is important to remember that, while wine may improve withage, it improves only if it is properly stored. Heat is an enemy of effective winestorage.LIGHTJust as wine must be protected from excess heat, it must also be protected fromdirect sunlight. In olden times, this was achieved by storing wines in undergroundcellars or caves. In your own foodservice establishment, this means using a storagearea where sunlight cannot penetrate and where the wine will not be subjectto excessive fluorescent or incandescent lighting. With regard to light, the rule ofthumb for storing wine is that it should be exposed only to the minimum amountnecessary.CORK CONDITIONIt is the wine’s cork that protects it from oxygen, its greatest enemy, and from theeffects of oxidation. Oxidation occurs when oxygen comes in contact with bottledwine; you can detect a wine that has been overly oxidized because it smells somewhatlike vinegar. Oxidation deteriorates the quality of bottled wines; thus, keepingoxygen out of the wine is a prime consideration of the vintner and should beimportant to you as well.Cork has proven, over the years, to be the bottle sealer of choice for most wineproducers. Quality wines demand quality corks, and the best wines are fitted withcork sealers that should last many years if they are not allowed to dry out. This isthe reason wine should be stored in such a manner that the cork remains in contactwith the wine and, thus, stays moist. In an effort to accomplish this, most foodservicemanagers store wines on their sides, usually on specially built wine racks.Corks should be inspected at the time the wine is received and periodically thereafterto ensure that there are no leaks resulting in oxidation and, thus, damagedproducts. If a leak is discovered, the wine should be refused; if the leak occurs duringstorage, the wine should be examined for quality and then either consumed ordiscarded, as appropriate. In general, you can effectively manage the storage ofwines if you think about how you should treat the cork protecting the wine. Thewine the cork is protecting is likely to be properly stored if the cork is always kept

1. Cool2. In the dark3. MoistProper beverage storage techniques are important if you hope to have the desiredamount of product ready and available for service during the beverage productionprocess. In most instances, wine and beer will be consumed directly fromtheir original containers. With spirits, on the other hand, the bartender will probablyfind that the guest prefers the spirit mixed with some other product to makethe beverage fit their personal preference.BAR TRANSFERSWhile the great majority of product cost related to bar operations is alcoholicbeverages, you must also manage the cost of those items associated with thepreparation and service of beverage products. In the case of wine and beer, thereare, in general, no additions to the beverage prior to serving and, thus, no additionalproduct costs. As far as spirits are concerned, however, a great number ofnonalcoholic food products may be served as a part of the drink order. To illustratethis, assume that a guest in your bar orders Irish coffee. This popular drinkhas, as its two primary ingredients, Irish whiskey and brewed coffee. The cost ofthe spirit itself should clearly be charged to the cost of operating the bar. A questionarises, however, on how to account for the coffee. In this case, coffee is as centralto the preparation of the drink as the whiskey itself. If your operation is astand-alone bar, accounting for the cost of purchasing the coffee is not complex. Ifthe bar is, however, operated as part of a larger foodservice operation, the groundcoffee used to make the brewed coffee in the bar may have to come from the restaurant’sportion of the foods storeroom. When that is the case, the transfer of theproduct, and its associated costs, from the kitchen to the bar must be controlledand recorded to accurately track revenue and expense. If this is not done, the foodcost percentage in the restaurant will be artificially inflated (overstated) while thetotal cost of beverage sold percentage in the bar will be understated. This wouldbe the inevitable result if revenues from alcoholic drinks utilizing coffee were reportedas bar sales, but the expense of generating those sales (the coffee) was considereda restaurant expense.This same issue exists with products like cherries, limes, lemons, cream, coffee,sugar, and a host of other items, which may be ordered as regular foodproducts for the kitchen but are needed by and transferred to the bar area. Similarly,many foodservice operators use items from the bar when preparing menuitems for service in the dining room. Using a bottle of beer from the bar forsteaming bratwurst in the kitchen would be an example of a transfer of productsfrom the bar to the kitchen. Wines may frequently be used by the kitchento produce some sauces. In fact, a close working relationship between kitchenand bar management is helpful as both areas attempt to assist each other to thebest of their ability in providing needed ingredients and in helping to utilize anycarryover products.The control procedure for kitchen and bar transfers is quite simple. To beeffective, it requires nothing but consistency. Assume that you manage the SurfsideBar, on the beach in Florida. Figure 4.11 is an example of what your transferrecord for the first week of January might be. It is the type of form that youcan use to monitor product flow either to or from the bar. Should you prefer it,a separate form can be used for each transfer area, but, for most operators, Figure4.11 would be sufficient. Note that the form requires the initials of both theperson receiving and the person issuing the product. In addition, space is availableto compute the sum total of all product values at the end of the accountingperiod. These figures would then be used to adjust, as needed, either cost offood sold data or cost of beverage sold data.

As an example, suppose that you want to calculate food cost and beverage cost,and you have all the available data, which will be discussed later in this article,except transfers. The following numbers are provided to you by the kitchen managerand the bar manager.                  Transfers from Bar     Transfers to Bar_________________________________________________________Food                   $3,525.00              $1,440.00Beer                   $  187.00Wine                    2,700.00Spirits                   638.00              $1,440.00Total Beverage         $3,525.00The food cost would be calculated by adding transfers from the bar to thekitchen (+$3,525) and subtracting transfers to the bar from the kitchen (-$1,440).Conversely, the beverage cost would be calculated by subtracting transfers from thebar to the kitchen (-$3,525) and adding transfers to the bar from the kitchen(+$1,440). Notice that the total amounts transferred are the same for both foodand beverage. The principle is that all product costs should be assigned to the areaof the operation that is reporting the sale of that product.FIGURE 4.11 Transfer RecordIMAGE(https://etravelweek.com/hmattachments/26_200910300552521VapY.gif)

COMPUTING COST OF BEVERAGESThe proper computation of beverage cost percentage is identical to that of foodcost percentage with one important difference. Typically, there is no equivalent foremployee meals since the consumption of alcoholic beverage products by employeeswho are working should be strictly prohibited. Thus, “employee drinks” wouldnever be considered as a reduction from overall beverage cost.Consider the situation you would face as manager of Rio Lobo’s, a popularTex-Mex-style restaurant that does a high volume of alcoholic beverage sales. Toprepare your drinks, your bartenders use limes, lemons, and fruit juices from thekitchen. You would, of course, like your beverage cost percentage to reflect all thecosts associated with the actual ingredients used in drink preparation. You keepexcellent daily records of the number of food products transferred from the kitchento the bar, as well as the dollar value of these transfers. In this operation, there areno transfers from the bar to the kitchen as there might be, for instance, in a Frenchrestaurant that uses wine extensively in its recipes. Figure 4.12 details how youFIGURE 4.12 Cost of Beverage Sold__________________________________________________________________________                    Accounting Period: 1/1 to 2/1                    Unit Name:        Rio Lobo’sBeginning Inventory                   $24,405.00PLUSPurchases                              21,986.40Goods Available for Sale                                $46,391.40LESSEnding Inventory                                         18,741.25LESS                                                     27,650.15Transfers from Bar                                        1,572.00                                                         26,078.15PLUSTransfers to Bar                                          2,140.00                                                       _______________Cost of Beverages Sold                                  $28,218.15__________________________________________________________________________would compute your actual cost of beverage sold for a month where the followingdata represent your operating results:                                      Operating Data—Rio Lobo’s_________________________________________________________________Beverage sales                        $100,000Beginning inventory                   $ 24,405Ending inventory                      $ 18,741.25Purchases                             $ 21,986.40Transfers to bar                      $ 2,140Transfers from bar                    $ 1,572Note, again, that beginning inventory for this accounting period is the endinginventory figure from the prior accounting period.SPECIAL FEATURES OF LIQUOR INVENTORYDetermining beginning and ending inventory levels for beverage products is generallymore difficult than determining these same levels for food. Food items canmost often be weighed, counted, or measured for inventory purposes. Of course,any of these methods may be used for liquor inventory, should you choose to doso. Unopened containers of beer, wine, and spirits can, of course, be counted.

Opened containers, however, must be valued also. It is the process of valuing theseopened containers that will present a challenge to you. Three inventory methodsare commonly in use to accomplish this goal. They are:1. Weight2. Count3. MeasureLIQUOR INVENTORY BY WEIGHTThe weight method uses a scale to weigh open bottles of liquor. This system is effectiveif you remember to subtract the weight of the empty bottle itself from the totalproduct weight and if you remember that each liquor, due to its unique specific gravity(density), must be weighed separately. Because some liquors are heavier than others,3 fluid ounces of each, for example, would not weigh the same amount. Figure4.13 lists the specific gravity of some common products used to make the colorfulpousse-café, a layered drink that relies on the fact that differing spirit products havedifferent weights (the more dense liquids will fall to the bottom of the glass).Just as your bartenders will use their knowledge of specific gravity to createdrinks, you can use that same knowledge to weigh the amount of product in anopened bottle and, thus, establish its inventory value.FIGURE 4.13 Specific Gravity of Selected Liqueurs______________________________________________________________________Liqueur or Cordial                 Color              Specific GravityKirsch                             Clear                    0.940Sloe Gin                            Red                     1.040Rock and Rye                       Amber                    1.065Triple Sec                         Clear                    1.075Peach Brandy                       Peach                    1.085Blue Caraçao                        Blue                    1.120Crème de Cacao                     Brown                    1.150Crème de Cassis                    Purple                   1.170Crème de Banana                    Yellow                   1.180______________________________________________________________________LIQUOR INVENTORY BY COUNTCounting full bottles is easy; counting the value of partial bottles is more difficult.You can do it rather quickly and fairly accurately, however, if you use the tenthssystem. This system requires that the inventory taker assign a value of 10/10 to afull bottle, 5/10 to a half bottle, and so on. Then, when inventory is taken, the partialbottle is examined and the appropriate “tenth” is assigned, based on the amountleft in the bottle. While this system results in an approximation of the actual amountin a bottle, many managers feel the tenths system is accurate enough for their purposes.It does have the advantage of being a rather quick method of determininginventory levels of open bottles.LIQUOR INVENTORY BY MEASURESome beverage managers determine product levels of open bottles by using a rulerto determine the amount the bottle contains. Dollar values are then assigned to eachinch or portion of an inch for inventory evaluation purposes. This method has ahigh degree of accuracy and is favored by many.

In general, it is important to take liquor inventories at a time when the operationis closed so that product quantities on hand do not change when the inventoryis being taken. It is also important that product contained in the lines of mechanicaldrink-dispensing systems be counted if the quantity of product in theselines is deemed to be significant.Returning to the Rio Lobo example, regardless of the method used to determinethe actual value of ending inventory, with sales of $100,000 and a cost ofbeverage sold of $28,218.15 you would apply the beverage cost percentage formulaas follows:    Cost of Beverage Sold / Beverage Sales = Beverage Cost %                          or                     $28,218.15 / $100,000 = 28.22%Again, it is important to note that transfers both to and from the bar must beaccounted for, if and when they occur. These adjustments will affect the overallproduct cost percentages in the kitchen and the bar. In addition, computing transfersto the bar will help your bar staff remember that the use of fruit juices, milk,cherries, lemons, limes, and the like do impact the total cost effectiveness of the bar.There are a large number of factors that can influence the actual beverage costpercentage you achieve. Many of these factors are discussed in next article. Note,however, that guests themselves can contribute to relatively major changes in foodor beverage cost percentages, both on the plus and on the minus side of the ledger.This is due to the concept that food and beverage operators call the sales mix, orproduct mix. Our preferred term is the former.SALES MIXSales mix is defined as the series of guest purchasing decisions that result in a specificfood or beverage cost percentage. Sales mix affects overall product cost percentageanytime guests have a choice among several menu selections, each one havingits own unique product cost percentage.To illustrate the effect of sales mix on beverage cost percentage, assume thatyou are the food and beverage director at the Raider Resort, a 400-room beachfronthotel property on the Gulf Coast of Texas. In addition to your regular restaurant,you serve beverages in three basic locations. They are as follows:1. Banquet beverages for receptions prior to meal events, typically served inyour grand ballroom, foyer, or outdoors; banquet beverages are also servedduring meal functions.2. The Starlight Bar, an upscale bar with soft piano music that typically appealsto guests who are 55 years and older.3. Harry O’s, a bar with indoor and poolside seating. Contemporary Top 40music in the evenings draws a younger crowd interested in dancing.You compute a separate beverage cost percentage for each of these beverage outlets.Figure 4.14 details the separate operating results for each outlet and an overallpercentage for the three units using the standard beverage cost percentage formula.You know that each beverage location uses the same portion size for all standarddrinks. Well and call liquors, as well as wine-by-the-glass brands, are constantin all three locations. Since, in this resort setting, you dislike the difficulty associatedwith serving draft beer, beer is sold in cans or bottles only. In addition, bartendersare typically rotated on a regular basis through every serving location.Should you be concerned that your beverage cost percentage varies so greatly byservice location? The answer, in this case, is that you have no cause for concern.In this situation, it is sales mix, and not poor control that governs your overall beveragecost percentage in each individual location. A close examination of the threeoutlets in Figure 4.15 will reveal how this can happen.

FIGURE 4.14 Raider Resort_____________________________________________________________________________Monthly Beverage Percentage Report_____________________________________________________________________________Location      Cost of Beverages         Beverage Sales       Beverage Cost %Banquets          $20,500                  $ 80,000                25.6%Starlight Bar      10,350                    45,500                22.7Harry O’s         16,350                    67,000                24.4Total              47,200                   192,500                24.5_____________________________________________________________________________Although product cost percentages are constant in each location for beer, wine,and spirits, the overall beverage cost percentage is not. The reason that each unitvaries in total beverage cost percentage is due to sales mix, or the guests’ selectionof product. In other words, guests, and not management alone, have helped to determineyour final beverage cost percent. While you can certainly help shape guestselection by such techniques as cost controls, effective pricing, menu design, andmarketing, to some degree it is the guest who will determine overall cost percentagethrough sales mix. This is true in both the beverage and the food areas. In thecase of the Raider Resort, it is easy to analyze the sales mix by examining Figure4.16, a detailing of the beverage products guests selected in each beverage outlet.Each sales percent in Figure 4.16 was computed using the formula:  Item Dollar Sales / Total Beverage Sales = Item % of Total Beverage SalesTherefore, in the case of beer sales in the banquet area using the data fromFigure 4.15:   Banquet Beer Sales / Total Banquet Beverage Sales = % Banquet Beer Sales                                        or                                  $10,000 / $80,000 = 12.5%FIGURE 4.15 Raider Beverage Outlets___________________________________________________________________________                   Monthly Beverage Percentage Recap#1 Outlet Name: Banquets                                    Month: January___________________________________________________________________________Product        Cost of Beverages        Beverage Sales      Beverage Cost %Beer             $ 2,500                  $10,000               25.0%Wine              12,000                   40,000               30.0Spirits            6,000                   30,000               20.0Total             20,500                   80,000               25.6___________________________________________________________________________#2 Outlet Name: Starlight BarProduct        Cost of Beverages        Beverage Sales      Beverage Cost %___________________________________________________________________________Beer             $ 3,750                  $15,000               25.0%Wine               1,500                    5,000               30.0Spirits            5,100                   25,500               20.0Total             10,350                   45,500               22.7___________________________________________________________________________#3 Outlet Name: Harry O’sProduct        Cost of Beverages        Beverage Sales      Beverage Cost %___________________________________________________________________________Beer             $11,250                  $45,000               25.0%Wine               2,100                    7,000               30.0Spirits            3,000                   15,000               20.0Total             16,350                   67,000               24.4___________________________________________________________________________

Since it is necessary to cost beverage recipes just as it is necessary to cost fooditem recipes, a standardized recipe sheet should be prepared foreach drink item to be sold. A record of these recipes should be available at eachbeverage outlet. If questions about portion size or preparation arise, the standardizedrecipe should be referred to.PURCHASING BEVERAGE PRODUCTSMost foodservice operators select only one quality level for food products. Once adetermination on necessary quality level has been made and a product specificationwritten, then only that quality of egg, lettuce, milk, bread, and so on is selected. Inthe area of alcoholic beverage products, however, several levels of quality are generallychosen. This ensures that a beverage product is available for those guests whowish to purchase the very best, while a product is also offered for those guests whoprefer to spend less. Thus, the beverage manager is faced with deciding not only whetherto carry wine on the menu, but also how many different kinds of wine and their qualitylevels. The same process is necessary for spirits and, to a lesser degree, for beers.DETERMINING BEER PRODUCTS TO CARRYBeer is the most highly perishable of beverage products. The pull date, or expirationdate, on these products can be as short as a few months. Because of this, it isimportant that the beverage operator only stock those items that will sell relativelywell. This generally means selecting both brand and packaging methods.BRAND SELECTIONBeverage operators typically carry between three and ten types of beer. Someoperations, however, stock as many as 50 or more! Generally speaking, geographiclocation, clientele, ambiance, and menu help determine the beer productthat will be selected. Obviously, we would not expect to see the same beerproducts at Hunan Gardens Chinese Restaurant that we would at Three PesosMexican Restaurant. Most foodservice operators find that one or two brandsof light beer, two or three national domestic brands, and one or two quality importbeers meet the great majority of their guests’ demand. One must be verycareful in this area not to stock excessive amounts of products that sell poorly.Again, beer is perishable, and great care must be taken to ensure proper productmovement. It is important, however, to train bartenders to make a notationon a product request log (see Figure 4.5) so that guest requests that cannot befilled are noted and monitored by management. This log should be easily accessibleto service personnel. Its purpose is to maintain a record of guest productrequests that are not currently available. In the case of beverages, those itemsthat guests wish to purchase that are not available are nearly as important totrack as the sales of the items that are available.If you were managing the operation that generated the requests documented inFigure 4.5, you might, for example, wish to investigate the possibility of stockingLowenbrau beer.FIGURE 4.5 Beverage Product Request Log___________________________________________________________________________Date                   Item Requested                           Entry By___________________________________________________________________________1/1                    Lowenbrau Beer                           P. J.1/1                    Cherry Schnapps                          L. T.1/2                    Rolling Rock Beer on Draft               T. R.1/4                    Lowenbrau Beer                           P. J.1/5                    Soave Wine                               L. D.1/6                    Any Texas Wine                           S. H.1/6                    Lowenbrau Beer                           T. R.___________________________________________________________________________

It is important to realize that some bar-related software may be dependent on specific and sometimesexpensive automated beverage dispensing systems. Other software is either stand-alone or designedto operate in conjunction with many of the basic POS systems currently on the market.Key Terms and ConceptsAlcoholic beveragesBeerWineSpiritsDramshop lawsBlood alcohol content(BAC)License statesControl statesPercent selectingKeg beer/draft beerHouse wineJiggerPull dateProduct request logTapped kegWine listVintnerWell liquorsCall liquorsPremium liquorsBroken caseFresh datedTwo-key systemRecodable electroniclocksHalf-bottle or splitOxidationSales mix

PACKAGINGBeer typically is sold to foodservice operators in cans, bottles, or kegs. While eachof these containers has its advantages and disadvantages, most foodservice operatorswith active beverage operations will select some of each of these packagingmethods. It makes little sense to carry the same beer product in both bottles andcans; however, many operators choose to serve some brands of their bottled orcanned beer in draft form as well.Many beer drinkers prefer draft beer (beer from kegs) over bottled or cannedbeer, and the cost to you per glass served is lower with beer from a keg. Specialequipment and serving techniques are, however, required if quality draftbeer is to be sold to guests. Also, the shelf life of keg beer is the shortest of allpackaging types, ranging from 30 to 45 days for an untapped keg, that is, onethat has not yet been opened by the bartender, and even fewer days for a kegthat has been tapped (opened). Full kegs can be difficult to handle because oftheir weight, and it is hard to keep an exact count of the product servedwithout special metering equipment. Despite these drawbacks, many operatorsserve draft beer. Draft beer is sold in a variety of keg and barrel sizes as listedin Figure 4.6.FIGURE 4.6 Draft Beer Containers____________________________________________________________________________Container                         Ounces                       Liters____________________________________________________________________________Barrel                            3,968                        117.331/2 Barrel (keg)                  1,984                         58.671/4 Barrel (1/2 keg)                992                         29.331/8 Barrel (1/4 keg)                496                         14.67____________________________________________________________________________DETERMINING WINE PRODUCTS TO CARRYDetermining which wines to carry is, like beer, a matter of your selecting both productand packaging. Typically, you must determine if you will sell wine by the:1. Glass2. Split or half-bottle3. Carafe4. BottleWines sold by the glass or carafe can be served from bottles opened specificallyfor that purpose or they can be drawn from specially boxed wine containers. Winesin a box typically are house wines sold to the beverage manager in multiliter-sizedboxes to ease handling, speed, and service and to reduce packaging costs. Bottledwines of many sizes and varieties can, of course, also be purchased.In addition, you may find that wine for cooking must also be purchased. Ingeneral, these products will be secured from your beverage wholesaler rather thanthe grocery wholesaler. It makes little sense to use extraordinarily fine wine in cooking.Again, the guiding principle for you should be to select the appropriate qualityfood or beverage product for its intended use. Some operators add salt to theircooking wines in an effort to discourage the kitchen staff from drinking them. Thismethod, if used, should be clearly communicated to kitchen personnel if the operatoris to avoid possible liability.

WINE LISTSAs a good manager, you will build a wine list, the term used to describe your menuof wine offerings that fits your own particular operation and guest expectations. Figure4.7 is an example of a wine list that might be used at a mid-priced restaurant.At Toliver’s Terrace, the wine list is first divided by types of wines/grape varietals:Sparkling Wine and Champagne, Chardonnay, Other White Wines, Cabernet Sauvignon,Merlot, and Pinot Noir. Each category of wines is then numbered as follows:100s for sparkling wine and champagne, 200s for white wines (Chardonnay and otherwhite wines), and 300s for red wines (Cabernet Sauvignon, Merlot, and Pinot Noir).The numbering system is used to assist the guest in ordering and to help the serverFIGURE 4.7 Sample Wine List_____________________________________________________________________________Toliver’s Terrace_____________________________________________________________________________                                                          Dollars per Glass/                 Sparkling Wine and Champagne             Dollars per Bottle_____________________________________________________________________________101              Gloria Ferrer, Brut, Sonoma County          $7.00/$26.00102              Pommery, Reims, France                      $43.00103              Jordan “J”, Sonoma                        $48.00104              Moët & Chandon, Epernay, France             $55.00105              Dom Perignon, Epernay, France               $125.00                 Chardonnay201              Kendall-Jackson, California                 $5.00/$20.00202              Camelot, California                         $6.00/$22.00203              St. Francis, Sonoma                         $7.00/$26.00204              Cartlidge & Browne, California              $30.00205              Stag’s Leap, Napa Valley                   $52.00                 Other White Wines206              Fall Creek, Chenin Blanc, Texas             $5.00/$18.00207              Max Richter, Riesling, Germany              $6.00/$22.00208              Honig, Sauvignon Blanc, Napa Valley         $7.00/$25.00209              Tommasi, Pinot Grigio, Italy                $7.00/$25.00210              Santa Margherita, Pinot Grigio, Italy       $34.00                 Cabernet Sauvignon301              Tessera, California                         $5.00/$20.00302              Guenoc, California                          $7.00/$27.00303              Sebastiani Cask, Sonoma                     $35.00304              Franciscan, Napa Valley                     $38.00305              Chateau Ste. Michelle, Cold Creek, Washington $45.00                 Merlot306              Talus, California                           $5.00/$20.00307              Tapiz, Argentina                            $6.00/$22.00308              Ironstone, Sierra Foothills                 $7.00/$26.00309              Solis, Santa Clara County                   $35.00                 Pinot Noir310              Firesteed, Oregon                           $6.00/$23.00311              Carneros Creek, Carneros                    $31.00312              Iron Horse, Sonoma                          $39.00313              Domain Drouhin, Willamette Valley, Oregon   $55.00_____________________________________________________________________________

identify the correct wine in storage. Guests may feel intimidated by the French, Italian,or German names of wines and, thus, might not order them for fear of pronouncingthe words incorrectly. A numbering system allows guests to choose a number ratherthan a name, and so reduces the amount of anxiety they may have in ordering.The second column in Figure 4.7 lists the name and place of the vintner, orwine producer. The third column lists the price by the glass and/or the price perbottle. Usually, it is the less expensive wines that are available by the glass becausemore people are likely to order the less expensive wines than the most expensivewines, especially at a mid-priced restaurant. It is much more cost effective to offerwine by the glass from a $20.00 bottle of wine than from an $80.00 bottle of winebecause, once the bottle is opened, it has a relatively short shelf life.In wine list development, several points must be kept in mind. First, you mustseek to provide alternatives for the guest who wants the best, as well as for thosewho prefer to spend less. Second, wines that either complement the food or, in thecase of a bar, are popular with the guests must be available. Tastes in wines change,and you must keep up with these changes. Subscribing to at least one wine journalin the hospitality field is a good way to do so. You must also avoid the temptationto offer too many wines on a wine list. Excess inventory and use of valuable storagespace make this a poor idea. In addition, when selling wine by the glass, thoseitems that sell poorly can lose quality and flavor rapidly. Third, wine sales can bediminished due to the complexity of the product itself. You should strive to makethe purchase of wine by the bottle a pleasant, nonthreatening experience. Waitstaff,who help in selling wine, should be knowledgeable but not pretentious.In general, when foodservice managers have trouble selling wine (the world’smost popular beverage), the difficulty lies in the delivery of the product rather thanwith the product selected. It would almost appear as if some operators go out oftheir way to make the ordering, presentation, and service of wine so pretentious asto intimidate many guests into not purchasing wine at all. This is unfortunate sincewine is perceived as a beverage of moderation and is enjoyed the world over by somany guests. You can enlist the aid of your own wine supplier to help you trainyour staff in the effective marketing of wine, either by the bottle or by the glass.Far too few operators use this valuable resource to their advantage.DETERMINING SPIRIT PRODUCTS TO CARRYDistilled spirits have an extremely long shelf life. Thus, you can make a “mistake”and purchase the wrong spirit product without disastrous results, if that productcan be sold over a reasonable period of time. Guest preference will dictate the typesof liquors that are appropriate for a given operation, but it is your responsibilityto determine product quality levels in the beverage area. Nowhere is this more importantthan in the area of distilled spirits.Consumer preferences concerning alcoholic beverages can change rapidly. Thewise beverage manager stays abreast of changing consumption trends by readingprofessional journals and staying active in his or her professional associations. Theseassociations can be major providers of information related to changes in consumerbuying behavior as far as beer, wine, and spirits are concerned. What is extremelypopular one year may be out of fashion the next! It is important to spot these trendsand respond to them quickly.Packaging is not a particular issue, as it is for beer and wine, in the selectionof spirits for an establishment’s use. In the United States, as in most parts of theworld, bottle sizes for spirits are standard. Since the early 1980s, the bottle sizesshown in Figure 4.8 represent those most commonly offered for sale to the hospitalitymarket.

FIGURE 4.8 Spirit Bottle Sizes and Capacities____________________________________________________________________________Common Bottle Name             Metric Capacity          Fluid Ounce CapacityMiniature                          50 ml                          1.7Half-pint                         200 ml                          6.8Pint                              500 ml                         16.9Fifth                             750 ml                         25.4Quart                             1.0 Liter                      33.8Half-gallon                      1.75 Liters                     59.21 Liter equals 1000 milliliters____________________________________________________________________________The miniature, or “mini-bottle” (50 ml) is typically offered for sale on airlinesand in some situations, such as in-room minibars and room service, in the hotelsegment of the hospitality industry. In some areas of the country, it can even bepurchased singularly in bars. By far the most common bottle size used in the hospitalityindustry is the 1-liter size.While packaging is not a major concern of the operator selecting a spirit product,brand quality is crucial. As a comparison, consider a product such as BudweiserLight beer, a standard product, which tastes the same from coast to coast.An operator who chooses to carry that beer need only decide whether it will besold in bottles, in cans, or on draft. Should that same operator elect to carry scotch,however, an extremely wide selection of products at widely varying prices is availablefor purchase. In general, restaurant operators will select spirits in two majorcategories. These are well liquors and call liquors.WELL LIQUORSWell liquors are those spirits that are poured when the guest does not specify a particularbrand name when ordering. The name stems from the concept of “well,” orthe bottle holding area in the bar. The wise operator will choose well liquors verycarefully. Guests who order well liquors may be price conscious, but that does notmean they are not quality conscious also. It is fairly easy to tell the difference betweena well liquor of average quality and one of very poor quality. Managers whoshop for well liquors considering only price as a criterion for selection will find thatguest reaction is extremely negative. Conversely, if exceptionally high quality productsare chosen as well items, liquor costs may be excessive unless an adequate pricestructure is maintained.CALL LIQUORSCall liquors are those spirits that are requested by name, such as Jack Daniel’s,Kahlua, and Chivas Regal. Extremely expensive call liquors are sometimes referredto as premium liquors.You will generally charge a higher price for those drinks prepared with call orpremium liquors. Guests understand this and, in fact, by specifying call liquors indicatetheir preference to pay the price required for these special products.Figures 4.9 and 4.10 illustrate the effect of changes in the selection of wellliquors. In Figure 4.9, 50 well drinks and 50 call drinks are sold. Total beveragecost percentage, in this example, equals 19.1 percent.

FIGURE 4.9 Spirit Cost Percentage_____________________________________________________________________________Original Portion Cost_____________________________________________________________________________          Number    Portion    Total     Selling     Total     BeverageSpirit    Sold      Cost       Cost      Price       Sales     Cost %Well       50       $0.90      $ 45       $5          $250      18.0%Call       50        1.20        60        6           300      20.0Total     100                   105                    550      19.1_____________________________________________________________________________FIGURE 4.10 Spirit Cost Percentage_____________________________________________________________________________Reduced Portion Cost_____________________________________________________________________________           Number     Portion     Total     Selling     Total     BeverageSpirit     Sold       Cost        Cost      Price       Sales     Cost %Well        50         $0.60       $30        $5         $250      12.0%Call        50          1.20        60         6          300      20.0Total      100                      90                    550      16.4_____________________________________________________________________________In Figure 4.10, the portion cost of our well brand is reduced from 90 cents to60 cents, due to a reduction in the quality of product selected for this purpose. Thisresults in a decrease in beverage cost percentage to 16.4 percent.While the decision to lower the quality of well liquor used did, in this case, reduceoverall liquor cost percentage, the question of the long-term effect on guestsatisfaction and loyalty is not addressed. In fact, changes in guest behavior mayseem negligible in the short run. Successful foodservice operators, however, rememberthat you cannot fool all of the people all of the time. Quality products atfair prices build guest loyalty. Because that is true, you are wise to select well productsthat are in keeping with your clientele, price structure, and desired image. Anythingless cheats both you and your guests.BEVERAGE PURCHASE ORDERSThe form in Figure 3.13 can be used to document the beverage purchase order inthe same way it is used for food purchases. Special laws, depending on the stateand county, may influence how beverage purchases are to be made or paid for. Oneof the first responsibilities you have is to become familiar with all applicable stateand local laws regarding beverage purchases. As with food, the goal in purchasingis to have an adequate, but not excessive amount of product on hand at all times.Unlike most food products, however, beverage distributors will sometimes sell productsin less than one-case lots. This is called a broken case and occurs when severaldifferent brands or products are used to completely fill the case. Take, for example,the operator who orders a case of scotch, consisting of 12 bottles. The case,however, might contain four bottles of Scotch Brand A, four bottles of Brand B,and four bottles of Brand C.As a general rule, wine, beer, and spirits are purchased by the case. Beer, ofcourse, may also be bought by full- or reduced-size kegs. As with food products,smaller container size usually results in higher cost per ounce. It is important to rememberthat both product quality and container size are critical when determiningwhat to buy.

RECEIVING BEVERAGE PRODUCTSThe skill required to receive beverage products is somewhat less than what is neededfor receiving food. The reason is that beverage products do not vary in quality inthe same manner food products do. As with food, the receiving clerk needs a properlocation, tools, and equipment. In addition, proper delivery schedules must be maintained.The training required in beverage receiving, however, is reduced due to theconsistent nature of the product received. A case of freshly produced Coors beer,for example, will be consistent in quality regardless of the vendor. And if the productis fresh dated, that is, a date is stamped on the product to indicate its freshness,very little inspection is required to ensure that the product is exactly what wasordered. In fact, when matching the purchase order to the vendor invoice, onlyquantity ordered and price must be verified, unlike food deliveries that require theverification of weight, quantity, quality, and price.It is possible, however, that the goods delivered will not match those ordered.Or, in fact, the goods delivered are defective in some manner. Thus, appropriatereceiving procedures must be in place.When receiving beverage products, the following items are of concern andshould be verified:Key Beverage Receiving Checkpoints1. Correct brand2. Correct bottle size3. No broken bottles or bottle seals4. Freshness dates (beer)5. Correct vintage, or year produced (wine)6. Refrigerated state (if appropriate)7. Correct unit price8. Correct price extension9. Correct invoice totalIf errors are detected, a credit memo (see Figure 3.17) should be filled out andsigned by both the delivery person and the receiving clerk.STORING BEVERAGE PRODUCTSWhile the shelf life of most beverage products is relatively long, alcoholic beverages,especially wine, must be treated in a very careful manner. Beverage storagerooms should be easily secured since beverages are often expensive items and area favorite target for both employee and guest theft. These storage areas should, ofcourse, be kept clean and free of insect or rodent infestations, and they should belarge enough to allow for easy rotation of stock. Many beverage managers use atwo-key system to control access to beverage storage areas. In this system, one key(or, in the case of electronic locks, one pre-programmed, coded key) is in the possessionof the individual responsible for the beverage area. The other key, usedwhen the beverage manager is not readily available, is kept in a sealed envelope inthe safe or other secured area of the operation. Should this key be needed, managementwill be aware of its use since the envelope will be opened. Of course, it isup to management to ascertain the validity of the use of this key should the envelopebe opened. Recodable electronic locks (which are highly recommended) includefeatures that allow management to issue multiple keys and to identify preciselythe time an issued key was used to access the lock, as well as to whom thatkey was issued.

1. Temperature2. Light3. Cork conditionTEMPERATUREA great deal of debate has centered around the proper temperature at which tostore wine. All can agree that red wine should be served at cellar temperature. Thereis, however, less agreement about what exactly is meant by “cellar temperature.”When serving white wine by the glass, we may find that the proper storage temperature,at least for the containers currently being used, is refrigerator temperature.Obviously, this would not do for a case of fine red wine. But, generally speaking,most experts would agree that wines should be stored at a temperature of 50to 65°F (10 to 18°C). If you find, however, that wines must be stored at highertemperatures than this, the wine storage area should be as cool as can reasonablybe achieved, and it is important to remember that, while wine may improve withage, it improves only if it is properly stored. Heat is an enemy of effective winestorage.LIGHTJust as wine must be protected from excess heat, it must also be protected fromdirect sunlight. In olden times, this was achieved by storing wines in undergroundcellars or caves. In your own foodservice establishment, this means using a storagearea where sunlight cannot penetrate and where the wine will not be subjectto excessive fluorescent or incandescent lighting. With regard to light, the rule ofthumb for storing wine is that it should be exposed only to the minimum amountnecessary.CORK CONDITIONIt is the wine’s cork that protects it from oxygen, its greatest enemy, and from theeffects of oxidation. Oxidation occurs when oxygen comes in contact with bottledwine; you can detect a wine that has been overly oxidized because it smells somewhatlike vinegar. Oxidation deteriorates the quality of bottled wines; thus, keepingoxygen out of the wine is a prime consideration of the vintner and should beimportant to you as well.Cork has proven, over the years, to be the bottle sealer of choice for most wineproducers. Quality wines demand quality corks, and the best wines are fitted withcork sealers that should last many years if they are not allowed to dry out. This isthe reason wine should be stored in such a manner that the cork remains in contactwith the wine and, thus, stays moist. In an effort to accomplish this, most foodservicemanagers store wines on their sides, usually on specially built wine racks.Corks should be inspected at the time the wine is received and periodically thereafterto ensure that there are no leaks resulting in oxidation and, thus, damagedproducts. If a leak is discovered, the wine should be refused; if the leak occurs duringstorage, the wine should be examined for quality and then either consumed ordiscarded, as appropriate. In general, you can effectively manage the storage ofwines if you think about how you should treat the cork protecting the wine. Thewine the cork is protecting is likely to be properly stored if the cork is always kept

1. Cool2. In the dark3. MoistProper beverage storage techniques are important if you hope to have the desiredamount of product ready and available for service during the beverage productionprocess. In most instances, wine and beer will be consumed directly fromtheir original containers. With spirits, on the other hand, the bartender will probablyfind that the guest prefers the spirit mixed with some other product to makethe beverage fit their personal preference.BAR TRANSFERSWhile the great majority of product cost related to bar operations is alcoholicbeverages, you must also manage the cost of those items associated with thepreparation and service of beverage products. In the case of wine and beer, thereare, in general, no additions to the beverage prior to serving and, thus, no additionalproduct costs. As far as spirits are concerned, however, a great number ofnonalcoholic food products may be served as a part of the drink order. To illustratethis, assume that a guest in your bar orders Irish coffee. This popular drinkhas, as its two primary ingredients, Irish whiskey and brewed coffee. The cost ofthe spirit itself should clearly be charged to the cost of operating the bar. A questionarises, however, on how to account for the coffee. In this case, coffee is as centralto the preparation of the drink as the whiskey itself. If your operation is astand-alone bar, accounting for the cost of purchasing the coffee is not complex. Ifthe bar is, however, operated as part of a larger foodservice operation, the groundcoffee used to make the brewed coffee in the bar may have to come from the restaurant’sportion of the foods storeroom. When that is the case, the transfer of theproduct, and its associated costs, from the kitchen to the bar must be controlledand recorded to accurately track revenue and expense. If this is not done, the foodcost percentage in the restaurant will be artificially inflated (overstated) while thetotal cost of beverage sold percentage in the bar will be understated. This wouldbe the inevitable result if revenues from alcoholic drinks utilizing coffee were reportedas bar sales, but the expense of generating those sales (the coffee) was considereda restaurant expense.This same issue exists with products like cherries, limes, lemons, cream, coffee,sugar, and a host of other items, which may be ordered as regular foodproducts for the kitchen but are needed by and transferred to the bar area. Similarly,many foodservice operators use items from the bar when preparing menuitems for service in the dining room. Using a bottle of beer from the bar forsteaming bratwurst in the kitchen would be an example of a transfer of productsfrom the bar to the kitchen. Wines may frequently be used by the kitchento produce some sauces. In fact, a close working relationship between kitchenand bar management is helpful as both areas attempt to assist each other to thebest of their ability in providing needed ingredients and in helping to utilize anycarryover products.The control procedure for kitchen and bar transfers is quite simple. To beeffective, it requires nothing but consistency. Assume that you manage the SurfsideBar, on the beach in Florida. Figure 4.11 is an example of what your transferrecord for the first week of January might be. It is the type of form that youcan use to monitor product flow either to or from the bar. Should you prefer it,a separate form can be used for each transfer area, but, for most operators, Figure4.11 would be sufficient. Note that the form requires the initials of both theperson receiving and the person issuing the product. In addition, space is availableto compute the sum total of all product values at the end of the accountingperiod. These figures would then be used to adjust, as needed, either cost offood sold data or cost of beverage sold data.

As an example, suppose that you want to calculate food cost and beverage cost,and you have all the available data, which will be discussed later in this article,except transfers. The following numbers are provided to you by the kitchen managerand the bar manager.                  Transfers from Bar     Transfers to Bar_________________________________________________________Food                   $3,525.00              $1,440.00Beer                   $  187.00Wine                    2,700.00Spirits                   638.00              $1,440.00Total Beverage         $3,525.00The food cost would be calculated by adding transfers from the bar to thekitchen (+$3,525) and subtracting transfers to the bar from the kitchen (-$1,440).Conversely, the beverage cost would be calculated by subtracting transfers from thebar to the kitchen (-$3,525) and adding transfers to the bar from the kitchen(+$1,440). Notice that the total amounts transferred are the same for both foodand beverage. The principle is that all product costs should be assigned to the areaof the operation that is reporting the sale of that product.FIGURE 4.11 Transfer RecordIMAGE(https://etravelweek.com/hmattachments/26_200910300552521VapY.gif)

COMPUTING COST OF BEVERAGESThe proper computation of beverage cost percentage is identical to that of foodcost percentage with one important difference. Typically, there is no equivalent foremployee meals since the consumption of alcoholic beverage products by employeeswho are working should be strictly prohibited. Thus, “employee drinks” wouldnever be considered as a reduction from overall beverage cost.Consider the situation you would face as manager of Rio Lobo’s, a popularTex-Mex-style restaurant that does a high volume of alcoholic beverage sales. Toprepare your drinks, your bartenders use limes, lemons, and fruit juices from thekitchen. You would, of course, like your beverage cost percentage to reflect all thecosts associated with the actual ingredients used in drink preparation. You keepexcellent daily records of the number of food products transferred from the kitchento the bar, as well as the dollar value of these transfers. In this operation, there areno transfers from the bar to the kitchen as there might be, for instance, in a Frenchrestaurant that uses wine extensively in its recipes. Figure 4.12 details how youFIGURE 4.12 Cost of Beverage Sold__________________________________________________________________________                    Accounting Period: 1/1 to 2/1                    Unit Name:        Rio Lobo’sBeginning Inventory                   $24,405.00PLUSPurchases                              21,986.40Goods Available for Sale                                $46,391.40LESSEnding Inventory                                         18,741.25LESS                                                     27,650.15Transfers from Bar                                        1,572.00                                                         26,078.15PLUSTransfers to Bar                                          2,140.00                                                       _______________Cost of Beverages Sold                                  $28,218.15__________________________________________________________________________would compute your actual cost of beverage sold for a month where the followingdata represent your operating results:                                      Operating Data—Rio Lobo’s_________________________________________________________________Beverage sales                        $100,000Beginning inventory                   $ 24,405Ending inventory                      $ 18,741.25Purchases                             $ 21,986.40Transfers to bar                      $ 2,140Transfers from bar                    $ 1,572Note, again, that beginning inventory for this accounting period is the endinginventory figure from the prior accounting period.SPECIAL FEATURES OF LIQUOR INVENTORYDetermining beginning and ending inventory levels for beverage products is generallymore difficult than determining these same levels for food. Food items canmost often be weighed, counted, or measured for inventory purposes. Of course,any of these methods may be used for liquor inventory, should you choose to doso. Unopened containers of beer, wine, and spirits can, of course, be counted.

Opened containers, however, must be valued also. It is the process of valuing theseopened containers that will present a challenge to you. Three inventory methodsare commonly in use to accomplish this goal. They are:1. Weight2. Count3. MeasureLIQUOR INVENTORY BY WEIGHTThe weight method uses a scale to weigh open bottles of liquor. This system is effectiveif you remember to subtract the weight of the empty bottle itself from the totalproduct weight and if you remember that each liquor, due to its unique specific gravity(density), must be weighed separately. Because some liquors are heavier than others,3 fluid ounces of each, for example, would not weigh the same amount. Figure4.13 lists the specific gravity of some common products used to make the colorfulpousse-café, a layered drink that relies on the fact that differing spirit products havedifferent weights (the more dense liquids will fall to the bottom of the glass).Just as your bartenders will use their knowledge of specific gravity to createdrinks, you can use that same knowledge to weigh the amount of product in anopened bottle and, thus, establish its inventory value.FIGURE 4.13 Specific Gravity of Selected Liqueurs______________________________________________________________________Liqueur or Cordial                 Color              Specific GravityKirsch                             Clear                    0.940Sloe Gin                            Red                     1.040Rock and Rye                       Amber                    1.065Triple Sec                         Clear                    1.075Peach Brandy                       Peach                    1.085Blue Caraçao                        Blue                    1.120Crème de Cacao                     Brown                    1.150Crème de Cassis                    Purple                   1.170Crème de Banana                    Yellow                   1.180______________________________________________________________________LIQUOR INVENTORY BY COUNTCounting full bottles is easy; counting the value of partial bottles is more difficult.You can do it rather quickly and fairly accurately, however, if you use the tenthssystem. This system requires that the inventory taker assign a value of 10/10 to afull bottle, 5/10 to a half bottle, and so on. Then, when inventory is taken, the partialbottle is examined and the appropriate “tenth” is assigned, based on the amountleft in the bottle. While this system results in an approximation of the actual amountin a bottle, many managers feel the tenths system is accurate enough for their purposes.It does have the advantage of being a rather quick method of determininginventory levels of open bottles.LIQUOR INVENTORY BY MEASURESome beverage managers determine product levels of open bottles by using a rulerto determine the amount the bottle contains. Dollar values are then assigned to eachinch or portion of an inch for inventory evaluation purposes. This method has ahigh degree of accuracy and is favored by many.

In general, it is important to take liquor inventories at a time when the operationis closed so that product quantities on hand do not change when the inventoryis being taken. It is also important that product contained in the lines of mechanicaldrink-dispensing systems be counted if the quantity of product in theselines is deemed to be significant.Returning to the Rio Lobo example, regardless of the method used to determinethe actual value of ending inventory, with sales of $100,000 and a cost ofbeverage sold of $28,218.15 you would apply the beverage cost percentage formulaas follows:    Cost of Beverage Sold / Beverage Sales = Beverage Cost %                          or                     $28,218.15 / $100,000 = 28.22%Again, it is important to note that transfers both to and from the bar must beaccounted for, if and when they occur. These adjustments will affect the overallproduct cost percentages in the kitchen and the bar. In addition, computing transfersto the bar will help your bar staff remember that the use of fruit juices, milk,cherries, lemons, limes, and the like do impact the total cost effectiveness of the bar.There are a large number of factors that can influence the actual beverage costpercentage you achieve. Many of these factors are discussed in next article. Note,however, that guests themselves can contribute to relatively major changes in foodor beverage cost percentages, both on the plus and on the minus side of the ledger.This is due to the concept that food and beverage operators call the sales mix, orproduct mix. Our preferred term is the former.SALES MIXSales mix is defined as the series of guest purchasing decisions that result in a specificfood or beverage cost percentage. Sales mix affects overall product cost percentageanytime guests have a choice among several menu selections, each one havingits own unique product cost percentage.To illustrate the effect of sales mix on beverage cost percentage, assume thatyou are the food and beverage director at the Raider Resort, a 400-room beachfronthotel property on the Gulf Coast of Texas. In addition to your regular restaurant,you serve beverages in three basic locations. They are as follows:1. Banquet beverages for receptions prior to meal events, typically served inyour grand ballroom, foyer, or outdoors; banquet beverages are also servedduring meal functions.2. The Starlight Bar, an upscale bar with soft piano music that typically appealsto guests who are 55 years and older.3. Harry O’s, a bar with indoor and poolside seating. Contemporary Top 40music in the evenings draws a younger crowd interested in dancing.You compute a separate beverage cost percentage for each of these beverage outlets.Figure 4.14 details the separate operating results for each outlet and an overallpercentage for the three units using the standard beverage cost percentage formula.You know that each beverage location uses the same portion size for all standarddrinks. Well and call liquors, as well as wine-by-the-glass brands, are constantin all three locations. Since, in this resort setting, you dislike the difficulty associatedwith serving draft beer, beer is sold in cans or bottles only. In addition, bartendersare typically rotated on a regular basis through every serving location.Should you be concerned that your beverage cost percentage varies so greatly byservice location? The answer, in this case, is that you have no cause for concern.In this situation, it is sales mix, and not poor control that governs your overall beveragecost percentage in each individual location. A close examination of the threeoutlets in Figure 4.15 will reveal how this can happen.

FIGURE 4.14 Raider Resort_____________________________________________________________________________Monthly Beverage Percentage Report_____________________________________________________________________________Location      Cost of Beverages         Beverage Sales       Beverage Cost %Banquets          $20,500                  $ 80,000                25.6%Starlight Bar      10,350                    45,500                22.7Harry O’s         16,350                    67,000                24.4Total              47,200                   192,500                24.5_____________________________________________________________________________Although product cost percentages are constant in each location for beer, wine,and spirits, the overall beverage cost percentage is not. The reason that each unitvaries in total beverage cost percentage is due to sales mix, or the guests’ selectionof product. In other words, guests, and not management alone, have helped to determineyour final beverage cost percent. While you can certainly help shape guestselection by such techniques as cost controls, effective pricing, menu design, andmarketing, to some degree it is the guest who will determine overall cost percentagethrough sales mix. This is true in both the beverage and the food areas. In thecase of the Raider Resort, it is easy to analyze the sales mix by examining Figure4.16, a detailing of the beverage products guests selected in each beverage outlet.Each sales percent in Figure 4.16 was computed using the formula:  Item Dollar Sales / Total Beverage Sales = Item % of Total Beverage SalesTherefore, in the case of beer sales in the banquet area using the data fromFigure 4.15:   Banquet Beer Sales / Total Banquet Beverage Sales = % Banquet Beer Sales                                        or                                  $10,000 / $80,000 = 12.5%FIGURE 4.15 Raider Beverage Outlets___________________________________________________________________________                   Monthly Beverage Percentage Recap#1 Outlet Name: Banquets                                    Month: January___________________________________________________________________________Product        Cost of Beverages        Beverage Sales      Beverage Cost %Beer             $ 2,500                  $10,000               25.0%Wine              12,000                   40,000               30.0Spirits            6,000                   30,000               20.0Total             20,500                   80,000               25.6___________________________________________________________________________#2 Outlet Name: Starlight BarProduct        Cost of Beverages        Beverage Sales      Beverage Cost %___________________________________________________________________________Beer             $ 3,750                  $15,000               25.0%Wine               1,500                    5,000               30.0Spirits            5,100                   25,500               20.0Total             10,350                   45,500               22.7___________________________________________________________________________#3 Outlet Name: Harry O’sProduct        Cost of Beverages        Beverage Sales      Beverage Cost %___________________________________________________________________________Beer             $11,250                  $45,000               25.0%Wine               2,100                    7,000               30.0Spirits            3,000                   15,000               20.0Total             16,350                   67,000               24.4___________________________________________________________________________

LIQUOR STORAGESpirits should be stored in a relatively dry storage area between 70 and 80°F (21to 27°C). Since these products do not generally require refrigeration, they may bestored along with food products, if necessary. An organized, well-maintained areafor spirits will also ensure that purchasing decisions will be simplified since no productis likely to be overlooked or lost. In addition, care should be taken that accessto liquor storage areas is strictly limited.BEER STORAGEBeer in kegs should be stored at refrigeration temperatures of 36 to 38°F (2 to3°C) because keg beer is unpasteurized and, thus, must be handled carefully toavoid excessive bacteria. When receiving and storing canned and bottled beer, itis also important to examine freshness dates. If these dates are not easily discernible,you should demand that the vendor explain to you the coding systemthat is being used. Pasteurized beer in either cans or bottles should be stored ina cool, dark room at 50 to 70°F (10 to 21°C) but does not, of course, requirerefrigeration.Storage areas should be kept clean and dust free. Canned beer, especially, shouldbe covered when stored to eliminate the chance of dust or dirt settling on the rimsof the cans. Nothing is quite as disturbing to a beer drinker than to find the top ofa cold beer can covered with dust, dirt, or other foreign material that cannot be removed.Because that is true, it is a good idea for the individual issuing canned beerto the bar to thoroughly rinse beer can tops prior to delivering these products foruse in the bar.Product rotation is critical if beer is to be served at its maximum freshness, and itis important that you and your team devise a system to ensure that this happens. Thebest method is to date each case or six-pack as it comes in. In this manner, you can,at a glance, determine whether proper FIFO product rotation hasoccurred.WINE STORAGEWine storage is the most complex and time-consuming activity required of beveragestoreroom personnel. Depending on the type and volume of the restaurant, extremelylarge quantities of wine may be stored.In general, the finer wines in the United States are sold in bottles of 750 ml.Foreign wines are generally sold in bottles of approximately this size, but the contentsmay vary by a few milliliters more or less. Sometimes, larger bottle sizes maybe sold, especially of sparkling wine, such as champagne. A tremendously underutilizedbottle size that may also be purchased and stored is the half-bottle or split,which is about half the size of the 750-ml bottle. If you find that large numbers ofcouples or two-person groups are coming to your restaurant, it is simply unrealisticto assume that they will have before-dinner drinks, a full 750-ml bottle of winewith dinner, and then finish the meal with coffee and after-dinner drinks. In today’sage of caution about drinking and driving, the trend is away from this kindof consumption, and if wine sales are to be maintained at their current levels, operatorswould do well to provide the option of the half-bottle to their guests.Regardless of bottle size stored, the techniques for proper wine storage mustbe followed in all circumstances if the quality of the product is to be maintainedand product losses are to be kept at a minimum. Despite the mystery associatedwith wine storage, the effective manager will find that proper wine storage can beachieved if the following factors are monitored:

FIGURE 4.16 Raider Resort___________________________________________________________________________Beverage Sales Percentage Recap___________________________________________________________________________Unit                Beer        Wine       Spirits            Total SalesBanquets            12.5%       50.0%       37.5%                100%Starlight Bar       33.0%       11.0%       56.0%                100%Harry O’s          67.0%       10.5%       22.5%                100%___________________________________________________________________________As indicated, each beverage outlet operates with a unique sales mix. Figure 4.16shows that, in the banquet area, the mix is heavy in wines and spirits, the choiceof many guests when they are at a reception or dining out. The Starlight Bar clienteleis older, and their preferred drink tends to be spirits. Harry O’s, on the otherhand, caters to a younger crowd that prefers beer. It is important to remember that,despite controls that are in place, costs that are in line, and effective managementpolicies, variations in beverage cost percentages can still occur due to sales mix,rather than other confounding factors. Experienced managers recognize this factand as a result, they monitor sales mix carefully.Beverages are, and will remain, an important part of the hospitality industry.Marketed and consumed properly, they enhance many an occasion. In the handsof the thoughtful and conscientious manager, they are a powerful profit center.Now that we know who is coming and we have enough food (last article) and beverages (next article) available to be served, we turn to one of the mostchallenging aspects of foodservice management, namely managing the food and beverageproduction process.Technology ToolsIn this article you learned about cost control concepts related to the service of alcoholic beverages.For those operations that sell a significant amount of alcoholic beverage products, there area variety of programs designed to discourage theft and carefully monitor product sales and expenses.In fact, the software and hardware available to help you in the beverage service area isgenerally more sophisticated than that found in most food-related areas. Programs available includethose that can help you:1. Monitor product sales.2. Monitor product (inventory) usage.3. Calculate actual and targeted pour percentages.4. Adjust product costs for happy hours and specials, as well as product transfers toand from the kitchen.5. Maintain adequate levels of product inventory.6. Establish par stock quantities and values.7. Generate purchase orders.8. Schedule employees based on forecasted sales levels.9. Create and print customized wine lists and specials menus.10. Maintain sales histories.11. Maintain drink recipe files.12. Project the impact of sales mix on beverage cost percentages

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