The goal of any bar is to make money. Even if you run a pub for the sheer pleasure of providing a place where people can gather to share a decent glass of beer and pleasant conversation, you need to make enough money to stay in business. Making money is a matter of managing your resources.

Category management at retail has become increasingly sophisticated with each successive advance in technology. The use of bar code scanners, consumer data and software to crunch the information has made it easier to select and control inventory of all types of products.

The on-premise industry may not be on the same level of management as retailers, but operators don’t need scanners to tell them what sells and what doesn’t. And while not every operation has a state-of-the-art POS system, beer category management in bars and restaurants is far from a hit-or-miss proposition these days.

True category management is proactive, not reactive. It means constantly assessing the mix of products on hand. That means stocking the right number of the right brands, in the right packages and quantities at the right price. Being right all the time is no easy task, but beer category management is more about staying on your toes than getting it perfect. The more adaptable you are, the more likely you are to maximize your beer profits.

The first step towards a profitable beer program is picking the right beers to carry. With thousands of brands available, beer lists can vary tremendously. Ask most operators how they pick and choose from that vast assortment, and most will likely tell you they don’t think about it, they just do it from experience.

“I carry what’s going to sell,” said James Berg, vice president and general manager of Bistro Bella Vita, Grand Rapids, Mich., “based on my experience being in the business.” The two-unit operation is known for its Martinis, but has a respectable beer list with eight draft and 35 bottled beers.

But there’s more to picking what beers to stock than just gut instinct. The more facts you have at your disposal, the less emotional your decisions will be, and the more likely your beer list will be profitable. Evaluate your selection using the following criteria.

* Beer’s role in the mix. “The first step we take is an exercise to understand our total beverage strategy,” said John Beck, vice president marketing at Bennigan’s. “What is the role of beer, spirits, wine and non-alcoholic beverages? At Bennigan’s, beer and spirits are category drivers. Wine is more of a convenience for guests.”

Depending on the type of operation you run, beer can play a dominant or a supporting role. In a pub, beer is usually the beverage category driver, the operation’s reason for being, in fact. In fine dining restaurants, wines and spirits usually take center stage, with beer playing a much less significant role.

“You have to understand what role the beer category will play in the operation,” said Dennis Kamper, national on-premise category manager for Coors Brewing. “Knowing whether beer is a destination category or plays a routine role helps determine the breadth and depth of the category.”

At the Horse Brass Pub in Portland, Ore., for example, good beer is considered a social lubricant, according to owner Don Younger. “What we try to do here is build a community of good beer drinkers,” he said. With 49 taps, several of them devoted to rotating beers, the pub’s customers come to drink craft and specialty beers. Younger doesn’t carry brands like Heineken and Corona because they won’t sell, and though he does more than $1 million in annual volume, he sells less than a keg a week of Budweiser.

Beer also is important at Chammps Entertainment, Inc., Denver. Beer accounts for more than half of all beverage alcohol sales in Chammps units. Despite its importance, beer isn’t even listed on the beverage menu, according to Tim Johnson, director of purchasing and beverage.

“About 70 to 75 percent of all the beer sold at a Chammps is one of the top four beers — Bud, Bud Light, Miller Lite and Coors Light,” he said. Since beer plays a more routine role at Chammps, Johnson bases his brand selection on different criteria. He looks for beers that he can promote across all Chammps units.

* Image. In addition to the role beer plays in the marketing mix, it also helps reinforce an operation’s image or theme. Customers won’t believe a Mexican restaurant is very authentic if it doesn’t stock a variety of Mexican beers. That doesn’t mean it can’t carry Guinness or Budweiser, but image counts. An English style pub will carry an entirely different assortment of beers than a beach bar in Daytona.

* Marketplace trends. In large part, trends dictate what customers drink, which will influence what you carry. “I don’t pick the beers we carry,” Younger said, “my customers do.” That may be overly simplistic advice, but it’s a good place to start.

“We look at consumer data in terms of what kind of beers they are drinking,” said Angela Afflack, senior director beverage marketing and development at T.G.I. Friday’s, Dallas. “It gives us an idea of the type of beers we ought to stock. We also look at trends: what are our competitors doing? And we take into account that some consumers are more experimental on-premise than off- premise, so we consider beers they might not have tried.”

Sales data, monitored by companies such as A.C. Nielsen, is available from the major domestic brewers. Bennigan’s utilizes information from all three to help determine what brands to carry.

“We look at off-premise numbers for domestics, imports and micros on a national and regional level,” Beck said. “Brands that satisfy 80 percent of our guests are mandated in all units.” About 60 percent of the 40 to 50 beer brands in a typical Bennigan’s are mandated. Managers can choose the other 40 percent.

“Our core beer list of about 60 beers is determined in part by the ‘lame’ factor,” said Tracy Finklang, beverage director at Old Chicago Restaurants. “It would be lame if we didn’t have beers like Heineken and Miller Lite. We rarely have craft beers on our list because they’re not available everywhere, but it would be really lame if we didn’t carry one where it is available.”

* Consumer preferences. The type of customers who frequent your operation will have a major influence on your beer list. Conversely, you can attract the type of customers you want by adjusting your offerings accordingly.

“There’s data available that lets us take a look at consumer preferences,” Kamper said. “When we know who the target customer is, we can suggest what brands to carry by matching target demographics against a broad list of brands.”

Consumer trends can help guide your choices; they don’t have to dictate them. “I look for things where I don’t have a lot of representation in that category or try to get things that aren’t seen as much,” said Chris Black, owner of the Falling Rock Tap House, Denver. “For example, Fat Tire is the hot product from New Belgium. Everybody has it, so I try to feature their other products.”

* Feedback. Find out from the horse’s mouth what to carry. Sometimes, the best advice you can get is from your own customers and staff.

“Talk to customers,” said Johnson. “Talk to your bartenders. We don’t talk to them often enough as an industry.”

Often, operators will stock a particular brand because regular customers like it.

“We have one guy who comes in and drinks Samuel Smith’s Oatmeal Stout,” Berg said. “We keep it on hand just for him. But we also have a few other eclectic offerings that will draw people here because they can’t get it elsewhere.”

* Balance. Finally, give customers some variety to choose from. Try to find a balance of domestic, import and craft beers. Offer a range of styles, too, if it’s appropriate for the operation.

“We try to make sure there’s a good balance of blondes to reds to browns and stouts,” said Finklang. “There are about 120 beers in each unit, so managers have a lot of latitude.”

Balance and variety also are important at The Bistro, a small cafe and pub in Hayward, Calif. “We have 12 beers on tap all the time,” said bar manager Victor Kralj. “We always have a pilsner, pale ale, stout, a red or amber ale, a barley wine or strong ale, a seasonal beer and usually at least three IPAs. The palate of beer connoisseurs keeps changing, so consumers want to keep trying new beers.”

Once you’ve narrowed down the list of brands you want to stock, you need to decide what packages to carry. Here again, you should gather as much information as possible instead of taking a shot in the dark.

Draft beer can be one of the most profitable items in your operation. The biggest factors influencing your decision of what to put on tap are space, freshness and profitability. Draft beer makes sense for high volume brands. Since most operators have a limited amount of cooler space for kegs, however, the decision should come down to which brands offer the most profit.

Other packages ­ bottles and cans ­ often are dictated by customer preferences and physical layout of the operation. “We give some consideration to packaging if a unit has a patio, for example,” said T.G.I.F.’s Afflack. “What we’re really trying to sell, however, is a 22-ounce draft.”

“The top four brands we have to sell on draft,” agreed Johnson. “There are those customers who want long-necks, so we have to have those, too. You have limited space; I’d much prefer building a draft system than giving the space to bottled beer. Draft beer is the most profitable system in the restaurant next to soda, coffee and tea.”

Freshness is another key concern when it comes to draft beers. “Draft beer can tie up a retailer’s dollars in inventory,” Kamper said, “so turns can be a key to evaluating performance because of shelf life. You have to make sure you maintain quality. Category management doesn’t stop at brand selection and brand mix recommendations.”

Inventory control becomes a key component of category management once mix and packaging have been selected. Old Chicago uses an outside firm to count inventory weekly. The firm weighs kegs and checks inventory, giving the information to bar managers so they can place orders. Inventory “pars” are based on sales and inventory showing actual usage.

“That’s another lame thing — you can’t run out of Corona and Miller Lite,” Finklang said, “so you have to make sure you always have a couple of cases back-up.”

T.G.I. Friday’s sets inventory strategy and offers guidance at corporate headquarters, but lets unit managers determine par levels. Inventory is taken weekly at the unit level to see what’s moving. Headquarters reviews inventory quarterly to see if the list of mandatory brands should be changed.

Controlling inventory is critical for two reasons. First, product freshness and quality suffers when it doesn’t turn fast enough. Second, excess inventory means an operation’s cash is tied up in warehousing the product.

“Inventory management is a key goal for us,” Beck said. “We use what we call a velocity threshold or how fast beer sells through. Draft beer should be gone in 14 days or less. Bottles should be gone in 30 days.”

Inventory management is having an additional impact at Bennigan’s. The chain purchased more than 800 different brands last year. The top 20 brands accounted for 84 percent of beer sales. The top 125 beers accounted for 98.9 percent of sales. About 300 brands on the list sold less than a case each. This year the chain hopes to create a “sell from” list that unit managers will be authorized to choose from. Beck hopes to trim the number of beers offered in each restaurant to 35 or 40. The chain will make exceptions for “wild cards”–beers not on the list–only for regular customers.

You have to determine what constitutes a slow seller in your operation. At Chammps, if a unit doesn’t sell five kegs a week of a particular brand, it’s considered a slow mover. T.G.I. Fridays’ has a lower threshold of a keg a week, especially for imports and specialties. In general, however, you should put some sort of time limit on how long you’ll keep product in inventory.

“If a beer doesn’t move, we’ll suck it up and get rid of it,” said Black. “A lot of places fire sale the beer, but by the time they do, the quality’s gone. We’ll pull it off line; it’s better than putting out beer that’s not up to snuff.”

One advantage to using an outside firm for inventory control, according to Old Chicago’s Finklang, is that the company has no compunctions about pulling old product from inventory. The firm helps units identify inventory problems quickly such as trading out bad kegs.

Perhaps the best place to start to get a better handle on beer category management in your operation is your distributors. They can put you in touch with brewer reps with access to beer category management programs. In addition to brand mix recommendations, the major brewers can offer help with inventory control, analyzing true profit contributions of different products, pricing analysis and server training.

A little time spent managing your beer category means satisfied customers and more money in the bank.

Beer category management is really about offering your customers a mix of products they want in the most profitable way possible. At retail, brewers have developed software programs that can design a shelf set based on sales data from the account and local market. The programs create schematics of how different beer brands and packages should be positioned on the shelf.

On-premise accounts don’t merchandise beer in the same way, but drawing attention to your profitable products is just as important. Actively managing your beer category means promoting and merchandising the products that will give your operation the best return.

Because draft beer is so profitable to most operations, that’s what they tend to promote. T.G.I. Friday’s uses several merchandising strategies to push its 22-ounce drafts. Tap handles of more profitable drafts are located at the main bar where they’re more visible to patrons; less profitable tap handles are on the back bar. Draft beers are listed first on the beverage menu, followed by bottled imports and specialties, then bottled domestics. And the chain’s 22-ounce schooners are displayed on the bar. The chain promotes its most profitable bottled beers by displaying them in ice troughs built into the bar.

While Chammps doesn’t list beers on its beverage menu, it does promote beer regularly. As part of a late-night program to encourage guests to stay longer, Chammps uses “video tabletents.”

“Instead of showing ads on network programs and selling other companies’ products, why not advertise what we sell?” Tim Johnson, director of purchashing and beverage for Chammps said. “We pop in a tape with a great beauty shot of beer on special.”

In addition to its 69 taps, Falling Rock has 130 beers in bottles. New beers are listed on chalkboards, and the pub also has a beer list which is updated weekly. The staff promotes what’s on tap.

“We promote them all,” said Chris Black, Falling Rock Tap House, Denver. “We don’t usually have one product that sells 10 kegs a week. The staff is good at recommending products and encouraging people to try them. They’re also allowed to give customers samples, which makes selling easier.”

To promote the bottled beers, however, most of which are more eclectic beers not available on draft, Black purchased a display cooler to show people what the pub has. –MS