Heard over and over again, one phrase became the mantra of the 1999 Cheers Beverage Conference: People are drinking less, but drinking better.
Evidence of the success of super- and ultra-premium beverages was everywhere: in the kick-off cocktail party Tuesday night, where more than 200 restaurant executives, F&B professionals, beverage managers, distributors and suppliers sampled the best spirits, wines and beers available in the US; in the on-premise sales figures presented from Adams Business Media’s collection of annual beverage consumption reports; in the keynote address by Philip Hickey, president and ceo of Rare Hospitality, Inc., and in the testimony of operators on panels in and the halls of the conference.
Anecdotal reports from the field alone don’t prove a point, but Cheers editorial director Bob Keane presented a review of industry trends that bolstered the “Less is better” concept, using data from Adams Business Media’s Liquor Handbook, Wine Handbook, Beer Handbook and Handbook Advance.
Keane’s key points: On-premise beverage alcohol sales in 1998 reached $54.5 billion. Spirits accounted for $29.6 billion, a 3.37% volume increase; beer for $28.5 billion, a 2.6% volume increase; and wine, $3 billion, a 7% volume increase.
The 1998 figures represent an on-premise dollar volume increase of 42% since 1985: In dollars, beer sales are up 69%; wine up 40, spirits up 20%. Since then, however, though dollar volume is up, case volume is down, another indication that consumers are drinking less but spending more.
In selected spirits categories from 1980 to 1998, scotch, gin and, surprisingly, vodka volume has decreased, while rum and tequila volume has increased.
Winners for 1998 include Cognac, which did especially well with an 11.3% increase. Imported vodka jumped 7% increase, and tequila climbed 6.9%. Rum’s increase of 6.6% was attributed to new brands like Bacardi Limon. Though Irish Whiskey still accounts for less than 1% of total volume of spirits, it jumped 6.5%. Single malt Scotches, while showing a 5.7% increase, have slowed. Domestic vodka showed a 5.1% increase and imported gin grew 3.9%
The ever-evolving beer market has seen premium beers plummet from 40% to 25.9% share of market since 1988. Light beers have rocketed from 25.6% to 40.2% share. Superpremium/micro/specialty beers, still a small market force, almost doubled from 2.8% to 4.4%. Imports have grown from 5% to 8.5%, and ice beers, non-existent in 1988, dramatically rose at first but have now settled at 3.9% of the market. Meanwhile, popular brands and malt liquor continue to lose ground.
In the wine arena, case volume has declined while dollar volume has increased, a trend expected to continue. And table wine consumption is trending steadily upward, also expected to continue through year 2003.
Keane’s predictions for 1999: Another year of modest growth for spirits with strongest gains for vodka; repeats of solid growth for rum and tequila and slow but steady growth for Irish whiskey. There’ll be a slight increase for beer, with double-digit growth for imports, and a repeat of 1998 for wine, with growth for table and sparkling wines.
From Longneck To Lafite-Rothschild
“The low hanging fruit is gone, so grab your ladder,” Philip J. Hickey, Jr., president & CEO of RARE Hospitality International, Inc., told attendees packing the Westin Michigan Avenue ballroom in his keynote address.
The title of Hickey’s presentation, “From longneck beers to Lafite-Rothschild,” referred not only to the range of beverages available in Rare’s three main concepts, but also the breadth of product awareness today’s beverage managers must maintain to compete.
While restaurant sales are expected to grow by 4.6% in 1999 and total demand is increasing due to a rising population, Hickey said the bad news is that per capita spending is not growing as fast
With such demographic trends as an increasing percentage of married households without children, and therefore more inclined to spend more when dining out, and with an expected increase in Generation X household incomes as they reach their prime income years, good times should continue, he said.
“The buzz in the industry is that it was a good year because the numbers didn’t go down. What does this mean?,” he asked.
Those demographic trends are counterbalanced by the fierce competition in the restaurant industry, he said. Growth in casual dining units has remained flat since 1996, he said, and every time a new restaurant opens, another closes. Even brewpubs are seeing slower growth; For example, in 1998 140 new brew pubs opened while 78 closed.
Hickey said he believes older baby boomers, aged 45 to 54, are key for operators since their consumption of meals away from home is growing faster than for boomers aged 35 to 44, still in the late stage of having children. To capture boomers, offer them adventure and variety, as do restaurants like Bahama Breeze, which Hickey says offers an exciting experience with great food.
According to Hickey, some continuing problems will make it harder for operators to gather easy money from their customers:
Fights over blood alcohol and drunk driving laws are raging from coast to coast.
Younger baby boomers and Gen Xers, both with high disposable incomes, are very demanding customers, having been raised on restaurant food and service.
Revolving door work force and rapid turnover lowers sales, Hickey said. Veterans sell more than the basics, while rookies only survive. As a result, service-vulnerable beverage sales drop faster than food sales.
Restaurateurs must now develop better relationships with suppliers to maintain competitiveness.
Customer demand is increasing for higher end products, but business pressures call for higher gross margins.
Restaurants, like their consumers, are into instant gratifications. As a result, long-term planning is neglected.
As a counterpoint, Hickey recommended some tactics for operators:
To counteract intrusive government regulation, operators must develop better relations among themselves and with politicians to set the agenda.
Build strong relationships with customers to drive loyalty and build consistency. “A great restaurant encourages great relationships,” he said.
Drive demand by answering needs. Met a guest’s needs rather than finessing them. For example, bartenders with the largest volume at Rare restaurants tend to be those who’ve worked the longest to build strong customer followings.
Grow sales by stabilizing staff
As in RARE’s case, conjoin the beverage and food programs. (while high-ticket Capital Grille is wine-focused, casual LongHorn Steakhouse is beer-oriented.)
Ignore those who say liquor is dying.
Hickey’s company, RARE Hospitality, operates 145 restaurants, building its reputation as the pioneer of the Texas roadhouse concept with LongHorn Steakhouse (112 units), expanding with the Rocky Mountain lodge family casual concept Bugaboo Creek Steak House and with the 11-unit upscale Capital Grille.
At Longhorn, beer and Margaritas drive beverage sales, with almost 50% of alcohol beverage sales beer and Margaritas representing 12%. Of that, 73% are branded Texas Margaritas. For both beverages, heavy merchandising and promotion have been very effective, Hickey said.
At Capital Grilles, however, customers are expected to drink wine. Waitstaff here receive two weeks training before hitting the floor, with emphasis on wine important since there are no sommeliers on the floor. The wine list is part of the menu, with an average bottle price between $45 and 65, and a check average of $65. Nearly 80% of wine sold is red.
But beverage sales are also strong among Martinis, Cognacs, Ports and bottled water, all of which are gently marketed and listed on the menu. Bottled water sales have jumped 300% over last year.
The results of RARE’s marketing efforts?
Capital Grille wine sales as a percentage of total sales increased three years running. LongHorn liquor sales grew 5% last year. Bottled water sales grew by 300% at Capital Grille. And total wine, beer and spirits sales crept up each of the last three years, from 33% to 34% to 35%.
Drinking In Casual Restaurants–
Who, What, When Where
More than half (60%) of casual restaurant customers don’t decide whether to order alcohol until after they enter an establishment. If they have a drink, they’re likely to leave more satisfied, but about half the time customers receive no suggestive selling at all, according to a much-anticipated report presented for the first time at the conference
Sponsored by Brown-Forman Beverages Worldwide and presented at the conference by Jerry Thomas, Decision Analyst Inc., the study explored casual dining restaurant programs to develop an in-depth understanding of the adult beverage alcohol consumer who frequents them, focusing on major national and regional chains, with some attention to general dining.
The study also concluded that the beverage alcohol customer eats out more often than the non-drinker, and consumes more appetizers and desserts than non-drinkers. They are heavy users of casual dining establishments and heavy spenders, accounting for as much as 70% of sales. Of the nine ingredients that make a restaurant attractive, four were alcohol-related. (The nine most important components: Fast service, atmosphere, good menu, value, up-scale, good bar, good wine, good mixed drinks, good beer.)
If the report uncovered untapped resources in beverage alcohol consumers and their dining and drinking habits, operators were roundly criticized for inadequate selling techniques and product selection.
Thomas said wine sales at casual dining restaurants suffered from both problems, and said casual restaurants performed the worst here. (This area offered the most hope for suggestive selling, as nearly two-thirds of those who order wine don’t specify brands.) He also cited poor performance in after-dinner sales of spirits, even though many opportunities exist. (According to his study, 74% of beverage alcohol consumers drink liquor before a meal, 37% during and 31% after.)
Thomas recommended that operators should develop a clear alcohol strategy to communicate their image to customers through quality and selection of beverages. Happy, friendly and upbeat waitstaffs are the most important stimulus to alcohol sales, he said. Upbeat waiters are congruent with a customer’s need for fun, he said.
Yet, he found, most servers receive very little, beverage training. Attentive wait staff will increase beverage alcohol ales with prompt orders, actively working for refills, suggesting wine with dinner and after dinner drinks.
He advised operators to use attractive drink menus, table POS, proprietary glassware and feature drink specials as ,methods to increase volume and income from alcohol.
Among the more interesting findings from the study: Women order liquor in higher proportion than men: 30% to 20%. But brand requests tend to be lower than might be expected: 44% of men seek brands, only 25% of women.
Wine is balanced between men and women: 10% overall ordered wine; 9% of men, 10% of women, and 83% order wine by the glass
The Brown-Forman study started with focus groups of causal dining managers, bartenders and waitstaff and then selected a sample from the American Consumer Opinion internet site online panel. Of the 6,884 people interviewed, 81% visited a casual dining restaurant in the past 30 days and 61% had visited a casual dining restaurant and consumed alcohol. They followed up with people in the 21-64 age group, men and women, who consumed beverage alcohol and who went to casual dining restaurants in the past 30 days. Of them, 37% of alcohol consumers in the study were single: 63% married. Seventy percent of alcohol consumers were employed full time; 59% non-drinkers employed full time. Almost half were under 34 and the average income was $57,000 a year
One final portion of the survey seemed to indicate that stronger brand promotion could benefit on-premise operators. Respondents were divided into two groups. The first group heard four drinks described without any brand identification and priced at $3.25. The second group heard the same descriptions, but this time, national brands were mentioned and the drinks were priced at $4.75.
The results: In the no brands/low price category, 67% of respondents said they’d order one of the drinks. In the branded/higher price category, 75% said they would order, a jump of more than 10%.
Beer: Your Bar’s Bread and Butter
Can beer still make or break a bar? Almost 80% of respondents in an NTN Poll of 7,311 bar-goers said they go to a bar or restaurant more than once a month, and of them, 66% said they order beer. And the speakers convened for the first of three panels held during the conference reaffirmed that beer still, at least in their operations, drives the business.
In general, panelists agreed that beer-awareness among staffers was important to boosting beer sales, and that beer brands, styles and the number carried depends primarily on location and local competition.
Moderated by consultant Tim Johnson, the panel included David Commer, Carlson Restaurants Worldwide, Dallas; Tracy Finklang, Rock Bottom Restaurants, Louisville, CO; Doug Jackson, RARE Hospitality, Atlanta; Bill Kunz, Growler’s Pub, St. Louis; Stan Novack, Host Marriott Services, Bethesda, MD; and consultant Glenn Schmitt, MarkeTeam, Laguna Hills, CA.
At Rock Bottom’s two main concepts, on-site training is important, said Finklang, and at both, training and tastings go hand-in-hand. “For example, our servers can try beers with food tastings every day. When you have so many beers, you have to know how to sell them and what they are. Our culture IS beer. What we end up with is a serious education in beer that helps with selling. We emphasize that beer is fun, so training is fun. We use flash cards, play games, let them have a good time.”
“There are two aspects in training: quality and selling,” said Doug Jackson. “It’s all in how to offer the beer to guests. Is the label on the bottle? Is the glass cold? We make sure the serving quality is good first. Then comes salesmanship.”
At Host-Marriott’s many concepts, staffers are trained in all forms of service, said Novack, with the company’s own CD-ROM materials. “The message remains consistent. It’s better than a trainer.”
Commer pointed out that keeping managers trained is equally important. “Management is the key to success. We devote a lot of time to training managers and the beverage part has stayed firm.”
Kunz of Growler’s said his staff is already over-trained. “At our place, the basic staff are corporate burn-outs. They are coming from a situation where they are force-fed everything. At our place, we have a common goal, but few rules. People who work for us already know about beer. Many of them are already members of our beer club. They go to a beer class and the managers go to work in a brewery for a week. With 120 beers, you can’t know it all, but they learn along the way.”
At TGI Friday’s, where a core list of about 20 beers is used, the number of beers to carry depends on the concept. “Even at TGI Fridays, it depends on the region and the market,” said Commer.”You need to experiment and carry different beers. We agonize over the decision, but nothing is firm these days. Our restaurants are encouraged to carry at least 40 beers. Some carry 120. Some have 10 draft lines, and some have over 30 draft lines.
For operations like Finklang’s, beer is the entire concept, so decisions follow the concept’s requirements. “We have 50 beers on our core list, and units have 1,000 beers to choose from.” National and regional brands do well, but lists are tailored to each locality.
Jackson said Rare sticks with well-known brands, 75% or more domestic. “The beer companies who have national campaigns do influence the beer buying habits of consumers,” he said.
Host-Marriott units typically we have a nationally-known light and premium beer and two regionals, with each property selecting the regionals. Under Novack, the company is known for pioneering the larger beer option. “Why is it successful? The larger 20 oz. Beer, served in a tall glass, creates a desire for the product; 75% of beer sales goes to a larger beer in our restaurants. We tried a 22 and a 24 oz., but a 20 oz. works best.”
Schmitt said beer-oriented operations have “outgrown the 12-oz. Some call it the baby beer. We like to use it for upselling. The 20-23 oz. glass looks great and is good for labor. There are fewer beers to deliver and it stimulates food orders.”
But the downside, said Jackson is quality, as slow drinkers end up with warm beer. “I would rather sell 2 12-oz. beers than 1 larger beer for $1 more because of quality.”
And for beer marketers, Commer and Finklang had some advice. “POS should target the on-premise customers,” said Commer. “And they shouldn’t expect off-premise ads to carry. These two customers buy differently.”
And Finklang suggested that brewers should market to servers. “That’s what works the best for us. If servers are committed to a brand, they get behind the product and sell it.”
Eighty Percent Dry
Perhaps the liveliest of the presentations came from the wine panelists, who tussled over how best to reach the 80% of the US population that doesn’t drink wine.
“Is beverage marketing at a crossroads,” moderator Doug Frost asked the panelists, noting that wine prices are climbing but the number of wine buyers is flat or decreasing. “If we want to increase wine sales, must we upsell? Do we need better products? Do we need fewer products?”
Frost, one of a handful of wine professionals who holds both a Master of Wine and a Master Sommelier designation, was joined by Michael Mindel, Il Fornaio, Corte Madera, CA; Bill Edwards, The Olive Garden, Orlando; George Miliotes, California Grill, Lake Buena Vista, FL; Michelle Pae, Maggiano’s Little Italy, Chicago and Walter Staib, City Tavern, Philadelphia
“It’s our responsibility to get people to drink wine,” said George Miliotes, whose restaurant won the 1999 Cheers Independent Restaurant Wine Award for Beverage Excellence. “We need to let them know that food will taste better and they will have a better experience if they drink wine with the meal.”
Edwards of the Olive Garden faces a different clientele. “Our guests are not wine savvy. Our whole premise is to have our guests feel comfortable with wine. We approach each table and ask them if they want a glass of wine and the waiter comes with a bottle. We did research to ask why didn’t they drink wine and found out it was because they weren’t asked if they wanted any.”
But restaurant wine sellers face another problem: recognition, said Mindel of Il Fornaio, another Cheers Award for Beverage Excellence winner and a chain where wine constitutes 75% of alcohol sales.
“Is it the language of wine that keeps people from trying wines? Or is it the patina? To me the big problem with wine is the notion of branding. We have powerful brands with beers and spirits, but no one knows branded wines any more. What happened to the big brands like Almaden and Sutter Home? They had it, but lost it. There are few recognizable brands.”
One of the ways Il Fornaio solves the lack of branded power is to brand their own: almost one-third of Il Fornaio wine sales come from their own Chiantis, he said.
Il Fornaio takes two approaches, he said: a one page wine list on the back of the menu paired with entrees; and a monthly changing food and wine focus that targets different regional dishes and wines of Italy, including dessert wines and grappas.
“How do you sell more wine? Be patient. As Boomers become older, wine palates get more sophisticated, and they will start buying,” said Mindel. But he warned against being too accommodating.
“It’s dangerous to be too customer-focused. We want to be leaders. The way to operate a wine business is to be out in front.”
Miliotes said strong wine sales demand more than a staff that knows wine. “I want servers to read guests. We find out if guests have dined at the restaurant before and look for the chink in the guest’s armor. One hundred wines are available by the glass, and we let guests taste them.If they want white zinfandel (I call it Chateau Cash Flow), let them have it. But if we have a long-term guest, we can show them that another wine might enhance the food. If we can educate the guest, it will come back to us.”
Quality of by-the-glass wines is monitored by servers. If a wine is on the edge, it’s sent to the kitchen. And their list changes constantly. “Our calling card is that we reprint the menu every single day. Our list changes all the time. So, if we have two cases of a wine, we sell that until it’s gone. Servers taste all the time, but constant training is too mind boggling. We tell servers to sell what they like. We want them to know three wines they like in each category.
Edwards says Olive Garden staff gets around wine-wary guests via training: monthly wine sessions, occasional multi-day wine training sessions that include matching wine with food and other incentives. Every menu dish is paired with a wine to get servers thinking about how wine matches are made. “Guests want to know more about wine. It’s important that servers also pronounce the wine properly. If they don’t, they lose credibility. If it gets to be part of the servers’ lifestyle, they will serve more wine.”
“Our whole marketing approach is to show why wine goes well with this food We get servers to use language they are comfortable with. What do they drink at home? We teach servers to get guests into a dialog.”
At Maggiano’s, staffers taste wine at every shift as they taste the food. “We updated our wine list and got our servers excited about the program so they want to sell. Servers walk through the list with guests and get them to understand the restaurant concept and the wine we sell. Our guests are becoming more knowledgeable.”
Staib, in addition to his Cheers award-winning City Tavern, consults for Omni Hotels on their restaurants, where wine is a significant problem. “It’s in the central part of the planning process. I take as much time with the wine list as I do with the food. Many times it’s a forgotten thing, but it should be top priority. At Omni, we are in the process of revamping the wine lists, introducing wine by the glass programs, which I think are very important. But we are overcontrolling wine.”
Staib said servers need both carrots–a good bottle to the highest wine seller—as well as sticks. “Sell or you are out.”
“If you want to maintain market share, you have to bring wine to the people. What makes microbrews exciting is that it’s always changing. Do the same with wine. If you listen to the waitstaff, you will be ahead. They know what people ask for.”