Business Spotlight: Bar Science

Last edited 10:17 p.m., Aug. 11, 2014

Restaurant and bar managers traditionally track their valuable bar inventories on a monthly basis. And they generally feel like they’ve got a good handle on the costs of goods sold.

BevIntel of Southwest Missouri exists to disrupt that notion.

Through a weekly audit of on-premise alcohol, BevIntel software analyzes an establishment’s ideal pour costs against actual costs, down to one-thirtieth of an ounce. With liquors that might cost $1-$1.30 an ounce, losses from overpouring or theft can quickly add up.

“We thought we had a good idea of what our liquor costs should be,” says Bill Borders, owner of two Li’l Rizzo’s Italian restaurants near Lake of the Ozarks.

This summer, he hired BevIntel for beverage inventory management, and after the first audit, he was surprised to discover a 22 percent loss behind one of his bars. The second audit brought the loss into a single-digit percentage.

“It takes us to a level of accuracy we’ve never had before,” Borders says, pointing to the analytics breakdown by drink type and brand. “Now, we’ve got it to a 5-6 percent loss. It’s saved us some money.”

Li’l Rizzo’s realized a $1,000 cost savings after the first few audits, he says.

Call it shrinkage, mismanagement, waste or theft, according to beverage industry estimates, the average restaurant and bar loses out on roughly 20 percent of profits due to beverage pours unaccounted in the sales system.

“It’s not a secret that bars and restaurants lose liquor to some degree,” says Mitchal Majors, a BevIntel co-owner and the local franchisee for parent company Bevinco.

Majors says most profits go down the drain from carelessness, free pours and overpouring.

“Instead of measuring it, you use this really subjective way of pouring, where losses can creep up,” he says. “In banks, in retail stores, it’s never acceptable to have such loose controls.”

Though it’s a difficult statistic to track without across-the-board monitoring, U.S. hospitality experts estimate bar shrinkage is in the billions of dollars and may be up to $10 billion, by some accounts.

Toronto-based Bevinco started in 1987 to fight against such losses with proprietary software providing empirical evidence of loss leaders down to the liquor brand and drink type.

With clientele including hospitality operators Marriott, Hyatt, Four Seasons and Ritz-Carlton, Bevinco competes in the beverage management systems space with AccuBar, EasyBar and BarMaxx. The Bevinco system, which has drawn recent notoriety through Spike TV show “Bar Rescue,” entered the Springfield market with franchisee Steve Nurnberg in 2006.

Nurnberg recently sold his franchise rights to a few Bevinco operators in the Arkansas market, and six months ago former Bevinco auditor Majors moved to Springfield to take the reins.

Working with about a dozen companies, Majors says clients include Old Chicago pizza restaurants in Springfield and Branson, Patton Alley Pub downtown and five Ernie Biggs piano bars. He’s on-site each week before staff members arrive to weigh inventory and crunch the numbers.

“You can see real-time variances,” Majors says, noting the software identifies the top five weekly loss leaders for beer, wine and liquor. “We’re taking everything down to the gram.”

Clients pay $220 per week on average, he says, and BevIntel’s 2013 revenue came in at $170,000, up some 40 percent from the year before. He says the company this year is on pace to grow another 40 percent to projected revenue of $240,000.

A key metric for bar managers is the Bevinco rating, calculated as a ratio of actual pour costs to ideal pour costs. The pour cost shows regular product purchases as a percentage of point-of-sale records.

As pours become more accurate, Majors says the goal is to score a Bevinco rating of 95-100 percent, which would mean pour costs are below 5 percent.

Borders says Li’l Rizzo’s rating now is humming along at 96 percent.

“Once the staff knows that we’re watching it, everybody is more careful in what they do,” he says of his casual dining establishments in Lake Ozark and Osage Beach. “I really like being able to get an ideal usage.”

While diagnosing the culture behind the bar, Majors says the Bevinco product is not intended to impede on bartenders’ relationships with patrons.

He acknowledges the romanticism of tossing bottles in the air and some liquor splashing, while artfully mixing cocktails, and he shies away from using specialized pour spouts or electronic gauges.

“A client’s perception might be altered. They might feel that craft cocktail is a little too robotic,” he says.

With his decade of work in the restaurant and bar business, Majors empathizes with operators.

“There are 1,800 other things you have to do in a bar or restaurant. They’re having to squeeze every penny out of every dollar,” he says. “We’re there to offer analytics and increase profitability.”