Caution! Crazy Up Ahead!

Wow... I’ve been out of touch with you guys for over a month! OK, two. Whatever. I could regal you with numerous superlatives as to how stinkin’ busy I’ve been, but I’ll just throw this your way... I’m smack-dab in the middle of producing about 100..that’s right, 100, different Beverage menus.. one for each store, all festively unique, because God forbid anyone should compromise. Commence with the pity.

Much as this tries my very soul, it does allow me to momentarily stop the obsessing about what is to come in 2008 for our beloved industry. Being all goddessy and whatnot, I have intimate access to Oracles and what they’re saying keeps me awake at night.

Fuel prices are going through the roof, hops are becoming scarce and more expensive, no one grows barley anymore because corn is so lucrative, but all the corn is going to ethanol and feed, which is going up, up, up, so food costs more, breweries are panicking, no one knows what to do about the lack of hops crops, drought is hurting the Australian wine industry, keg theft has pushed cooperage to $30 a keg, brewers are foisting higher-cost 1/6th barrels on the market, with the requisite 20% increase in ounce cost, the minimum wage hikes are costing a bundle, oh and by the way, the Big R looms ahead no matter what the Fed says... customers are watching their wallets and staying home more or trading down and I don’t know about you, but I’m a little freaked!

In the words of someone or other, I think we are heading into a perfect storm. Lordy, I hope I’m wrong. But it doesn’t look good from where I sit and as an operator, the litany above presents a multitude of trickle-down problems.

To make sure I wasn’t just a Chicken Little Freak, I did a survey of about 30 operators, suppliers and distributors about two months ago, and it was a pretty gloomy task. Glad to know I’m not alone in my worry; terrified to have my worst fears confirmed from various aspects of the industry.

So we all agree that 2008 is gonna be a ‘witch’, but what to do about it?

Well, we can take price, and, most likely, everyone will, as least to some extent.. but I can’t mitigate a 10% increase in costs with a similar increase in prices...at some point, customers just say no.

We can focus on cost control.. always a winner, but not something ignored regularly, so unless one is not paying attention at all, the gains might be minimal.

We can re-engineer our menus...try to keep the flash with less costly ingredients...for example, pour Smirnoff Vanilla in a Signature drink instead of Stoly...but keep it sexy enough to maintain most of the retail price. We can put one ounce of croutons on a salad instead of two, cut the limes into 6ths instead of quarters...avoid those damned 1/6th barrels, build wine lists with less expensive wines from non-drought ravaged viticultural areas..

We could try to buy more locally to avoid shipping surcharges.. a lovely thought, but no one makes scotch in these here mountains. We could stand at our bars and hairy eyeball our bartenders for waste and over-pouring. We could browbeat our staff into upselling... we could, we could, we could...

We could do a lot of things, some of which will work; others will be an exercise in futility.

So I guess all we really can do is take a hard, seriously, business-focused look at the areas we can improve upon, like menu engineering, smarter purchasing and cost controls, and let go of the things we cannot influence, like the hop crops, the price of steel, shipping, minimum wage increases (which, BTW, I am completely in favor of as a human being...not so much as a restaurateur..). Forego some of the woo-hoo fun part of why we got into this gig and really think about how to weather this storm. Hunker down and accept the fact that we may have to realize slightly lower margins and profits to stay competitive...because if we’re hurting, so are our customers and slamming them with big pricing increases is a fast track to empty bars.

As I have been known to say while negotiating discounts with brewers who are overly impressed with their own product and charging based on that elevated opinion, ‘You can sell a lot of beer for less money or no beer for more. Pick.’

We’ll get through this, certainly...people have to eat and drink, after all.. but we should be well prepared to pro-act to the storm that’s a-comin’.

Fortunately, the nature of our business ensures that, if we do, at times, give way to despair, there’s plenty of booze at arm’s reach.

Cheers.