By: Neeraj (Raj) Tulshan – Founder of Loan Mantra
Most small and medium business owners define this year as a “make it or break it” time for them, according to a recent survey from Slack. After dealing with the COVID pandemic, rising inflation, ongoing labor shortages, supply chain disruptions and other challenges, nearly a third of respondents (32%) aren’t sure their businesses will make it through 2024.
Is this year going to “make it or break it” for your beverage business? There are things that all beverage industry professionals can proactively do to mitigate risks and maximize successes.
The Future of Beverage Sales Looks Bright
First, the good news: after years of challenges and struggles – including a $200 billion loss in restaurant and bar sales during the pandemic – this year, sales are expected to top $1 trillion for restaurant and foodservice industry for the first time in history.
More promising news: significant growth is expected in the restaurant and foodservice industry, with a projected increase of 200,000 jobs. Additionally, 45% of foodservice operators report needing more employees to meet increased customer demand. Dining out is trending again, after taking a major hit during COVID shutdowns. Now, the average American dines out three times per month and orders takeout or delivery four and a half times per month. Statistics for the younger Gen Z demographic are even higher, with 10% of Gen Z eating out at least once per week. Demand is high, especially among younger consumers, as 52% of consumers – including 67% of millennials and 63% of the Gen Z demographic– say ordering takeout from restaurants is an “essential part of their lifestyle.”
This comes as Americans are spending more of their income on food than they have in 30 years. As food prices remain high, U.S. consumers spent more than 11% of their disposable income on eating, either in restaurants or at home.
But Costs are Rising
It’s not all sunshine and rainbows for the restaurant industry, which is facing increased operating costs that are cutting into their profits. In fact, over a third (38%) of restaurant operators said their restaurants were not profitable last year.
A big problem is that grocery prices continue to skyrocket, and 97% of restaurant operators say higher food costs are negatively impacting their businesses. Grocery prices have jumped by 25% over the past four years, outpacing general inflation (19%) during the same timeframe. Several factors – including supply chain disruptions, droughts, avian flu, and labor shortages – have contributed to higher food prices.
Another pressing issue: 98% of restaurant operators say higher labor costs are a problem for their business. For instance, unhappy employees cost U.S. businesses an astounding $1.9 trillion in lost productivity last year, according to a recent Gallup poll. Another report found that the highest percentage of paid time off (PTO) requests in the last four years (56%) occurred in January 2024.
Many employees are currently disengaged, dissatisfied, and burnt out, with only one-third of respondents saying they feel engaged at work. And that’s a problem for employers, as happy, satisfied, engaged employees have been proven to boost a variety of important metrics, including sales, profits, productivity, and employee retention.
With all this in mind, how can brewers, distributors and pub owners prepare to make it in 2024, with successful, profitable businesses? They should implement these tips:
Offer seasonal specialty drinks. Consider offering specialty and seasonal offerings, like Starbucks does with their popular lavender drinks in the spring and beloved pumpkin spice lattes each autumn. Think of best-selling and highly anticipated seasonal brews, like Sam Adams Octoberfest, that customers look forward to all year – and purchase as soon as they’re available. Offer “limited time only” drinks to boost customer interest, engagement, and sales. Also, leverage hot trends, like distilling, to attract more customers and drive additional sales. Sell alcohol and coffee – and fun boozy coffee drinks – to attract a wider audience and increase sales.
Give customers what they want. For instance, the online ordering market has grown exponentially since the COVID shutdowns, and is expected to grow to a whopping $505.5 billion by 2030. Additionally, food delivery services are on the rise. Food delivery is the most popular way for consumers to engage with restaurants, with more than three-quarters of customers (77%) regularly ordering delivery. If you aren’t already offering online ordering and delivery options, it’s time to start! Tap into trends like lagers and new hop products and techniques (including hop extracts and oils). It’s also smart to offer a wider selection of nonalcoholic options for a growing population of people who are not imbibing. Also, be mindful of consumers’ favorite foods to order when dining out – including French fries, hamburgers, mashed potatoes, and grilled cheese– and include these items on your menu. When you give people what they want, they’ll be more likely to visit (and return to) your establishment.
Engage employees. As unhappy, disengaged employees cost U.S. businesses nearly $2 trillion in lost productivity last year, it’s clear that employers need to work proactively to keep staff satisfied, loyal, engaged, and motivated. To accomplish this, provide competitive salaries and attractive benefits packages. Invest in employee development, give tuition reimbursements, and promote from within. Create a healthy work environment and supportive culture, where employees feel valued and appreciated. Thank employees – sincerely – for their hard work. Recognize top performers at staff meetings, on your social media platforms and website, and via in-store signage. Give financial bonuses and other incentives – such as gift cards, extra days off, etc. – to employees who go above and beyond. Set sales goals and provide individual or team rewards when key metrics are met. Accommodate time off requests for personal commitments. These efforts will differentiate your brand from the competition, helping you attract, retain, and engage talented employees.
Tap into the virtual market. Ghost kitchens and virtual restaurants are the fastest-growing segments in the restaurant category, with a staggering 85% growth rate in the past year. They’re expected to become a $71.4 billion industry by 2027. Ghost kitchens share physical space, focus on delivery, and offer an opportunity to run a profitable business with limited operating expenses. These virtual businesses allow brands to run their operations in a more cost-effective, risk-adverse way. Some brands are diversifying the ghost kitchen model, providing food and drinks for catered events instead of solely meal deliveries. Consider this trend – and get creative with it!
Embrace automation. Automation offers restaurants and bars the opportunity to supplement their existing teams and do more – even if they are short-staffed. By automating time-consuming and tedious tasks – such as inventory management – your employees can focus more time, energy, and attention on customer-facing, value-add activities. Tech solutions, like automation, can help boost your organization’s efficiency and productivity, reduce errors, improve accuracy, decrease waste and associated spending, leverage data for more informed decision-making, and improve the customer experience. Fortunately, tech tools have become more affordable, accessible, and intuitive, making them realistic for beverage companies of all sizes and budgets.
Reduce food waste. Food waste costs the industry a tremendous $162 million in America alone. With the cost of groceries still astronomical, taking proactive steps to cut food waste can have a huge impact on your bottom line. Some ways to successfully reduce food waste include getting creative with leftovers, training staff on portion control, avoiding over prepping foods, storing foods at proper temperatures, improving inventory management, and using the FIFO (first in, first out) system to cut down on spoilage. Repurpose ingredients, like using the bones from your roast chicken dinner special to make broth for the next day’s soup or risotto. Use lower-performing beers to make beer cheese dip or beer-battered fish. Additionally, rely on historical data to drive smarter purchasing decisions.
Be financially prepared. While no one could have predicted the black swan of COVID, it’s essential to be financially prepared for business curveballs. Perhaps your bar’s oven breaks or your basement floods. Maybe sales are down for a few months, or a supply chain disruption interrupts a key liquor delivery. Or maybe the increased costs of running your business are cutting into your profitability and money has become tight. Prepare for any eventuality by getting your financial ducks in a row before a monetary crisis hits. Watch your credit report and creditworthiness. Organize your paperwork and financial documents in case you need to apply for a loan. Businesses can set up a free account online at loanmantra.com to keep records ready and secure. Get prequalified with multiple lenders, even if you’re tempted to just apply to your existing bank or credit union. While you may think it’s easier to have all your banking centralized in one place, you may save significant money with a different lender, so it’s worth doing some research. It’s also wise to meet with a financial advisor to get an objective opinion on your financial situation. A trusted professional can help you identify (and mitigate) risks, determine how to become more profitable, and provide valuable advice when (and if) you ever need a loan.
After four tumultuous years of nonstop challenges, hopefully many beverage businesses will “make it” in 2024, enjoying increased sales, higher profits, more engaged employees, and happier customers. Give customers what they want, leverage trends, experiment with seasonal offerings, reduce waste, be financially prepared, and enjoy a better, more profitable, highly productive year.
About the Author
Neeraj (Raj) Tulshan is the Founder and Managing Member of Loan Mantra. For more information visit our website or give us a call! www.loanmantra.com 1.855.700.BLUE (2583)
