inflation bar industry

With everyone being financially crunched, Danny Murphy suggests some ways to help keep bar costs low and customers coming in.

According to the news we are living in The Bad Times, with Much To Fear – and it’s not hard to see why. With Covid only just in the rear-view mirror there is the war in Ukraine and its wider implications, and the less than tangible but closer-to-home issue of inflation.  

This pecuniary foe hits Joe & Jane Bloggs by silently working its way into every corner of their finances, increasing the cost of living. Not that we needed telling, but the headlines have energy up 50%. Fuel has risen 30%. How we are supposed to live our Instagram-pleasing Best Lives under such restrictive circumstances is anyone’s guess. And bringing it back to our lives – working in and running bars – what does it mean for us? Why would anyone want to venture out in this climate?  

This inflation has to have an impact on disposable income. The problem is that our precious pennies will become just that, pennies. As basic needs become more expensive the pennies disappear from our tills, and therefore our wage packets.  

Trying to predict what behavioural impact this will have on our treasured patrons is therefore a pressing puzzle. There appear to be two schools of thought on the subject. The first and most logical is that people will drop luxuries to pay for necessities. However, the other school posits that people will spend more on luxuries (specifically, affordable luxuries) as a means of escape. And history backs this up. Hit by the Depression era of the 1930s, American women are said to have turned to lipstick to make themselves feel better. And the rise of the tiki bar movement in the US really took off post-WW2 with inflation into double figures. People were eager to escape their daily grind, and what better place to do so than in your local tropical hideaway?   

So good news, right? Well, not really. You see, it’s not just the Bloggs for whom life is more expensive. The cost of operating a venue has, frankly, soared. Every single item and every single human in our business now costs more when compared to one year ago. And it’s unlikely to change soon. In the Good Times, passing this burden on to the consumer without a fuss may have been taken for granted. But in these times, it’s less of a certainty. 

Steps to take

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How can we combat these challenges? To be honest, I’m curious about that myself. The first step may be to re-evaluate the value proposition of your business. What do you do well? What does your customer care about? Know this and get your customer to buy into it.  

Knowing this can also help inform other decisions, for example whether you really need to pour that £17 house vodka over a £13 alternative, or whether you want to consider any discounted periods/products during the week. The concept of a Happy Hour may seem alien to some but the impact to your brand can be more damaging when you only have 10 people through the door on a Tuesday. I think it’s safe to assume the tiki bars of the past will have made good use of the Hawaiian phrase “Pau Hana” (which translates to “time after work”, aka Happy Hour) back in their day. 

Another tactic to consider is ‘shrinkflation’, the act of lowering the volume of a given product but maintaining the price. This may sound like a devious ploy, best left to the spud-stealers at Big Crisp (yes, Walkers, I’m looking at you), but as an example, let’s say you sell a portion of nine olives at £4.50. Now you need to raise it to £4.95. But first, ask how often does that whole portion get eaten? If it’s not the majority of the time, then the best course of action may be to lose an olive, and maintain the price. If you run a cocktail joint where the starting price is £10, maybe consider offering a midweek special at a lower entry point, but with a great GP and which uses an item you currently find you often waste (for example’s sake, a Long Island Iced Tea which can make use of the dregs of cans/bottles of cola)?

Finally, regular visitors are manna from heaven, and a system rewarding them should be a priority. It goes without saying that keeping the quality of both product and service high will be key to keeping those tills ringing.

We may not be able to predict the future, but we can prepare for it. Forecasting the macro behavioural economics of the drinking public may be beyond us, but it’s hopefully not a stretch to consider how to keep our business appealing places to visit in The Bad Times.