By David Wyld, Contributing Editor
According to hospitality industry experts, every year in the United States, over $7 billion is lost due to “liquor shrinkage.” What is “liquor shrinkage?” It happens when bartenders give out free drinks, overpour intentionally making drinks too strong, or make mistakes as they mix cocktails. It also happens when bottles of liquor disappear from bar storage areas due to theft. It all adds up to a major alcohol problem.
In fact, industry analysts project that liquor shrinkage across the hospitality industry affects between 20 and 30 percent of alcohol stock. For banquet and reception operations, losses may range even higher. Thus, solving the liquor shrinkage problem can be vitally important to restaurant and bar managers, as they can not only control costs, they can recover lost revenue from otherwise unpaid drinks.
Liquor shrinkage is creating a unique opportunity for RFID in restaurants and bars around the world. RFID can not only provide improved control over operations and inventory, but provide new levels of customer satisfaction in beverage service.
How “smart bars” work
Today, there are two primary competitors that are vying for share in this in the marketplace. The San Francisco, California based Capton, Inc. and Scottsdale, Arizona based Nuvo Technologies, Inc. are marketing systems that use RFID-equipped pour spouts that are fitted on liquor bottles in bars and restaurants. With readers positioned in the bar environment and software that compiles the data and produces analytical reports, the “auto-ID” bar gives restaurant and hospitality managers new heretofore unprecedented visibility on this critical part of their operations. Each company’s system (Capton’s Beverage Tracker and Nuvo’s BarVision) can be installed for $10,000-20,000 per location, and the early results show significant (and quick) ROI – measured in months, not years – and vastly improved operational control.
How will these systems work in practice? Today, when using either system, each bottle of liquor in the bar inventory must be fitted with a reusable smart pour spout containing a battery-powered RFID tag. Currently, this is a task that must be performed by the employees of the restaurant or bar after their liquor stock is delivered to them. However, one could certainly see that when there is an industry standard, such smart pour spouts could be attached by liquor distillers and producers, or even distributors or service specialists. Both companies smart pour spouts can be washed and used for thousands of cycles. The battery power source for Nuvo Technologies BarVision smart spout has an expected lifespan of three years, while Capton’s Beverage Tracker is projected to have a lifespan of up to a decade. And, with the smart pour spout at the air-filled top of the bottle and the use of active tags, there are no real readability concerns with the systems, which operate in the 418 MHz range.
Physics is key to the operation of both systems. In a free pour environment, in order to mix a drink, the bartender must tip the bottle in order to pour from it. The tipping of the bottle “turns on” the smart pour spout when each drink is mixed, and in essence, it enables the system to measure the volume of liquor poured before the employee tips the bottle back up, which ends the process of making that drink. The smart spout then instantly transmits the information on the pour to the RFID reader positioned above the bar (or in the case of a larger facility, the nearest reader). The information on each pour is then transmitted from the receiver to the bar or restaurant’s computer system, which is integrated with the vendor’s proprietary software that compiles bar and bartender-specific data.
In the case of Capton’s Beverage Tracker, there is a flow measure device built-into the smart pour spout, which measures the amount of alcohol poured. It thus records the volume, type of liquor, and the date/time of the pour. Nuvo Technologies uses a different technique, whereby the spout simply transmits the total time of the pour and the angle of the tipping of the bottle. This data is then matched to the type of alcohol in that particular bottle in its BarVision Global software for PCs, which then matches the serial number of the RFID tag to calculate the volume of alcohol poured in each instance to the restaurant or bar’s database (containing information on the date, price, quality, etc. of all tagged bottles).
According to Christopher Morrison, President of Nuvo Technologies and Chief System Architect of the BarVision system, such smart pour systems will provide hospitality managers with – for the first time “automatic, real-time liquor usage information.” The bar management software can provide not only journal-like reports that detail sales chronologically or by bartender/shift, but detailed analytical reports on:
- Overall liquor costs/inventory
- Bartender performance analytics
- The number of pours from a given bottle, liquor brand, or price category
- Overpours and other exceptions
- Serving/purchasing trends
- Promotional impacts
- Liquor stock utilization and out-of-stock/reorder alerts.
Both Capton and Nuvo have made their software compatible with PDAs so that managers can access the information in real-time on the bar floor or anywhere in the world via web interface. Both firms reporting and analytical capabilities are robust, providing new metrics for bar and restaurant management.
How can such reports be utilized to improve hospitality management? Take the example of the Marriott Atlanta Perimeter in Atlanta, Georgia, which is an early user of the Capton system. The hotel’s Assistant General Manager, Peter Byers, spotlighted that one of the chief non-financial benefits of such systems is to better assure drink consistency. Byers commented that in today’s competitive environment, “the importance of mixology standards and bartender adherence to drink preparation in the ever growing list of specialty cocktails is high.” Using the reporting capabilities of such systems, hospitality managers can detect not just overpours, but wrong pours, where mixed drinks were being made incorrectly. If patterns emerge over time, management can pinpoint both bartenders that perhaps need more mixology training and also gauge the effectiveness of their training and development programs for bar staff.
RFID is rapidly spreading in the hospitality industry
What is the market potential for such “smart bar” systems? There are literally millions of bars, clubs, and restaurants globally that have what is referred to in the hospitality industry as a “free pour environment” – in which a human bartender, rather than a machine, mixes drinks. While the smart bar systems are certainly feasible for use in individual restaurants and food service chains, the interest in the technology will reach much further. Casinos, stadiums, large hotels and even cruise ships are proving to be prime venues for such systems. Installations have already been performed at several large venues, including the mammoth Treasure Island Hotel & Casino in Las Vegas and the newly built Island View Casino in Gulfport, Mississippi. Systems have also been installed at large hotels, including:
- Hyatt Regency McCormick Place (Chicago, Illinois)
- Sandestin Golf & Beach Resort in (Sandestin, Florida)
- The Barclay Intercontinental (New York City, New York)
- Marriott Atlanta Perimeter (Atlanta, Georgia).
Even though U.S. firms are developing the technology, it will have a world-wide impact. Nuvo Technologies recently announced that it is partnering with Infosense Technologies to market the BarVision system in India, which has already installed the system at several Bangalore restaurants, including 1912 and Olives.
Thus, as more and more bars and restaurants around the world turn to RFID-equipped smart pour spouts, the smart bar is more than just a smart investment to improve inventory control and manage the actions of bartenders and other service personnel. It is more than simply employing RFID in a cost-effective, innovative manner to deter “liquor shrinkage.” Rather, it is a great opportunity for the hospitality business to experiment with new ways of managing with the better visibility and analytics that auto-ID technology can provide.
About the author
David C. Wyld is the Robert Maurin Professor of Management and Director of the Strategic e-Commerce/e-Government Initiative at Southeastern Louisiana University.