How to Eliminate Excess Inventory

Boleo at the Kimpton Gray Hotel in Chicago. Image: Kimpton Hotels

No one has ever—ever— said they’d like to take an inventory of their bar.

But anyone in the business knows this is an essential task and that the more bottles there are, the more difficult the task is. There are other downsides to having too much inventory: you have too much capital tied up in it, for starters.

So, how do you keep your inventory under control, and how do you eliminate overstock?

Mike Ryan is the director of bars for Kimpton Hotels, which is headquartered in San Francisco and has 62 locations across the U.S.

“The cause of inventory problems can be poor management,” he says. So, if bar operators don’t understand the demands of their guests, they may over-index on a number of products they’re personally excited about.

This can be a problem if it’s not something their guests are going to be interested in, Ryan says, “so it might just sit there for years and it’s a lot of capital tied up.” There’s also the issue of excess inventory tying up physical space and, though it’s not likely, deterioration of the product.

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Other times, suppliers will offer purchasing incentives to the buyer, Ryan points out, such as six free cases of a product if you commit to buying six. “If that’s a high-volume product, like vodka, that’s a smart business decision, but if it’s something you’re going to have trouble moving, even if you’re getting the price down it’s a bad business decision because you’re tying up too much capital in inventory,” he points out.

There can be even more incentives up sellers’ sleeves. They might offer trips or freebies, which is even worse than extra product, explains Ryan. “That’s walking a legal and ethical line. It may not necessarily be blatantly illegal if they’ve routed it through the right channels, but it definitely casts doubt on the person or bar.”

Other reasons a bar might have too much stock is liquor is purchased for a cocktail that’s then taken off the menu. If this is an obscure spirit, it can be hard to get hold of. Multiply that to a few cocktails eliminated from the menu “and you can go from a tight ship to a swollen one,” Ryan says.

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Another problem that can arise if a bar has too much stock is there’s a much higher chance of shrinkage. “With a cluttered and complicated liquor stockroom there’s a great opportunity for bottles to just fall over as someone’s grabbing one in the busiest time,” Ryan says. Plus, “there’s shrinkage from people just walking out with liquor.” And the reality is that theft happens, he says.

How Eliminate Excess Inventory

  1. Decide if you can make a smaller margin when you sell your excess inventory, compared to what you initially forecast.
  2. Staff training. Bring attention to some of these products and educate staff about them so they in turn can help move them. “Most liquor companies have people who can talk to your staff and talk about products or product categories,” Ryan says. “You can get staff excited and hopefully they pass that on to guests.”
  3. Create incentives for staff if they sell excess inventory. The first person to sell ten beverages containing something in the excess inventory gets a $5 Starbucks gift card, for example.
  4. Create cocktails around them and generate excitement for these LTOs.

Ryan suggests tackling the most expensive bottles first, as well as the more obscure products.

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