Bars and brands broach back bar deal-making

As producers vie for prized shelf space, the practice of securing discounts and deals in return for back bar visibility and menu listings is relatively furtive – SB explores the benefits and drawbacks.

Retros and support can be “extremely beneficial” for both bars and brands, says Max Venning of 69 Colebrooke Row

*This feature was initially published in the September 2015 issue of The Spirits Business magazine

In quintessentially British fashion, discussions surrounding the financial relationships between bars and brands are almost non-existent. Nobody wants to talk about money – but a long history of bartering and deal-making has existed between the two sides for many years.

In such a fiercely competitive market producers are understandably being forced to up the ante in order to win valuable shelf space. But is “buying” your way onto the back bar through hefty discounts and incentivised sales the right way to do it?

“Retros and support are services brands brought in a while ago,” explains Max Venning, head bartender at London’s 69 Colebrooke Row. “When they work well they can be extremely beneficial for both parties. For the bar, they have support setting up when any financial assistance helps. For brands, they bring visibility and volume. Bars are probably the brands’ most influential route to market, so it can be a massive boost to their marketing strategy.”

While the practice of placing discounts and special offers in return for menu listings and house pouring rights has been outlawed in the US, it remains commonplace across countries such as Australia and the UK. Nonetheless, opinions vary vastly over whether these negotiations act as a help or hindrance to the global bar and spirits scene.

Mutually beneficial

Evidently, there are benefits to be enjoyed by both bars and brands when the right deal is agreed, and for up-and-coming producers it can be an incredibly welcome foot in the door, whether money is involved or not.

In July, American Beverage Marketers (ABM) proudly announced its Reàl Cocktail Ingredients’ Cream of Coconut and Agave flavours had gained listings through word of mouth in one of the world’s best bars, Artesian, and that they would feature in a number of classic and original cocktails.

“We don’t advertise in any big way since that is so expensive,” explains Bill Hinkebein, vice president of marketing at ABM. “But since we do have great products, sometimes it comes to the attention of a ‘big guy’ like Simone Caporale at Artesian, and sometimes they like it and they use it.”

For bars – both established and newly founded – a little financial backing from certain producers can be a great investment for future growth.

Monetary support may enable a bar to channel funds into bettering the drinking experience for consumers – a benefit reciprocated by all involved.

As Greg Sanderson, operations manager of Speakeasy Group, which owns venues in Australia including Eau de Vie, insists: “The idea behind working with brands is to assist each other [with] growing each other’s business. We need brands on the bar and they want help to grow. Getting financial backing from brands to list their products on the menu enables the venue to invest in eye-catching menus and make the cost to the consumer more reasonable.”

As producers compete to secure listings, SB explores the benefits and drawbacks of “buying” your way onto the back bar

Damaging integrity

However, over recent years increased attention has been cast upon both bars and brands as consumers demand more bang for their buck by seeking heritage, provenance and authenticity from their spirits. So are heavy discounts and offers damaging the integrity of the venues and brands they serve?

“Yes,” insists Mark Ward, founder of Australian vermouth Regal Rogue. “There are venues that have asked for listing fees or annual listing fees, however you know it’s not right when you’re paying to play and there isn’t a natural synergy between the venue and brand. We’re all here to make our businesses work and menu listings are good placements for a brand. However, if the venue can’t see past immediate cash then it is broken.”

It’s a view reiterated by Michael Vachon, founder and brand development manager at craft spirits importer and distributor Maverick Drinks, who believes masterclasses and training sessions to be far more beneficial and profitable in the long term. He argues that bar culture has developed in a way that is especially restricting for independent distillers striving to increase their presence in the on-trade.

Priced out of the market

As production costs are often more expensive for smaller firms compared to larger distilleries, these companies are unable to compete when it comes to offering bars discounts and are being priced out of the market.

“We love big brands,” vows Vachon, “we just don’t like the practice of giving retros and the reciprocal expectations. These deals are a taboo subject, but we need to have more open discussions to improve these relationships. We would rather collaborate with the bars and make the same amount of money in a way that benefits everybody.”

Vachon continues to explain that the majority of bars are fixated on generating a 75% margin on cocktail sales. But he advises that venues should be more focused on cash margins rather than percentages and not shy away from charging a little extra for a drink made using more “interesting and complex” spirits.

“I don’t think consumers are so price sensitive when it comes to buying cocktails that they wouldn’t pay £9 for a cocktail instead of £8,” he adds.

So passionate is Vachon about finding more organic methods of driving sales, securing back bar listings and heightening brand awareness that he has embarked on a project to promote “retro-free” establishments and products.

Though the campaign is still in the early stages of development – with the website and official title a work in progress – Vachon hopes to have materials available for venues and spirits producers by the end of the year. Those keen to shout about their retro-free approach will be able to request materials such as stickers to stamp on their bar or bottle.

“Consumers don’t know about retros – it’s so pervasive and clear in other industries but not so much in spirits,” he compares. “Nobody wants to admit that they took a deal to put a particular product on the menu because they’re not choosing things on merit. They’re using things they’re told to use, not what they want to use.”

Level playing field

By raising the profile of retros and creating a dialogue around alternative methods to generate desired profits and brand visibility, it is hoped the industry can create a more level playing field between newcomers and long-standing professionals. Jamie Kimber, day manager at Trailer Happiness, London, offers a few words of advice for brands that are finding themselves being priced out of the market.

“Smaller brands can’t compete with bigger brands when it comes to money, not with the likes of Diageo, Bacardi or Pernod Ricard,” he says. “Shows like London Cocktail Week and Rumfest are all opportunities for smaller brands to get their foot in the door – you just have to pick the right people.”