On-Premise Sales: Navigating the "New Normal" in the Bay Area, Part One

Alongside hundreds of Bay Area wine and spirits sales professionals, I moved through the five stages of grief at the sudden loss of my work life as I knew it. From nervously visiting accounts when restaurants and bars began to empty in the beginning of March, to a company-wide furlough the following month, I have experienced denial (this can't be happening?), anger (I love my job! This isn't fair!), bargaining (well, maybe a month-long lockdown will "fix" everything, alcohol has thrived even after Prohibition!), depression (do I learn to code?) to acceptance.

No ifs, ands or buts, and proven vaccines notwithstanding: the art of selling in the on-premise account universe has to change. The days of warming a bar stool and dropping into accounts are over.

Am I crazy for saying, "Here's the fun part?" - because I really believe in our industry and its resilience, fueled by the brilliant minds I am humbled to call colleagues.

A few sobering facts, though:

- As of August, 51% of restaurants in San Francisco reported zero credit card transactions, likely due to full or temporary operational closure.

- Restaurant sales are down 84% YOY with overall sales down 91% since the beginning of March.

- Bars that do not serve food are still not permitted to open.

The lack of Federal support for independent bars and restaurants nationwide has largely contributed to the permanent closure of over 350 businesses in the Bay, and movements spearheaded by such organizations as The Independent Restaurant Coalition basically ignored by Congress - with the HEROES Act seemingly dead (and the Restaurants Act included therein), what's next for our industry? How can we sell if no one is buying?

As someone who chooses to see obstacles as opportunities, I've compiled a summary of current trends and those I see on the horizon from which the alcohol industry can creatively pivot our business.

First things first: an entirely on-premise focused approach for sales specialists is obsolete. I believe a dynamic, mixed account universe consisting of on- and off-premise businesses, private client relations and creative sales avenues will not only float the boat through the remaining months of the pandemic, but elevate our business in the "new normal" for the future.

Trendspotting in the Bay Area:

• Outdoor dining has revived the "town square," shutting down streets to foot-traffic only and creating a neighborhood-centric feel for customers. While this isn't possible in all San Francisco neighborhoods (like the Financial District) it has changed the vibe of enclaves like Hayes Valley and Valencia in the Mission completely, and in my opinion, for the better. The positives: Fewer people will drive to their dining and bar destinations as available parking has been replaced by parklets. I've noticed street vendors taking advantage of heightened foot traffic to sell their wares, and this could expand to pop-ups and other "out of the box" opportunities for restaurants that wish to increase their visibility in other neighborhoods. The obvious negatives: weather and fires. We are fortunate in most of California to have outdoor dining-friendly weather the majority of the year, but this will adversely affect businesses otherwise. Wildfires have been a consistent occurrence this year as we barely move into the "season" and outdoor dining spaces are forced to close due to poor air quality. Less space for dining means far fewer covers, putting pressure on restaurants to grow their take-out and delivery business to recoup those losses which is nearly impossible. Shortened hours, due to noise ordinances, also impact total covers. It is estimated that current restaurant sales inclusive of outdoor dining are only about 30% of typical business.

• Smaller budgets mean smaller drink lists. A friend of mine commented that, out of his run of about 110 accounts, only 15% are actively purchasing alcohol but that number is rising, albeit slowly. Beverage directors - once focused on selling back stock after months of closure - are seeing alcohol sales pick up. "I was pleased actually with the wine sales numbers after we reopened Uva Enoteca," said Chris Tarbell, Beverage Director for The Avenues Group, which encompasses the Fiorella family, Uva Enoteca and Violet's Tavern. "Since we can sell across dine-in and To Go wine, this is only a good thing for my bottom line." Budgets have not caught up yet though. The opportunity here is not in obtaining new placements, but rather offering creative tangible value in achieving depletions at accounts with whom sales specialists have a bounty of product. Bespoke happy hour events, "to go" specials and brand partnerships are all excellent ways to help our accounts make some good beverage numbers - and place your brands front and center on a smaller list will increase visibility, especially with wine. I'll expand on that in part two, a discussion of ways we can participate in these changes.

• Incubator-style outlets for furloughed chefs, sommeliers and bartenders. Hi Neighbor Hospitality group is something to be admired. Consisting of Trestle, Corridor and The Vault, the company conceived an open-source kitchen wherein furloughed chefs could create a bespoke concept for take-out. The Vault's own Kaitlin Ryan features her Atta Girl Hospitality bar program service with beautiful cocktails to go, as well as a special menu at the Vault Garden - the most inspiring success story of a full restaurant pivot. Given its location at 555 California - smack in the middle of FiDi, which feels like a ghost town due to the absence of office workers - its ability to create an entirely new business model was nothing short of amazing. This collaboration is an incredible example of a diverse model that could eventually lead to full-on operations post-pandemic, thus - not money, or opportunity lost in the experiment.

• Delivery is changing. With Prop 22 on the ballot this November, and the controversial cap San Francisco placed on delivery app fees to restaurants, partnering with firms like Caviar, Postmates and UberEats is costly to restaurants already suffering deep financial losses. Prop 22 keeps its drivers and delivery personnel as independent contractors, but with special labor policies and benefits including minimum earnings, healthcare subsidies and more. Basically - flexibility with some protections. This Prop will raise state income taxes for the apps, which may be passed down to restaurants - this all remains to be seen. The cost to consumers varies by app, as well - a meal from your favorite restaurant ordered by Caviar, for instance, can be 20% more expensive than if ordered through UberEats. Some restaurants opt to partner with several delivery apps or forego them altogether in favor of a Toast pre-order option. The Bay Area alcohol industry, given lax laws surrounding deliverable beverages alongside the rise of delivery apps like Minibar and Drizly needs to more aggressively seize this momentum to add to its existing sales channels.

• Fine dining and the value-added experience. This is another blog post all its own, but for the sake of brevity - I foresee, and have observed fine dining pivoting to heightened exclusive experiences. Admirably, the Quince team has wowed with a transition to outdoor dining packages at Fresh Run Farm and McEvoy Ranch on summer weekends. Running around $350 a person (plus beverages, tax and tip) you can book your own unique experience culminating in a meal in an outdoor pagoda. Likewise, the French Laundry created outdoor dining in its elegant courtyard space, in addition to very limited indoor tables. A charming Burgers and Half-Bottles pop-up program through sister restaurant Ad-Hoc compliments the array of TKG options.

• Take-out with a twist. The creativity in take-out abounds and I find it so inspiring! No longer limited to a handful of cardboard boxes, restaurants have reshaped what it means to enjoy their menu in your home. My favorite example is Atelier Crenn. Not only can you reserve a dining experience via their outdoor Terrasse Dinner, but take-out and delivery options encompass the Crenn Kit Luxe (a meal with accompanying plating instructions), Blind Taste Kit (three half-bottles of wine with notes from the wine team), and Bleu Belle Farm Selection (a gorgeous box of produce with house-made accoutrements.) Similarly, supper club Lazy Bear has created an on-brand "Camp Commissary" with a fabulous and creative menu of take-out dishes and beverages. While these imaginative take-out programs are downright awesome, I don't naively believe these options can even remotely pay the bills - but perhaps will prove to be a viable permanent income channel as the industry recovers.

All of this considered - it's rough out there. In an upcoming post, I've created a "think tank" of ways in which the drinks business can get creative and break out of the old-school on-prem sales model to meet the needs of this changing market. If you have any feedback or ideas, please email me! If you're currently out in market and have found ways to assist sales success in your accounts, I'd love to hear about your wins.