Solving the Mystery of Draft Beer with Real Data
Jacob Hunke, the general manager at the Mellow Mushroom in Ballantyne, North Carolina, recalls the old-fashioned method of measuring a keg of beer: shake it and see how to feels. Given the countless digital solutions hitting the market, from the back to the front of the house, archaic might be a better description. Yet, draft beer has long been a guesswork-at-best kind of operation, where bar managers are scrambling to arrange tap rotations and make sure trendy kegs don’t run dry at inopportune times, which not only will lead to a missed opportunity, but will likely send consumers searching elsewhere for both food and beverage.
Until recently, Hunke, whose restaurant has 47 taps and averages around $5,000 a week in draft sales, says that’s simply the way things were: “Keg beer is the only thing you can't keep track of on a day-to-day basis, and these guys have made that possible,” he says. “These guys” are SteadyServ, an Intel powered mobile, SaaS-based inventory and order management system designed specifically for the beer industry.
Steve Hershberger, the CEO, founded a craft brewery called Flat12 Bierwerks in 2009, and was appalled by the processes in place. He asked distributors if he could ride along during supply trips and site surveys, and found that most of the decisions, by multiple parties, were made without any concrete data. “You can’t really be making business decisions based on hunches. That just doesn’t happen,” he says.
It bothered Hershberger to the extent where he began to seek out a solution on his own terms. The goal was to produce a digital application capable of measuring beer, making sure operators don’t run out, and also tracking sales data to the point where deciding on a specific tap is a truly informed decision. “Here’s an industry where, if you think of craft beer in the U.S. alone, it’s $23 billion in sales every year. That’s four times larger than the U.S. smart phone market,” he says. “It’s huge. And everybody’s guessing.”
Despite most people scoffing at the logistical possibilities of such a measuring system, Hershberger went to work. In 2012, he started and spent two and half years engineering the details. An alpha testing system was released in fall of 2014, with a beta improvement arriving the following January. General release took place in June with SteadyServ’s kinks ironed out and Hershberger pleased with its capabilities.
What and how does it work exactly? The iKeg system integrates with an operator’s point of sale system. A sensor is placed on the bottom of the keg, which measures the amount of beer, and one is stuck on the side, which identifies the kind of beer and the packaging date—to make sure the product is fresh. The data is then sent to a wireless gateway and feeds the cloud, which arrives on a manager’s device. Now, in addition to knowing how much beer is left in each keg, an operator can keep track of the sales of each selection. That enables dynamic pricing on a product that was previously being labeled based on … Hershberger isn’t even sure exactly.
“Why did you price this beer at $5.50,” he recalls asking a manager. “[He says] ‘That’s what we priced it last week and the week before, and that’s what Joe across the street is pricing it at.’”
“You can raise your price by 33 percent and see absolutely zero degradation to the consumption velocity, until you hit a point and then it drops off the cliff,” he adds.
For Hunke, his biggest concern was waste. Not just from product that wasn’t selling, but from employees giving away beer for free. He signed up for SteadyServ, which charges a subscription fee Hershberger estimates at $7 per tap, in July. “Waste was the biggest thing I was looking to lower with SteadyServ, and it has exceeded my expectations. My [cost of goods sold] have gone down because my bartenders know I'm keeping track of what is sold and rang in so nothing is given away for free.”
Jake O’Rourke, the bar manager at The Score Restaurant and Sports Grill in Grand Rapids, Michigan, has 128 taps—122 of which are craft beer—and has been using the system since early summer as well. He says his goal was to create a better beer program with tap selections catered to supply and demand. “It is nice to see when a keg is getting low so we can tell our bar staff to go ahead and get the backup keg ready to go,” he says. “I was surprised to see that some beers I thought were good movers were just not selling, and beers that I was looking to get rid of were actually moving relatively quickly, so it has adjusted my outlook on ordering.”
Hershberger adds that the information provided arrives in real time and can even allow for a dynamic digital display for restaurants: a menu that shows how much beer is left in their favorite selections. This way, consumers are likely to order quickly, and maybe even ask for multiple beers to start with, just to make sure they don’t miss out before it runs low. The system also factors in natural influences, like weather, to help restaurants make better choices. For example, in the summer months, SteadyServ can identify the types of beers likely to move quicker, such as lighter, citrus-forward selections, as opposed to the stouts and dark beers typically associated with the cooler months.
“At the end of the day, the question is, ‘If you could get the right beers in front of the right people, and they were going to drink more of your beer and make you more money, would that be a good thing?’” Hershberger says. “And the answer, of course, is yes.”