You don’t have to break the bank to have a good drink. Offering a variety of options for a wide audience means you’ll bring in a bigger pool of customers willing to spend money, and making sure it’s delicious keeps them coming back! The goal of any restaurant and bar is to make money on selling food and alcohol, so it’s important to attract customers for any budget. Here’s a quick guide to pricing alcohol for your restaurant and bar and a list of some great alcohol choices that’ll impress any customer, regardless of how much they can spend.
Liquor Costing Quick Guide
Liquor cost, also referred to as your “cost of goods” or COGS, is how much you’re paying for goods to create revenue. So how do you know how much to charge per pour, or if you’re making money?
Liquor Cost Formula. This formula is used to determine how profitable your restaurant or bar is based on the cost of your current inventory, supplemental inventory, ending inventory, and sales. All of this together tells a story about what you’re making in profit in a period of time. It should look something like this:
(Current Inventory + Supplemental Inventory - Ending Inventory) ÷ Sales = COGS
An example of this would be:
($1250 + $6245 - $1548) ÷ $25,000 = $5,947 (23.78%)
This tells you that your profit is around 24%. These numbers can tell you when to adjust pricing, help you identify products that aren’t making money, and if you’re looking for investors or business advice, you can bring up this number.
- Average Liquor Costs and Profit Margins. There’s a wide variety of factors involved in what’s “average”, but 18 to 24% is a good place to start looking. Some costs can look closer to 15% for things like spirits however, so don’t get too scared if those numbers come up. Draft beer has some of the highest profit margins, while craft cocktails can have higher liquor costs.
- How to Price Drinks. You’ll want to start by pricing out the actual cost of the liquor per ounce. You can do this by dividing the bottle price with the total ounces per bottle. If you have any garnish you plan on adding to your drink, you can calculate the cost the same way. Example:
$49.98 for a bottle ÷ 60oz in the bottle = $0.83 per oz
Next, we’ll price out the cost of the drink itself. This can be how you’re factoring in labor. For the sake of this example, we’ll set that at around 20%.
The base drink cost will be the cost per ounce divided by the 20%, so in this case:
$0.83 per oz (we calculated this above) ÷ 0.2 (20%) = 4.15
And with the 4.15 we get after doing that math, that will be our base price of $4.15. You can do the same for any garnish and add that onto your base price as well.
It’s common for bars and restaurants to add an additional fee for shrinkage as a little extra cushion for damages and lost inventory. 20% is a common number for this. If we take the $4.15 base price we have right now, we can just add on 20% and get the price up to $4.98. Rounding up makes things nice and clean, so we’re going to say the total price for this drink can reasonably be $5.
What to Look Out For When Pricing Drinks. Keep track of your sales, sometimes the price you calculated isn’t enough for what you’re selling to be profitable, and that’s okay. You can increase the price if needed. If you’re noticing small profit margins, it’s also okay to move on to something else. Try to keep your eyes on what’s working and what’s not, even if it feels like a small issue at first it can cost you a lot of money later on.
Some Great Alcohols for your Bar
There will always be a huge market for alcohol. You can keep it classy without digging yourself into a financial hole too! Here’s some quick picks for reasonably priced beverages for your bar. Some come with a caveat though, so be sure to take everything into consideration before putting it on your menu.
Alcohol to Sell for Under $20
- Wine. Wine can be sold by the glass, and many people get excited when they see wine on a menu, especially at a restaurant when paired with their favorite meal. It’s important to note that wine has a higher markup due to import fees and labeling needs. If you play your cards right however, you can see some decent profit margins. Suggesting wine to go with a meal is a great way to upsell and it gives a luxurious experience.
- Specialty mixed drinks with multiple types of alcohol. Handcrafted mixed drinks can be an experience, especially when you’ve created your own recipes. Having one-of-a-kind flavors can keep customers coming back to you for more. It’s important to consider how complicated the drink is though, it can take a lot of planning depending on the recipe. Service can slow down too if things get busy.
Alcohol to Sell for Under $15
- Midrange liquor. Midrange liquor is a staple for any bar. For folks who prefer straight liquor or sodas, it’s essential to have these midrange choices. It’s difficult to walk into any full service bar and not have midrange liquor, and the profit margins can be huge. The profit margin for liquor can be as high as 80%!
- Domestic wine. Domestic wine can get expensive, but people love to buy local products. Knowing the vineyard a wine has come from is domestic is appealing to a lot of customers and can be a great selling point, especially if the vineyard is nearby.
- Craft beers. The market for craft beer is on the rise and there’s local breweries nearly everywhere. It’s appealing to spend money on local businesses. Craft beer has such a massive range it’ll be difficult to find one you don’t like, and depending on the beer you choose, you can gain customers just by picking some popular brands.
Alcohol to Sell for Under $10
- Domestic beers. Having classic beers that everyone’s familiar with is another essential for your bar. Classic choices will always sell well. Domestic beers are perfect for restaurants too, people love drinking their favorite beer with a delicious meal.
- Lower range liquor. These choices are perfect for basic mixed drinks like vodka cranberries where the flavor is hidden by a mixer. There’s no sense in using a midrange liquor for a drink that’s going to have flavor competing with it.
Provi Can Help!
Provi’s all-inclusive hub offers a variety of tools that can help you run your business. Provi provides inventory analytics, beverage ordering, and flexible payment options with representatives that keep you connected to your orders. You can learn more and join for free at Provi.com/bars-restaurants now!
Now you should have a pretty good idea of how to price drinks for your bar or restaurant, and which drinks you should sell. Not every business is built the same, so don’t be afraid to experiment with whatever works best for you!
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