For those of you new to this whole bar managing thing, or if you’re a bartender who keeps hearing, “Goddammit, the pour cost percentage is too high,” and you find yourself nodding thoughtfully and pretending to know what in the hell that means, I’m here to help.
In fact, we’re not only going to go over how to figure your overall pour cost percentage, but how to figure it for individual products so you can price them properly. So let’s go ahead and find out exactly what this pour cost percentage crap is all about.
What in the Hell is Pour Cost Percentage Exactly?
Pour cost percentage measures the gross margin of profit on your products and goods. For food, or any other goods you sell, you would just be Cost Percentage (without the “Pour”)
“Great,” you say, “and what the hell does that mean?”
That means if your pour cost percentage for your beer, liquor and wine is 21%, then the bar made 79% in gross profit from those products.
In five-year-old terms: At 21% pour cost, for every $1 you sell, the bar gets $0.79.
Got it? I hope so, or you should stop managing bars, or be allowed to participate in society as a citizen in general anymore.
How to Figure Your Monthly Cost Percentage
I say “monthly” but it could be for any time period: weekly, quarterly, yearly, etc. I’m choosing monthly because it is the most common.
Chances are many of you at least have a notion of what pour cost percentage is and what it measures. Calculating it can be a bit more tricky if you have never done it before, so let’s dive right in.
Calculating your monthly pour cost percentage means that we are going to get an overall cost percentage of your entire inventory, broken down (hopefully) by category. Those categories being: Bottled beer, draft beer, liquor and wine
Why do we break it down by category? Because different categories have different cost percentage standards and if we lump them all together, it’s difficult to pinpoint problem areas. You can learn more about industry standards here:
The Monthly Cost Percentage Formula
The cost percentage formula is fairly straightforward. It goes like this:
Remember, the top row means the wholesale dollar amount of each (what it cost you to purchase the inventory). Let’s do a quick example:
June 1st – You take a full inventory of beer, wine and liquor and the wholesale value = $12,743.
During the month of June, you order $11,500 worth of products (beer, liquor and wine)
July 1st – You take another full inventory and your wholesale value = $12,158
Your monthly sales for June = $50,649
Now let’s do the math:
That’s it, but don’t forget that this is your overall pour cost percentage for all of your bar products. To get a truly accurate projection, you’ll want to do this formula for each category of your bar inventory, so you’ll have a different cost percentage for each category.
How to Figure Cost Percentage For Individual Products
Determining cost percentage for your individual beer, liquor and wine products is not always necessary, but it’s nice to know how in case you want to get an idea of what percentage each one is pouring at.
It can also help with pricing, but there is a much easier way to do this if you want to determine your pricing for your beer, liquor and wine which you can read about here.
The Individual Product Cost Percentage Formula
The formula itself is pretty simple:
Wholesale Cost ÷ Retail Value x 100 = Pour Cost %
In order to figure the pour cost %, we must know both the wholesale cost and retail price of the entire container(i.e. bottle, keg, etc).
This makes sense for the cost of the container (what you pay) but how do we figure the retail value of the entire container? Well, we need to know three things:
1. The number of oz. in the container (or ml, if you’re international)
2. The portion size for each product (i.e. liquor = 1.5 oz. pours, wine = 6 oz. pours, etc)
3. The retail price of that portion (what you charge your guests)
Here’s an example:
The Retail Value Formula
With this information, we can now figure the retail value of the entire container of Grey Goose. Simply divide the number of oz. in the bottle by the number of oz. in the serving size to get the number of shots (portions) per bottle.
33.81 ÷ 1.5 = 22.54 (rounded to 22.5)
Then simply multiple the number of shots by the retail price:
Retail Value = 22.5 x $9 = $202.50
Now go back to the original formula and simply plug the numbers in:
Wholesale Cost ($38) ÷ Retail Value ($202.50) x 100 = 18.77%
There you go. Now you’re a professional in figuring pour cost percentage. Remember, running a business is all about the numbers, and if you don’t keep a close eye on your numbers, you will eventually drown Lake Bankruptcy.
See you next time,