It still amazes me how often I come across bar owners and managers—supposed leaders who are running a major brick & mortar business in the heart of their community—who treat their business as they would an outdoor cat they kept as a pet: Absentmindedly. Casually. Something to be fed once per day, with a quick pat on the head and then forgotten about, because it will basically just take care of itself.
This, of course, simply cannot be. The business you run is more related to a newborn baby that needs constant care and feeding if it is to grow up healthy and productive. This is my melodramatic way to slap you through the screen you are reading this on to wake you up. To urge you to pay attention. To implore you to put a magnifying glass on the small details and systems you have in place because it can add up to huge dividends in the long run.
One of those small details involves pricing all of your liquor, beer and wine inventory properly, to find that sweet spot between squeezing maximum profit from each bottle, while still providing a fair price to your guests so they will come back again and again.
Unfortunately, many of you (because I have seen it firsthand on a repeated basis) simply price your products on a whim, off the top of your head. This could be hurting you more than you know, so in order to systemize (if you don't know, I love systemizing bars and restaurants) your pricing, I'm going to give the formula for pricing all of your products based on a desired pour cost percentage.
If you're not quite sure what your desired pour cost percentage should be for each category, click here to read Bar & Restaurant Industry Standards: Find Out Where You Stand.
You can also visit our Resource Page to download the industry standards in a pdf.
With that said, off we go...
HOW TO PRICE YOUR BAR INVENTORY PRODUCTS
In order to price any product, all you need is the wholesale price you paid for the individual container ÷ the desired cost %. Very simple, but sometimes there can be additional steps involved. For instance:
- You'll need to divide the case price by the number of bottles in a case in order to get the individual wholesale price of each bottle (for example: a case of 24 bottles of Corona costs $26.75 ÷ 24 bottles = $1.11 per bottle).
- For anything not sold as a whole unit (like bottled beer), in other words, anything poured from a bottle or keg, you will need to declare a portion size.
With that said, here is how to price each category:
BOTTLED BEER (OR ANYTHING SOLD AS A WHOLE UNIT)
Using our example from above, we know that a bottle of Corona costs you $1.11, and if your desired cost percentage on bottled beer is 20%, divide $1.11 into 0.20 and you get $5.55 for the retail price of that one bottle of beer.
You may want to round that down to $5.50.
Draft beer is definitely the most difficult to price because we have to figure out how many oz. in a gallon first. Luckily, your faithful bar servant has that for you right here so you don't have to go look it up.
In addition, if you have multiple glass and pitcher sizes, you'll need to use this formula to price each one out. Let's look at an example for pricing a 16 oz. Draft Beer at a desired pour cost percentage of 25%.
DETERMINING HOW MANY POURS PER KEG
1 Gallon = 128 oz.
15.5 Gallon x 128 oz. = 1,984 oz.
1,984 oz. ÷ 16 oz. Glass = 124 pints per keg
PRICING A 16 oz. GLASS
Keg Cost = $119
Desire Cost % = 25%
$119 ÷ 0.25 = $476 (Retail Price for Entire Keg)
$476 ÷ 124 pints = $3.84 per pint (round up to $4)
*If you have different sized glasses, you'll need to do the same process for each.
Liquor is just like draft beer, but the container is a bottle and it's much smaller. Once again, you need to know how many oz. are in each container and then divide by your portion size to figure out how many portions (or shots) you're getting out of a bottle. Here's how to figure out how many shots are in a bottle based on 1.5 oz. pours.
1 Liter Bottle = 33.81 oz. ÷ 1.5 oz. = 22.5 shots per bottle
750 ml Bottle = 25.36 oz. ÷ 1.5 oz. = 16.9 shots per bottle
As an example, let's look at a 1 liter bottle of Jack Daniels, wholesale cost = $24.46.
Desired pour cost percentage = 17%
$24.46 ÷ 0.17 = $143.88 (retail price of bottle)
$143.88 ÷ 22.5 shots = $6.39 (rounded up to 6.50 or $7.00)
Pricing wine couldn't be easier, if you pour 6 oz. like most places do. Most wine bottles are 750ml which contains 25.36 oz. If you pour 6 oz. portions, it's almost exactly 4 glasses of wine per bottle.
Because of that, if you price your wine by the glass the exact same price that you paid wholesale for the bottle, it works out nicely to 25%. In other words, wholesale price of the bottle = $11, retail price of the glass = $11. Check it out.
One bottle of wine costs $11 wholesale.
$11 ÷ 0.25 = $44 (retail price for the entire bottle)
$44 ÷ 4 glasses per bottle = $11 (retail price per glass)
However, if you don’t pour 6 oz. or you have a different target for your pour cost percentage, you'll need to go through the same process as you did for liquor and divide 25.36 oz. by your individual portion size to determine number of glasses per bottle instead of shots.
So that's it. No more que sera, sera attitude—whatever will be, will be—when it comes to pricing and systemizing your bar. If you want real results, you need to take real action the right way.
Ok, that concludes my preachy scolding for the day.
See you next time.
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