There are a variety of factors to consider when determining how to price the products sold at your bar or restaurant. It is important to think through all of these factors in order to ensure your prices increase business and maximize profits.
While liquor cost is certainly not the only element that must be considered, it will play a significant role in determining your price point. Therefore, it is important to understand how this element impacts your pricing.
At Bar-i, we work with over 60 bars and restaurants. This has provided us with extensive experience with a wide range of establishments. We understand the unique factors impacting the decisions made at high end bars, fast-casual establishments, neighborhood bars, and low-end dive bars. This perspective drives our advice regarding how liquor cost will impact your pricing.
Average Liquor Cost for Beer
When considering the liquor cost of beer, it is important to distinguish between draft beer and bottled beer. Draft beer tends to have a slightly lower liquor cost, typically between 19-24%. Bottled beer costs are commonly in the 23-28% range.
We typically recommend that you focus your beer promotions on draft beer for several reasons:
• Draft beer is a product you can only get in bars. This provides added value to draft beer service since it is something your customers can't get at home.
• The lower liquor cost for draft beer means you will be able to make more money off of promotions since you already have a greater built-in margin.
• Most people who are set in their beer product of choice typically drink bottled beer. Draft beer drinkers are often more flexible in their ordering habits since they are limited to the selection the bar has on tap.
This last point is particularly important to consider. Since draft beer drinkers are more likely to deviate from their typical ordering habits, they are more likely to order the beer on special than a bottled beer drinker who remains loyal to his favorite beer. Running promotions for these customers will make them happy, and ultimately it will make you more money.
Average Liquor Cost for Spirits
The average liquor cost for spirits is extremely variable since some bars experience high sales volume for wells while others largely sell high end liquors. We have experienced a liquor cost range of 13-21% for liquor products.
Most bars should never have a liquor cost higher than 21% for spirits, but you can lower this cost closer to the 13% range by offering craft cocktails. This provides value to your customers and allows you to sell more expensive drinks. In high end bars, it is common for craft cocktails to cost between $10 and $12, and you can maximize your profits on these drinks by combining different liquors and mixers in clever ways.
Average Liquor Cost for Wine
Liquor cost on wine is always the highest because wine costs more per bottle than other alcohol products. In our experience, you should expect your liquor cost for wine to be in the 26-32% range.
While wine isn't necessarily very profitable when you think in terms of liquor cost percentage, it can actually be quite profitable when you change the way you view profitability. A glass of wine will typically sell for anywhere between $6 and $15. While you may not make a large profit based on the liquor cost percentage, you are still making a decent profit on wine when you consider how many dollars you make per glass.
We hope this provides you with some insight regarding how liquor cost impacts your pricing. In our next post, we will delve deeper into the factors which impact how you set your prices.
To find out how a modern liquor inventory system can benefit your bar and help you maximize profits, please contact Bar-i today to schedule your free consultation. We provide services to bars nationwide from our offices in Denver, Colorado.