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How to determine what cost of beverage sales or “pour cost” percentage is for alcohol

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When operating a restaurant or bar you are most likely going to sell alcohol. Hard liquor is a great item in that you can sell it for a considerable marked up price compared to its cost. In addition to having a good cost to revenue ratio, hard alcohol does not spoil and doesn’t require refrigeration like fresh foods do.

 

Step 1: Decide what kind of liquor or current liquor that you sell/want to sell. Some items are obviously more profitable than other ones. An inexpensively mass produced Vodka might be cheaper than an imported French cognac. You can mark up the less expensive item more, as the inexpensive Vodka may only be $2.00 a bottle and you can charge $5.00 a drink. But on the other hand if the French Cognac costs you $100 a bottle, you can’t necessarily charge $100+ a pour. You could have your alcohol priced perfectly for your pour cost percentage but if no one is purchasing the alcohol, then who cares. Everything must be maximized for profit, but also priced low enough that consumers will still purchase.

 

Step 2: You’ll want to know how much each item costs. There are typically 2 sizes of bottles used in the United States hospitality industry. 1 liter and 750ml. A lot of companies offer there products in both sized bottles, but sometimes for higher end items, they only offer the 750ml size. For example, some high end Tequilas and small batch Bourbons are only offered in the 750ml size. With these two sizes you’ll obviously receive different amounts of product. The standard size of a “shot” of alcohol is 1 1/4oz. in most locations. From a liter bottle you’ll receive approximately 27 “shots” or pours. For a 750ml bottle, you’ll receive approximately 20 “shots” or pours. These are only approximations as depending on service style, you might “free pour” which will have human error to account for. The term “free pour” refers to when the bartender pours straight from the bottle not using any measuring devices like a “jigger” or measuring cup.

 

Step 3: The pour cost formula is actually fairly simple to calculate. For a liter bottle of alcohol the pour cost formula is as follows, (Bottle Cost)/(Number of “shots” in the bottle x How much you charge for each shot or pour of alcohol.) In the following example $10(Bottle Cost)/ (27 shots in a bottle x $10.00). In this example the pour cost is 3.7%. Fantastic pour cost. For pour cost for 750ml bottle size the formula is the same but you change the number of shots in a bottle to 20. In the following example $10(Bottle Cost)/ (20 x $10.00). The pour cost is 5%. The pour cost is higher because you are receiving less product than in the previous example. The lower the percentage the better, as this means you are spending less of a percentage of cost to generate the revenue. Now that you know what percentage you are running, you can evaluate whether certain items are priced correctly, or should be replaced with less expensive items, that will generate more profit. Happy selling!






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