The right drink prices maximize a bar’s profit. This post will explain exactly how to determine those prices.
First, choose a target pour cost.
There is no universal “good pour cost.” The 20% figure is thrown around a lot, but determining pour cost depends on too many variables to plug in 20% and think you’re maximizing profit. Pour cost is influenced by:
If you’re in San Francisco, you’re going have higher drink prices (and lower pour costs) than a similar venue in rural California. The cost of living is higher so people expect to pay more for their drinks and they have to so you can afford the higher rental cost and wages it takes to run your venue.
Next, consider your customers. Are they coming to your venue for a fancy night out or a few beers on the way home from work? Drink prices must be tailored accordingly.
Finally, think about your competition. If your bar is the only poolside bar at a resort, you can charge higher prices (and have lower pour costs) because no one else is bringing drinks to those lounge chairs.
Taking these considerations into account, target a pour cost percentage on the lower or higher side of these rough guidelines:
It will take some adjusting, but this method will bring you to your most profitable pour cost percentage.
Once you’ve determined your target pour cost, setting a drink price is straightforward.
Here’s the formula:
Cost of Ingredients ($)
Target Pour Cost (%)
Drink Price ($)
If it costs $1.25 to make a Citrus Rosemary Gin and Tonic and your target pour cost for liquor is 16%, you’d do this calculation:
$1.25 / .16 = $7.81
Round up to $8.00 and rest assured that your Citrus Rosemary Gin and Tonic is properly priced.
Finally, keep in mind:
Product Cost: The amount you pay for each bottle of liquor directly influences your drink prices. When the product cost increases, your drink prices should increase as well.
Distributor Promotions: Taking advantage of distributor promotions can help keep costs lower, but make sure you’re not keeping too much inventory on hand. It’s a balance.
Top Sellers: Slightly increasing the price of your top five drinks/shots can notably increase profit. Pardon the shameless plug, but you can easily see your Top Five Selling Products when you use our app.