How to Price Your Drinks to Achieve Excellent Pour Cost

 
Proper drink pricing is a skill that bar and restaurant owners should learn. Without accurate pricing, a successful pour cost won’t be easy to achieve. But, setting the price for your drinks is not a piece of cake. There are many things to consider, including changing product prices and customer preferences.
 

Here’s a quick guide to help you come up with drink prices that will benefit your bar.

The formula

To price a drink, you have to calculate the cost of your drink by adding up the cost of the ingredients. You need to pick a pour cost percentage to target as well. Then take the cost of your ingredients and divide it by your target pour cost.
Price = Cost of Ingredients ($) / Target Pour Cost (%)
Based on our recent study, the good target pour costs were 20% for beer, 14% for liquor, and 22% for wine.To price your drink menu, there are two things you need to consider.

01 Variance

It’s important to remember that variance or shrinkage increases pour costs. Lost products might not directly affect sales, but they influence pour costs. Since industry shrinkage rates are around 20%, you have to consider the anticipated shrinkage in your pricing. Pour Cost = Inventory Usage / SalesLet’s assume that your bar earns $100,000 in sales each month and you want to achieve a 20% pour cost. When you factor in the 20% variance, this means you have to price your drinks at an average pour cost of 16.67%.Through pricing this way, you will be able to get $16,670 in usage, which will be added to an additional $3,334 of expected variance ($16,670 x 20%)

02 Sales Mix Across Products

The second thing to consider is that the target pour cost of 16.67 is an average. To achieve this number, you have to find the right target for each product category. So do you do that? Say 50% of your monthly sales are in spirits. You can achieve a lower pour cost in spirits compared to wine and beer, and beer will be the least profitable. If you price your drinks on average to get a 10% pour cost on spirits, a 20% pour cost on wine, and a 27% pour cost on beer, then you will achieve the target inventory usage of around $16,700.(10% x $50,000 spirit sales) + (20% x $25,000 wine sales) + (27% x $25,000 beer sales) = $16, 750 total sales usage.
There are no hard rules in pricing. At the end of the day, it all depends on what your establishment needs. But a deep understanding of numbers and consideration of the vital factors will help you build an effectively priced drinks menu, which will eventually boost the profits of your bar!