How to Price Beer, Wine, and Liquor in Your Bar or Restaurant

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Determining Beverage Prices in Your Establishment

Pricing is a major factor in deciding how to run your establishment, and you must consider it when developing your business plan. Figuring out how to correctly price alcohol in your establishment isn’t easy. Many operators struggle to find the magical number that will increase profits and continue bringing customers through the door. 

While many establishments will generate money from their food offerings, most of the profits lie within alcohol sales, so it is imperative to price your drinks accordingly. To make things even harder, beer, wine, and liquor follow different pricing structures.

Liquor Cost logo

Liquor

Draft Beer cost logo

Draft Beer

Bottled Beer Cost logo

Bottled Beer

Wine Cost Logo

Wine

But before we get into that, we need to discuss the two most important metrics, pour cost and pour cost percentage.

What is Pour Cost?

Pour Cost is the cost it takes for your bar or restaurant to make a drink/price you are selling it for.

Your pour cost should be as low as possible to earn higher margins on your beverages. Once you’ve determined your pour cost, you can set drink prices by dividing your ingredient cost by your target pour cost.

What is Pour Cost Percentage?

Pour Cost Percentage is the ratio of beverage costs compared to beverage sales.

To hear an industry expert discuss key performance metrics, costs, and more, check out the video below. Jim Wright, Director of Operations at four self-pour venues, provides tools you can use when budgeting and analyzing costs within your bar or restaurant. 

Below, we’ll break down the pricing for each beverage type so you can make the most out of each drink you’re serving!

How to price beer in your establishment - PourMyBeer

How to Price Beer

Beers account for around 35% of your bar sales and potentially even more if you own a self-pour establishment. So, you need to ensure that you are pricing your beer in the right way to keep the suds flowing and maximize your profits. 

The markup on beer depends on a few factors, including the type of beer, its popularity, and the type of establishment that you operate. On average, the markup on beer is between 200-300%, though it will depend on the specifics of each beer and the way it is served.

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ABV/IBU

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Profitability

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Competitor Pricing

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Pour Size

Finding the perfect price for a beer can be tricky. You want to price it perfectly so that you increase your profits. Any higher and people won’t pay for it, any lower and you lose out on revenue. Although pricing is a decision that you, the bar owner, are responsible for establishing, we have put together some general advice together for you below.

Bottled & Canned Beer

Bottled beer will have the lowest profit margin due to the nature in which you buy the beer. You are paying for extra packaging costs and material, and it is the least efficient way to serve (from a strictly financial perspective). But patrons like having options, and it allows you to offer a larger selection. Not everybody will want an exotic beer, so it may be unwise to order a keg of something that you may lose money on. In this case, order bottles of the specialty beer and see how your customers react. 

When determining your pricing, you must consider your desired profit margins, the amount you make on any drink sold, the pour costs, and the cost of each drink. If you pay $1 for a wholesale beer bottle, you should sell it anywhere between $3.35-$5. 

For canned or bottled beer, your profit margin should be around 75%, which gives you a pour cost of about 25%

Profit Margin

Bottled Beer Profit Margin Logo

Pour Cost

Bottled Beer Cost logo

Use the equation below to estimate your retail price per bottle or can.

How to Calculate the Price of Bottled/Canned Beer

Draft Beer

Selling beer on draft has proven to be the most cost-efficient way to serve your patrons. When you buy in bulk, similar to economies of scale, the individual price of each pour is lower. There are other costs associated with maintaining keg systems, but at this point, it is common and easy to manage. It is recommended that you aim for a profit margin of around 80% and a pour cost of 20%. Generally, the cost of beer in kegs is 40-45% less than bottles/cans.

Profit Margin

Draft Beer Profit Margin Logo

Pour Cost

Draft Beer cost logo

See the equation below to find out how to estimate the cost of one beer from any keg.

How to Price Draft Beer in Your Bar or Restaurant

Craft Beer

Pricing of craft beer differs from regular, non-craft beer simply because of its status. Typically, a customer looking to buy a local craft beer is more interested in trying something new and willing to pay a premium. Be careful; if you price it too high, you will steer people away from trying it.

We recommended you use the same pricing system you use for beers on draft. If you are selling it in bottles/cans, it will be a little different. For example, depending on factors such as the wholesale price, supply, demand, and competitive pricing, you will multiply the wholesale price by factors of 2, 2.5, or even 3, depending on the beer. If the wholesale price you paid is more expensive, multiply the price by 2 so that the retail price is not too high. 

Conversely, if you buy craft beer at a cheaper wholesale price, then you can multiply that price by 2.5 or 3 and expect a large number of patrons to pay the premium. Your target pour cost for craft beer should be between 20-26% and a 74-80% profit margin.

PourMyBeer Tip: To determine how to best price your beers, check out this Beer Profit Calculator!

Profit Margin

Craft Beer Profit Margin

Pour Cost

Craft Beer Pour Cost

How to Price Liquor

When it comes to pricing liquor in your bar or restaurant, there are a few routes you can take and several factors to consider before deciding on the price tag. Think about your target demographic and your geographic location. If your bar or restaurant is in a big city, your drink prices will most likely be more expensive than that of a bar paying lower rent. Consider the age of your customers as well. Is your market younger or older? If younger, it may not be wise to charge high prices.

If you’re unsure where to start when considering prices, take a look at the industry average pour cost, which typically falls between 18-24% with an 80-85% profit margin. But this should not be the deciding factor when it comes to your prices. Think of it more as a starting point.

Profit Margin

Liquor Profit Margin

Pour Cost

Liquor Pour Cost

Below, we’ll discuss the two methods when it comes to pricing liquor, the traditional method and the four-tiered method, so you can decide which is better suited for your operations.

Traditional Method

  1. Calculate Pour Cost – The cost it takes to make the drink/price you sell it for.
  2. Calculate the Cost Per Ounce – To determine the price per ounce, divide the cost of your alcohol bottles by the total number of ounces in the bottle.
  3. Calculate Cost of Liquor for Each Drink – Decide how much alcohol will be in each drink, then multiply that by the cost per ounce determined in step 2.
  4. Consider Other Costs – Alcohol is not the only cost you must factor in when pricing drinks. There are also garnishes, mixers, and over-pours to consider. Bar owners will usually add 20% to the price of their drinks as a cushion.  
  5. Round Your Prices Up – Round the price up to the nearest quarter to make calculations easier for your customers and your staff members.  

Four-Tiered Method

If your establishment can easily determine what category your drinks fall in, this may be the perfect method for you! There are four categories when it comes to alcohol bottles…

Well

This alcohol is considered the lowest-tier or “house” alcohol, and customers do not specify the brand name. For example, a customer can order a Rum and Coke from the bar and only spend about $5. Typically, pour cost percentages for well drinks are around 30%. To learn how to make your well drinks profitable, check out this post from our partners at Toast.

Call

This alcohol is higher tier than well alcohol. It’s referred to as “call” because customers call out the brand by name (i.e. Jack and Coke). The pour cost percentage for this type of alcohol usually falls around 25%.

Premium

Nicer than both well and call alcohol, premium bottles are on display behind the bar for customers to see. These are of higher quality, resulting in a higher price tag. The pour cost percentage for premium drinks falls around 20%. 

Super Premium

These are the highest-quality bottles that brands have to offer, ultimately leading to an expensive price tag for guests. If serving drinks with super-premium alcohol, your pour cost percentage should be around 15%.

You must understand liquor costs in your establishment so you can maximize your margins and increase your profits. While you may have found a price that works well for one drink, it may not be the right price for another. Keep track of your metrics and continue to evaluate and reassess what’s working and what’s not so you can make the most out of your beverage sales!

If you’re just opening up your bar or restaurant and are looking for more information on permits and licenses you may need, check out this blog post where we dive into this topic in detail! And, check out the video below to hear the owners of Beer Wall On Penn discuss permits in the state of Pennsylvania.

How to Price Wine

Wine is the most difficult beverage to price. There are different prices for glasses and bottles. You need to ensure that your prices aren’t scaring customers away, but also that you aren’t losing out on profits due to spoiled bottles of wine. Before you can price your wine, think about your demographic (as you did when calculating your liquor prices). If you’re targeting an older market with a more refined palette, charging more for your wine may be acceptable, while an establishment with a younger crowd needs to be more cautious with its wine prices. Another factor that you must consider is state laws and taxes. Depending on where your establishment is located, the price of wine will vary.

You must understand liquor costs in your establishment so you can maximize your margins and increase your profits. While you may have found a price that works well for one drink, it may not be the right price for another. Keep track of your metrics and continue to evaluate and reassess what’s working and what’s not so you can make the most out of your beverage sales!

By The Bottle

Once you’ve established the type of market you’re serving, it’s time to create a strategy when it comes to pricing wine by the glass versus the bottle. While you may expect otherwise, WineEnthusiast states that lower value wines have the highest markups, while more luxury wines have a lower markup.

When pricing wine by the bottle, restaurants tend to charge 4-5 times the wholesale cost. This leads to a pour cost of 20-25% and a 70% profit margin. It’s important to note that while these are common markups, they won’t work for everyone. Try different markup values and see what works and what doesn’t.

Profit Margin

Wine by the bottle Profit Margin

Pour Cost

Wine By the Bottle_Glass Pour Cost

By The Glass

With wine by the glass offerings, many restaurants lose out on profits because the bottle goes bad before another customer orders a glass (we recommend kegged wine as a way to prevent this, but more on that later). Take a look at your offerings, determine the most popular wines, and offer those by the glass.  

Wine bottles contain 5-6 glasses depending on the pour (or 25.4 ounces). Binwise states that wines by the glass are commonly priced at 85-100% of the entire bottle. Many restaurants charge the wholesale cost of a bottle for a glass of wine. This allows the establishment to make up for the cost in case no other customers order that same wine. Your pour cost for wine by the glass should also be 20-25% like with wine by the bottle.

Pour Cost

Wine By the Bottle_Glass Pour Cost

If you’re ready to say goodbye to the days of throwing out half-full bottles while adding a fun experience for guests, it’s time to consider self-pour! Check out the video below to see how wine on tap is a game-changer for operators.

Pricing Advantages of Self-Pour

Now that we’ve broken down the pricing structures for beer, wine, and liquor, let’s talk about the pricing advantages that come when serving kegged drinks with self-pour beverage systems! Since every ounce is accounted for, operators will never lose out on profits from spillage or over-pours like at a traditional bar. While self-pour is a cool and unique experience for customers, it also brings numerous benefits to operators! Let’s get into it.

  • Decreased Waste – Less than 3% waste with self-pour drinks. 
  • Less Overhead 20% decrease in labor costs.
  • Kegged Wine Saves 39 Pounds of Packaging From Landfills
  • Easier to Manage Inventory With Kegged Cocktails. 
  • No Free Samples. Every ounce is paid for, meaning no lost sales to complimentary drinks or incorrect POS entries like at a traditional bar. 

With self-pour technology, you can serve significantly more guests than at a traditional bar. Don’t just take our word for it though…

"We just opened our third PourMyBeer location a month ago. We have three cocktails on tap - Moscow Mule, Bourbon Ginger Cider, and, of course, a Margarita. In that month, we have sold 27,553 ounces of self-pour cocktails. That is over 9,000 ounces per tap or approximately 500 ounces a day per cocktail tap. Not sure more justification is needed. While cocktails are on a limited number of taps in our locations, they are a powerful revenue driver in many ways. The cocktail options give friends of beer enthusiasts (who may not feel like a beer) other options. This mitigates the 'I want something besides beer' friend from convincing the group to go somewhere else. Therefore driving (or saving) revenue."

Maximizing Profits Through Strategic Pricing and Promotion

While we’ve discussed the basics of pricing your alcoholic beverages, it’s also important to consider how strategic pricing and promotion can maximize your profits. As an industry that thrives on social interaction and customer experience, bars and restaurants have unique opportunities to leverage pricing strategies that not only increase sales but also enhance the overall customer experience.

Promoting Prices In-Store and Online

How you frame your price adjustments is often as important as how much you change your prices. Whether altering costs near a holiday or addressing demand fluctuations, you must create hype to engage your audience. An effective way to attract customers is to run online and in-person promotions. You can do this by hosting happy hours, game nights, and themed or musical events.

You should also take advantage of the internet through email newsletters and social media posts publicizing what’s happening within your establishment. Running special offers and competitions for unique prizes can help, as well!

Happy Hour and Special Promotions

Happy hour and special promotions are time-tested strategies that can drive traffic during slower periods. By offering discounted prices on select beverages, you can encourage customers to try new drinks they might not usually order. This not only increases sales during the promotion but can also lead to future sales if customers discover new favorites.

Remember, the key to a successful happy hour or promotion is balance. You want to offer attractive prices that draw in customers but are not so low that it significantly impacts your profit margins.

Volume Discounts

Offering volume discounts, such as reduced prices for pitchers or bottle service, can encourage larger orders. This strategy can be particularly effective for groups, leading to increased overall sales. Additionally, it can speed up service since staff can prepare and serve drinks in larger quantities.

Dynamic Pricing

Dynamic pricing involves adjusting prices based on demand. This could mean higher prices during peak times and lower prices during slower periods. While this strategy requires careful management to avoid customer dissatisfaction, it can be an effective way to maximize profits.

Premium Experiences

Consider offering premium experiences, such as tastings or pairing events, at a higher price point. These events can attract customers who are willing to pay more for a unique experience, increasing your average ticket size.

Evaluating Customer Response

Your customers are an essential component of your business model. While you have to do what’s best for your bottom line, you also want to ensure you meet your patrons’ needs and wants. It’s all about finding a healthy balance.

After changing your prices, it’s wise to check how your patrons respond. Are more individuals purchasing drinks? Less? Have people complained? Understanding how customers feel will strengthen your relationship with them and give you the information you need to enhance your services.

Regular Price Reviews

Regular price reviews are essential. Costs can fluctuate due to a variety of factors, including changes in supply chain, seasonal availability, and market trends. Regularly reviewing and adjusting your prices can ensure you maintain healthy profit margins.

After changing your prices, it’s wise to check how your patrons respond. Are more individuals purchasing drinks? Less? Have people complained? Understanding how customers feel will strengthen your relationship with them and give you the information you need to enhance your services.

Maintaining Records of Sales and Inventory

An efficient inventory management system will help you optimize your bar’s beer pricing strategies and maximize profit margins. Any beers, liquors, syrups, juices, or foods you have are a part of your inventory. With greater visibility across your entire stock, you’ll have a clearer picture of what you have enough of, what you need to order, what drinks fly off the shelves, and which ones sit for longer. 

Analyzing your inventory information will guide you toward finding the proper pricing structure at your restaurant or bar. You can increase prices for popular drinks and charge less for drinks that are more cost-efficient to stock. These adjustments will help you strike the right balance to put more money in your pocket while providing customers with affordable and delicious food and drinks.

Leveraging Technology

Finally, in today’s digital age, technology can play a crucial role in your pricing strategy. For instance, self-pour technology, allows customers to pour their own drinks, paying by the ounce. This not only creates an interactive experience for the customer but also allows for more precise pricing and reduced waste.

Strategic pricing is about more than just covering costs and securing profits. It’s about understanding your customers, leveraging trends, and creating an experience that keeps people coming back. By considering the strategies above, you can create a pricing strategy that not only boosts your bottom line but also positions your bar or restaurant as a go-to destination for a great time.

If you have any questions about how to price alcohol in your establishment or self-pour in general, contact us today!

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