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

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.

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Liquor

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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 = 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 that 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

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.

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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 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

The pricing of craft beer is different 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 is willing to pay a premium for this. 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 – 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 you’re 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
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."

Jim Wright - Operates 4 PourMyBeer Venues: Stanley Beer Hall, The Golden Mill, Malcolm Yards, and Broadway Market

Self-pour is a no-brainer! 

If you’re interested in learning how self-pour can help your business, download the survey below where we asked our customers for feedback on various aspects of their operations like physical location, branding, and food sales.

Simply Fill out this form to Gain Access to the Survey to see the results.

PourMyBeer self-serve beverage wall at Pizza Artista in Greenville

If you have any questions about how to price alcohol in your establishment or self-pour in general, you can get in touch with us directly at cheers@pourmybeer.com or by filling out our contact form below!

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