Everywhere we look, it seems like a new, high-level cocktail program is being offered at bars both new and old. More restaurants and bars are adding inventive cocktails to their menu, and this means they all need to figure out how to you properly price cocktails.
The good news? It isn't difficult. Though pricing a cocktail is a simple formula, there are a handful of decisions you'll need to make along the way because each bar and restaurant has their own unique challenges and considerations. So we'll lay down guidelines that will ensure that your cocktail menu generates sales and excites customers.
Figuring Out Liquor Cost
Backbar has written about liquor cost before, but instead of making you hunt down that past post, we'll lay out the basics here.
Here's a recap of what we've written about liquor costs before:
Your “liquor cost” is how much it costs you to purchase each ounce of your alcohol.
To determine your liquor cost properly, you need to follow the formula:
Bottle purchase price ÷ ounces in a bottle = cost per ounce
This will help you determine how many ounces you have in each bottle:
- A one liter bottle has 33.8 ounces of liquid
- A 750ml bottle has 25.4 ounces of liquid
Remember these two numbers, they'll help you immensely when pricing cocktails, or even pre-batching cocktails for faster service.
Therefore, if you purchase a 750ml of Grey Goose for $20 (you got a good deal!), you would follow this formula:
$20 (bottle purchase price) / 25.4 ounces (ounces in a 750mL bottle) = 79 cents per ounce
But, of course, it doesn’t stop there.
Since drinks usually contain about two ounces of alcohol, you’ll need to double your final amount (or determine how many ounces you typically pour) to figure out your total liquor cost per drink.
Your liquor cost will change with each bottle you serve.
Figuring Out Pour Cost
So now, we just need to figure out our pour cost, which is the margin between the price you pay for ounce (liquor cost) and the price you charge customers for one. Here is what we wrote about pour costs:
You’ve figured your liquor cost, but now you need to figure out your profit/markup, which is known as your “pour cost”. This is where the drink charge becomes tricky.
Why? Because your pour cost is entirely subjective.
What percentage do you want to make off of a drink? That is entirely dependent on the costs you need to charge to cover your overhead.
If you’re in a downtown area, your rent and advertising needs are steeper, and you’ll need a lower pour cost to cover your overhead. If you’re out in the country, you probably don’t have to pay as much to keep yourself in business, and you can work with a higher pour cost.
Wait—did I just say that higher overheard means a lower pour cost and lower overhead means a higher pour cost? What gives?
Remember: liquor cost is what YOU pay for the drink, therefore a higher pour cost means that a higher percentage of your per-drink income is coming out of your pocket.
Conversely, a lower pour cost means that a lower percentage of your per-drink income is coming out of your pocket, and that therefore you make a higher profit.
Okay, now that you’re starting to have an idea about how to consider your costs, you’ll want to know what a standard rate is for the pour cost. The bad news is that there is no “standard” rate, but if your bar is awesome enough to get a 15% pour cost, you’re doing really, really well.
If you want to charge less, you could go up to a 25% pour cost, but that means that your guests are only paying for 75% of the drinks they receive. If you aim your pour cost to fall in the 18%-24% range, you’re doing well. Whatever you choose, figure your pour cost and then stick to it.
To figure this math, you use this formula:
Liquor cost ÷ pour cost in decimals = drink charge
If the Grey Goose drink that you poured in the previous example has a 15% pour cost…
$1.58 (liquor cost) ÷ 0.15 (pour cost) = $10.53 drink charge
If the Grey Goose has a 24% pour cost…
$1.58 (liquor cost) ÷ 0.24 (pour cost) = $6.58 drink charge
That is one heck of a difference!
Taking the liquor cost equation, you can easily apply that to costing a cocktail. It's simple when you're mixing a cocktail that only calls for alcohol in its recipe.
It takes a little more work to figure out the cost if you're juicing fruit for fresh juices, creating your own in-house tonics or using pre-made purées, but the principals are all the same.
How to Calculate the Cost of Non-Alcoholic Ingredients
Many cocktail bars and restaurants divert from classic drinks like the Manhattan and run menus full of culinary cocktails that utilize fresh, house made ingredients like fresh pineapple juice or house made shrubs.
To understand how to price more complex cocktails, it's best to take instruction from the kitchen and how chef's prices dishes.
Portion control in the kitchen is essential. It refers to using the same amount of each ingredient for each dish made. Think of a 6 oz. portion of salmon, or even the amount of hollandaise that comes with a steak. For complex cocktails, it's crucial for the same portion of ingredients to be used in each drink.
For portion control in cocktails, bartenders should be using jiggers to measure each ingredient. This also ensures each drink made tastes the same no matter who is making it.
If you're making a fresh juice like pineapple juice, you will have to do some testing to see how much juice you get on average from a single pineapple. With fresh produce, there will always be some variance in how much juice each item yields, so an average amount is your best bet.
Account for the cost of each individual item, or the cost of produce purchased in bulk like lemons and apples, and find out your juice cost in the same manner you find out your liquor cost.
For example, if 8 pineapples yield 2 quarts of pineapple juice, and each pineapple costs $1.00, then 2 quarts, or 64 oz., of pineapple juice costs you $8.00. So, use the liquor cost formula from above and take 8 / 64 = .125, or, 12.5 cents per ounce of juice.
Say you use 1 oz. of pineapple juice in your cocktail, then you would add 12.5 cents to the pour cost of your cocktail. Still pretty simple, right?
Your customers are definitely an ingredient in your bar or restaurant's success. Understanding what your customer base is willing to pay for a drink will help guide the types of cocktails you put on your menu. If your bar caters to the beer and shot crowd, then a $12.00 cocktail might be laughed at.
Engineering Your Cocktail Menu
Shooting for a 20 percent pour cost is a pretty safe bet. But some cocktails are more expensive to make than others, and applying a 20 percent cost to those cocktails might make them too expensive for your customers to purchase. It's important to take this into account when pricing high-end cocktails.
For these cocktails, a higher pour cost in the 30 percent range can be acceptable. Influential bartender and blogger Jeffrey Morganthaler referred to these cocktails as loss leaders in a blog on pour costs.
This is a good way to think about it, and it means that a cocktail sold at a higher-than-average pour cost can be balanced by another cocktail sold at lower pour cost.
A complex cocktail is a good way to tell customers that they can come to your bar to try something new and exciting. It boosts the appeal of your bar, without hurting your bottom line too much.
Menu engineering promotes the idea of not strictly relying on margins like pour cost to price and build your menu. It argues that there are other factors to take into consideration when pricing drinks or food, and a successful menu should take other variables into account.
That should should help you when designing your next cocktail list.