There are few things in this world that pair better than pizza and beer. Yes, some may argue steak and beer, hamburgers and beer, tacos and beer. Damn the list of what goes good with a cold beer is really endless.
The profit margin on draft beer is much higher than on pizza. Overall alcoholic beverage and >coffee sales can be so much more profitable than your restaurants food sales. Maybe this one of the reason why their are so many craft breweries outsourcing to food trucks.
Managing a bar successfully requires a deep understanding of beverage costs. High costs can eat away at profits, so it is crucial to control them in order to ensure the bar's longevity and establish it as a neighborhood staple. In this blog post, we will discuss how to calculate beverage costs and introduce some useful formulas that can help increase the profitability of your bar.
Beverage cost refers to the expenses incurred by a bar whenever a drink is poured or made. It is often referred to as pour costs, liquor costs, or costs of goods. To illustrate this concept, let's consider an example. Suppose a bar purchases a 12-ounce bottle of Lagunitas IPA for $1.20. In this case, the cost of goods sold for the bar would be $1.20. Now, if the bar sells this bottle of Lagunitas for $6, we can calculate the beverage cost by dividing the cost of goods sold ($1.20) by the sale price ($6), which equals 0.2 or 20%. Therefore, the beverage cost for Lagunitas IPA is 20%.
The formula for calculating beverage cost is simple: it is the cost of goods sold divided by the sale price. However, things get a bit trickier when it comes to determining the cost of drinks like cocktails or wine by the glass. For cocktails, you need to calculate the cost per ounce of each ingredient (spirit and mixers) before finding the beverage cost for the entire drink.
Let's take the example of a Moscow Mule. To calculate the cost of the vodka, ginger beer, and lime used in the drink, you need to determine the cost per ounce or volume of each ingredient. Start by considering the cost per container or bottle for each item. For instance, a 750 milliliter bottle of vodka costs $15.25, a 12-ounce can of ginger beer costs $0.84, and a 16-ounce bottle of lime juice costs $4.18.
To find the cost per ounce, use the formula: bottle cost divided by ounces per bottle. For the vodka, a 750 milliliter bottle contains approximately 25.3 ounces. So, $15.25 divided by 25.3 equals $0.60 per ounce. Similarly, the cost per ounce for ginger beer is $0.07, and for lime juice, it is $0.26.
Next, calculate the volume used for each ingredient in the cocktail. In the case of the Moscow Mule, we use 2 ounces of vodka, 3 ounces of ginger beer, and 0.75 ounces (or 3/4 ounce) of lime juice. This translates to a cost of $1.20 for the vodka, $0.21 for the ginger beer, and $0.19 for the lime juice per cocktail. Adding these totals together, we find that it costs the bar $1.60 to make each Moscow Mule.
If the bar charges customers $8 for a Moscow Mule, the beverage cost for this drink would be 20%. It is important to consider beverage costs when pricing drinks, selecting ingredients, and placing orders with distributors. By keeping costs low, you can generate higher profits for each sale at your bar.
In conclusion, understanding and managing beverage costs is crucial for the success of a bar. By calculating beverage costs accurately and using the right formulas, you can control expenses, increase profitability, and ensure the long-term viability of your establishment.
The greater the percentage of your total sales is from alcohol the better it will be to your bottom line.
Focus on getting your restaurants or pizza shop economics and concept right, then a draft beers sales can contribute substantially to your restaurants success and profits.
Good food and oven baked pizza will keep them coming back, but good domestic or craft beer will help ensure that you make a profit.
Leave a comment