Liquor cost is a bedrock metric for identifying expected profits in your restaurant. Knowing your numbers and achieving the right liquor cost can help you increase earnings by returning higher profits on alcohol sales. That’s why it’s important to know the industry benchmarks for liquor costs in restaurants. What should liquor cost be in a restaurant? It depends on a few variables. But we’ll cover what the standard liquor costs are so you can compare your numbers to the restaurant industry as a whole. This will let you find a healthy intersection of cost and sales to help your restaurant maintain success.
Why Benchmarks for Liquor Costs are Useful
Industry benchmarks are useful because they are a guideline against which you can weigh your restaurant numbers. They are especially useful for new restaurants who are uncertain of what to realistically expect for their business. And for struggling restaurants that need to discover areas to improve operations and tap into higher profits.
Standard liquor costs (or pour costs) are an average range of cost percentage that restaurants cost falls into.
The range is helpful because there is no single standard for costs that will apply to every restaurant type. Understanding the focus, limits, and variables of your beverage program will give you a better idea of where you should land in the standard cost range.
Which Variables Impact Liquor Costs
Depending on what your focus is for your bar program, you can decide which standard costs are important for your business.
For example, a neighborhood wine bar is focused on selling wine by-the-glass and boutique bottles and won’t expect to do high volume business. So a wine bar like this shouldn’t expect to have the same liquor costs as a night club that pours a high volume of low cost spirits and charges a premium price.
Variables to consider:
- Size of restaurant – larger restaurants will often have higher sales and higher costs
- Size of beverage program – a larger volume of wines, beers, or spirits will have higher costs
- Alcohol sales – The dollar amount of sales generated will have an affect on the cost percentage
- Beverage focus – Wine often has higher costs than spirits
- Location – The cost of purchasing items and the price point you can charge your customers are dependent on location
What Should Liquor Cost be in a Restaurant?
First. What is liquor cost? It’s also referred to as a pour cost. Though Uncorkd has covered what liquor cost is and how to lower your liquor cost, here’s a quick overview:
Liquor Cost is the cost of a drink ( and a drink’s ingredients) divided by it’s sale price.
Most industry figures cite that the standard pour costs for restaurants is 18% – 24%.
But that number has many skeptics. And it leaves out some useful information by combining the different components of a beverage program into a single statistic.
It’s helpful to take a look at the average pour costs of differently beverage types to determine what range your bar or restaurant should strive to hit.
Average Pour Costs for Wine
Wine is often found on the higher end of the beverage cost scale.
Bakery Tilly’s Industry Benchmark Report shows wine costs generally run between 35% – 45% of total wine sales.
If your restaurant is focused on wine sales, or you run a small wine bar, then your target liquor cost will be higher than other venues with spirit-based or a beer-centric sales.
Though wine has a higher pour cost which leads to smaller profit margin, wines can yield higher revenue than beer, which restaurants should keep in consideration when pricing their wine selections.
Average Pour Costs for Beer
The main thing to consider when looking at beer is whether it is a draft beer or bottled. Buying beer by the keg is a great way to maintain a competitive liquor cost.
The industry standard for draft beer cost is 15% to 18%. Beer on draft is good for building high margins, and is also useful for moving through inventory quickly.
On the other hand, bottled beer has a much higher pour cost at 24% – 28%.
Average Pour Costs for Spirits
Spirits, like draft beer, maintain some of the lower liquor costs out of any alcoholic beverage segment. The benefit of spirits over draft beer is that they often sell at a higher dollar value so you benefit from the combination of large margins and high price points.
Industry liquor cost standard for spirits is 18% – 20%.
High volume in spirits is one of the reasons that night clubs can generate some of the highest profits in the hospitality industry. That and features like bottle service, for which night clubs can sell liquor bottles with mark ups of 200% or more!
How You Can Lower Your Pour Costs
- A Good Inventory System: Spreadsheets are the most common tools used to perform and track liquor inventory. But adopting a mobile inventory solution like Uncorkd can reduce the time spent on inventory by 50% when compared to spreadsheets. Uncorkd and other inventory systems provide you with detailed financial reports and inventory analytics that are necessary to tracking and lowering your liquor costs.
- Purchasing Budgets: Coming up with a budget for alcohol purchases will help keep your costs manageable. It’s great for making sure you don’t overspend and aren’t stuck with overstock or inventory you can’t sell. You’ve just got to make sure you stick to your budget.
- Analyze Your Data: We mentioned above that reporting and analytics are a great way to lower liquor costs. Knowing your numbers is key to success in the restaurant industry. Having data to analyze will give you good insights for making the right decision to lower costs.
Latest posts by Kyle Thacker (see all)
- Restaurant Management Skills Level Pyramid - October 10, 2018
- 5 Fall Cocktails to Capture the Flavors of Autumn - September 26, 2018
- Industry Benchmarks for Liquor Costs in Restaurants - September 11, 2018