Liquor Costs

The key to success for a bar is to keep liquor costs in check. Bars and restaurants operate on profit margins thinner than a lime wheel garnish, which means that bar and restaurant operators must always be looking at ways to keep costs like liquor, food, and labor in check. When looking to lower your bar’s liquor cost, even the smallest adjustment can make a big difference. Let’s dive into four tips for cutting pour costs.

1. Combat Overpours and Spillage with Pre-batched Cocktails

It doesn’t take a mixologist or fancy cocktail bar to create great tasting and inventive cocktails. But a high-end cocktail program can be costly for bars and restaurants to run.

Craft cocktail programs call for complex drinks with many ingredients. This increases the chance for mistakes like overpours, spillage, and inconsistencies with drink proportions that can turn into comped drinks for disappointed customers. 

Overpouring is a leading cause of lost sales for bars. The average overpour for cocktails can result in 48 percent loss of revenue. That alone can kill the profitability of a bar program.

A great way to combat overpouring, spillage, and inconsistent drinks is to pre-batch cocktails

Mixing cocktail ingredients, especially the base liquors in a drink, prior to a shift will ensure that the right proportions are used for every cocktail, which will limit the potential of overpouring and lost revenue.

Hold on to liquor bottles that have been poured out to stock up on vessels for premixed drinks. Make sure to clean them properly, and run them through a high heat dishwasher to help remove labels and glue on reused bottles.

Another perk of pre-batched cocktails is that it will save significant time on making cocktails. This means less stress on the bar and service staff and a better experience for guests. Truly a win-win. 

If you’d like to maintain the theater of having a great cocktail made right in front of guests, you can utilize the pre-batched drinks for the service well and allow bartenders serving guests to still mix drinks from scratch.

top view cocktail topped with herbs

2. Nix Extra Invoice Fees with Smart Purchasing

Being savvy when placing orders with liquor distributors is key to maintaining low liquor costs. How frequently and in what quantity you order alcohol products can have a major impact on your liquor spend even if it doesn’t seem like it.

If you pay close attention to your invoices, you’ll see that there are many costs hidden in the added fees section. From gas tax and delivery fees to liquor tax, those costs add up.

One of those fees is a split case fee. This is an additional charge that distributors and vendors add when a retailer orders a partial case and the vendor is required to “split” the full case into smaller allotments for the retailer. 

This is a common issue for bars and restaurants, especially when ordering a product that sells infrequently or in low volume. 

But where split case fees really hurt a restaurant’s costs is when they’re completely avoidable. A split case fee is like being charged a service fee when taking money out of a random ATM. It’s just money thrown away because of poor planning. 

It’s important for bar operators to identify par levels for each item. A par level is the minimum quantity of an item on hand at a given time to satisfy the expected demand for that item. 

A par level is a threshold that tells you when you need to order more of an item. But it may be more cost effective to order a higher quantity than your par level suggests if it will help you leverage better deals from vendors and avoid unnecessary costs like split case fees.

Here’s a straightforward example. If you pour through two bottles a week of Grey Goose, it doesn’t make sense to order two bottles of it every week if you have to pay a split case fee on it. It would be more cost efficient to order a case of 12 Grey Goose that will supply you with 6 weeks worth of product and allow you to avoid split case fees. 

Need help calculating your food and beverage costs? Use the free Food Cost Calculator.

3. Entice Distributors with Prime Menu Placements 

Anyone who has run a bar before knows how unpredictable ordering from liquor distributors can be. Particularly for bars who aren’t in a control state and buy alcohol through private companies and not government-run agencies. 

Prices fluctuate, deals change, and products bounce around between distributors like lottery balls. Despite the confusion that can ensue, we know that chaos is ladder. And smart bar operators will use the flexibility of distributor pricing to reach better deals. 

One of the best ways to get lower pricing for certain products is to list them in prominent places on your menu. 

For example, using a certain vodka as your well vodka option means a high volume of it is sold. The high depletion rate will mean larger and more frequent orders for your distributor, which a savvy bar manager will leverage into lower costs for buying case drops.

Another great area of your menu to leverage is your wine-by-the-glass list. Placement here is prime real estate for a brand. Use this real estate to negotiate better case pricing. 

Lastly, besides well liquors and wine-by-the-glass, a cocktail placement for a spirit will get you in good with a distributor. 

So use your menu wisely to lower the costs of the items you sell the most. This improves profit margins and reduces your pour costs. 

female bartender pouring cocktail

4. Create a Pop Song in Cocktail Form

What does this mean? It means to create a drink that might not be the most technical or creative cocktail ever shaken; but one that people will love and will keep ordering, just like a great pop song on repeat.

Oh yeah, it also means that it’s cheap to produce and sold at a competitive price so you get better profit margins on a high volume item.

The industry average on pour costs for cocktails is between 20-25 percent.

If you can create a pop song cocktail that hits an even lower cost like, 12 -15 percent, then you’ll have an 85%-88% profit margin for that drink. That sounds great, right?

This will also create a great counterbalance to complex cocktails that have smaller margins. A drink like this is essentially the opposite of a loss leader for your business.

One of the best strategies is to have a cocktail be vodka-based and easy to drink with refreshing flavors that are well known to most drinks. Vodka is generally the most inexpensive liquor and is the most popular liquor type in the U.S.

Key Takeaways

  1. Reduce lost profits from overpours and spillage
  2. Track fees on invoices to avoid unnecessary liquor costs
  3. Work with distributors to find the best pricing
  4. Focus on creating low-cost cocktails that value high volume over complexity
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Written by   |  
Kyle has years of hospitality experience from managing bar programs in Chicago. He is now the Director of Marketing for Backbar, a software company that helps bar and restaurant operators simplify inventory and beverage management with the free Backbar inventory platform.