What determines the price of a drink at a bar?
March 11, 2013 11:38 AM Subscribe
What determines the price of a drink at a bar? Why does it differ drastically in different places?
I've noticed that your average-run-of-mill bar (sports, chicken tenders) in different cities have different prices for your average run-of-mill beer (Bud Light, Miller Light, etc), whether it's $6 in NYC, $4.50 in DC or $3 in some college town (this is difference in up to 100% on retail cost). When I go buy a keg or case from a store the prices are alot more similar than the bar prices, however (or in the case of the college town, the keg prices is WAAAY higher than the one in another pricier city.).
I've always assumed that price is sort of sticky, that prices should be similar to similar places in the same locale.
I met a person who works with beer distributing that mentions it actually has alot to do with the wholesale cost, which changes depening on the local jurisdiction, etc.
Also, has anyone tried to create a CBI (calculated beer index)?
I've noticed that your average-run-of-mill bar (sports, chicken tenders) in different cities have different prices for your average run-of-mill beer (Bud Light, Miller Light, etc), whether it's $6 in NYC, $4.50 in DC or $3 in some college town (this is difference in up to 100% on retail cost). When I go buy a keg or case from a store the prices are alot more similar than the bar prices, however (or in the case of the college town, the keg prices is WAAAY higher than the one in another pricier city.).
I've always assumed that price is sort of sticky, that prices should be similar to similar places in the same locale.
I met a person who works with beer distributing that mentions it actually has alot to do with the wholesale cost, which changes depening on the local jurisdiction, etc.
Also, has anyone tried to create a CBI (calculated beer index)?
You aren't just paying for the beer, you're paying part of the cost for that establishment to sell you that beer.
So think about rents, labor, location, insurance etc.
This goes not just for the bars, but the grocery/beer stores. Whatever they are paying for their storefront or restaurant they need to cover costs on.
If it's a place that sells high volume of X, they can offer X cheaper. For example, if they put Bud Light on special and sell 10 kegs a week, they get a lower price on each keg from their distributor.
Some places get lower prices for having Bud Light advertising (coasters, etc) and promos. For carrying only Bud products.
Finally, they will charge what they think they can get. A trendy bar in an upscale neighborhood doesn't necessarily benefit from offering low prices. It means people drink more (and get drunk and dangerous) and takes away from the "trendy and exclusive" feel of your 12$ martini.
Selling 3 - 12$ martinis is much better for a bar than selling 18 2$ drafts.
posted by mazienh at 11:47 AM on March 11, 2013 [3 favorites]
So think about rents, labor, location, insurance etc.
This goes not just for the bars, but the grocery/beer stores. Whatever they are paying for their storefront or restaurant they need to cover costs on.
If it's a place that sells high volume of X, they can offer X cheaper. For example, if they put Bud Light on special and sell 10 kegs a week, they get a lower price on each keg from their distributor.
Some places get lower prices for having Bud Light advertising (coasters, etc) and promos. For carrying only Bud products.
Finally, they will charge what they think they can get. A trendy bar in an upscale neighborhood doesn't necessarily benefit from offering low prices. It means people drink more (and get drunk and dangerous) and takes away from the "trendy and exclusive" feel of your 12$ martini.
Selling 3 - 12$ martinis is much better for a bar than selling 18 2$ drafts.
posted by mazienh at 11:47 AM on March 11, 2013 [3 favorites]
Another thing that introduces price variations in different cities is the cost of a liquor license in that town or state.
posted by aimedwander at 11:50 AM on March 11, 2013 [1 favorite]
posted by aimedwander at 11:50 AM on March 11, 2013 [1 favorite]
And another factor is taxes -- for example there is a 10% tax on every liquor sale in Philly, but the surrounding suburbs do not have such a tax.
posted by DoubleLune at 11:53 AM on March 11, 2013 [1 favorite]
posted by DoubleLune at 11:53 AM on March 11, 2013 [1 favorite]
Some places get lower prices for having Bud Light advertising (coasters, etc) and promos. For carrying only Bud products.
As a former distributor of Bud products, I have to say that this is not true, at least in my area. The advertising products were provided to bars and stores free as incentive for them to purchase our wholesale products (and thereby provide marketing to sell their own stocks at retail), not because of some sort of exclusive deal.
Another factor I would throw in to the above lists is local and state taxes on alcohol. These can vary greatly from place to place.
posted by The 10th Regiment of Foot at 11:54 AM on March 11, 2013 [1 favorite]
As a former distributor of Bud products, I have to say that this is not true, at least in my area. The advertising products were provided to bars and stores free as incentive for them to purchase our wholesale products (and thereby provide marketing to sell their own stocks at retail), not because of some sort of exclusive deal.
Another factor I would throw in to the above lists is local and state taxes on alcohol. These can vary greatly from place to place.
posted by The 10th Regiment of Foot at 11:54 AM on March 11, 2013 [1 favorite]
Best answer: I've joked around with several friends who have worked in bars, and one who worked in a small upscale "trendy" bar where he regularly worked with the owner and could bounce questions off him.
All bars pay about the same for liquor and beer*. Generally there's only a couple distributors even in a large town, and they don't really get that much of a break below retail(besides not paying the sales tax).
The prices, incidentally, are entirely up to the owner and manager, and pretty much "what the market will bear"
There is no technical reason why that one venue everyone constantly goes to shows at charges $9 for a shot and a lemon(or $6 for a crappy beer) other than that they know they can.
*On preview mazienh has a good point about volume discounts, but there are still high-volume ripoff places that are constantly full because that's where people want to be, they just pocket the difference. Inversely, at least around here, there's plenty of "neighborhood" type small places with awesome deals on good beer, or beer+shot combos, or beer+food combos who probably aren't making a killing...
There really isn't any metric for determining this. Two places side by side can have >100% price differences, and the market can support that. People who live in the area or regularly go out drinking there will know it and just go to whichever place suits them.
Id also like to note the price break below retail thing is in Washington, and may be different elsewhere. Drinks don't seem all that much cheaper in other big cities though.
posted by emptythought at 11:55 AM on March 11, 2013 [3 favorites]
All bars pay about the same for liquor and beer*. Generally there's only a couple distributors even in a large town, and they don't really get that much of a break below retail(besides not paying the sales tax).
The prices, incidentally, are entirely up to the owner and manager, and pretty much "what the market will bear"
There is no technical reason why that one venue everyone constantly goes to shows at charges $9 for a shot and a lemon(or $6 for a crappy beer) other than that they know they can.
*On preview mazienh has a good point about volume discounts, but there are still high-volume ripoff places that are constantly full because that's where people want to be, they just pocket the difference. Inversely, at least around here, there's plenty of "neighborhood" type small places with awesome deals on good beer, or beer+shot combos, or beer+food combos who probably aren't making a killing...
There really isn't any metric for determining this. Two places side by side can have >100% price differences, and the market can support that. People who live in the area or regularly go out drinking there will know it and just go to whichever place suits them.
Id also like to note the price break below retail thing is in Washington, and may be different elsewhere. Drinks don't seem all that much cheaper in other big cities though.
posted by emptythought at 11:55 AM on March 11, 2013 [3 favorites]
I work for a beer and wine distributor. Wholesale prices and stuff like local taxes can sometimes play a role, but it's the retailer that's the major factor. Depending on where you live, wholesalers may even have to charge the same prices to everyone by law. The biggest factor I see, especially in bars and restaurants, is the image the retail establishment wants to present - this is why you see restaurants charging 4x more for a bottle of wine than it would cost to buy it at the grocery store, and why some restaurants will sell it for twice as much as others. The reason they do that: because they can.
posted by something something at 11:56 AM on March 11, 2013
posted by something something at 11:56 AM on March 11, 2013
Bars charge what they do in order to maximize revenue, period. It's not their additive costs plus some arbitrary profit. (Costs determine how much profit they take home, but not their prices.)
posted by 2bucksplus at 11:56 AM on March 11, 2013 [1 favorite]
posted by 2bucksplus at 11:56 AM on March 11, 2013 [1 favorite]
recent drinking shows, at least for me, that i got a white russian in a hotel bar in LA for roughly $10, and i got proportionately the same white russian in a hotel bar in green bay, wisconsin, for about $4.
i would assume costs vary as with any business: location (expensive LA real estate vs. not as expensive green bay), cost of liquor from distributor (i know nothing about this, however), cost of liquor license from municipality (i would guess that wisconsin probably doesn't have as many roadblocks to licenses as california), popularity of location, and competition.
also, it's fucking cold in green bay in the winter, and you have to drink more to stay warm.
posted by koroshiya at 11:57 AM on March 11, 2013 [1 favorite]
i would assume costs vary as with any business: location (expensive LA real estate vs. not as expensive green bay), cost of liquor from distributor (i know nothing about this, however), cost of liquor license from municipality (i would guess that wisconsin probably doesn't have as many roadblocks to licenses as california), popularity of location, and competition.
also, it's fucking cold in green bay in the winter, and you have to drink more to stay warm.
posted by koroshiya at 11:57 AM on March 11, 2013 [1 favorite]
What you're seeing is the difference in rent and other components of overhead in larger cities.
Also, yes, alcohol taxes can be a factor. You'd think drink prices would be consistent between New York and Los Angeles, but I find that drinks in LA are significantly cheaper, most likely because California has lower liquor taxes.
And, yeah, there's also the "what they can get" factor. When I was in college, we drank PBR because it was cheap swill, sold in cans at a dollar a pop. Then the hipster thing happened, and now PBR is treated as if it's some kind of fancy specialty drink. I've seen it go for $3-4 per can in the same dives that would have sold it for $1 a few years ago. Meanwhile you can get a whole pint of Budweiser for $4, and there are still Manhattan bars that serve $3 imperial pints of imports at happy hour.
posted by Sara C. at 12:01 PM on March 11, 2013
Also, yes, alcohol taxes can be a factor. You'd think drink prices would be consistent between New York and Los Angeles, but I find that drinks in LA are significantly cheaper, most likely because California has lower liquor taxes.
And, yeah, there's also the "what they can get" factor. When I was in college, we drank PBR because it was cheap swill, sold in cans at a dollar a pop. Then the hipster thing happened, and now PBR is treated as if it's some kind of fancy specialty drink. I've seen it go for $3-4 per can in the same dives that would have sold it for $1 a few years ago. Meanwhile you can get a whole pint of Budweiser for $4, and there are still Manhattan bars that serve $3 imperial pints of imports at happy hour.
posted by Sara C. at 12:01 PM on March 11, 2013
If I can charge you $40 for a shot, and you'll pay for it, why should I charge less?
On a more serious note, if I sell you 6 $2 beers I've had to open 6 beers for you. if I sell you 2 $3 beers I've had to do less work. Which means I can pay attention to other guests. Which leads to the potential for more regulars, which means more profit because they'll go to your place over somewhere else.
Bars can be a cut throat business. One of my friends was fired but given the chance to work a last shift behind the bar. She made sure to tell all her regular customers that she wasn't coming back and where they could find her from then on.
And just as a bonus thing, you know that Johnny Walker Blue Label they have for around $40 a shot? Nobody expects that to ever sell. But it sure does make everything else look pretty good price wise by comparison.
posted by theichibun at 12:08 PM on March 11, 2013 [1 favorite]
On a more serious note, if I sell you 6 $2 beers I've had to open 6 beers for you. if I sell you 2 $3 beers I've had to do less work. Which means I can pay attention to other guests. Which leads to the potential for more regulars, which means more profit because they'll go to your place over somewhere else.
Bars can be a cut throat business. One of my friends was fired but given the chance to work a last shift behind the bar. She made sure to tell all her regular customers that she wasn't coming back and where they could find her from then on.
And just as a bonus thing, you know that Johnny Walker Blue Label they have for around $40 a shot? Nobody expects that to ever sell. But it sure does make everything else look pretty good price wise by comparison.
posted by theichibun at 12:08 PM on March 11, 2013 [1 favorite]
Supply and demand, really. If the bar is packed full of people every weekend, they can raise prices to keep the lines at the bar down while still making a ton of money. If the bar is empty, they lower prices to draw people in. The extra money goes toward entertainment, marketing, decor etc.
The bars with expensive drinks spend a pile of money booking djs, paying for decor, paying a street team, promoting online, even paying girls to show up to dance so guys stay there and drink (seriously, regular dance clubs do this -- not just strip clubs). Think of expensive drinks as in-app purchases in 'free' apps on your phone -- they hide the true cost of going there by reducing the upfront costs (the cover).
posted by empath at 1:54 PM on March 11, 2013
The bars with expensive drinks spend a pile of money booking djs, paying for decor, paying a street team, promoting online, even paying girls to show up to dance so guys stay there and drink (seriously, regular dance clubs do this -- not just strip clubs). Think of expensive drinks as in-app purchases in 'free' apps on your phone -- they hide the true cost of going there by reducing the upfront costs (the cover).
posted by empath at 1:54 PM on March 11, 2013
Oh, one thing i forgot to address that i had really wanted to
has anyone tried to create a CBI (calculated beer index)?
No, and i don't really think you could. there would always be several curve destroying places. In every neighborhood i can think of near where i live that is consistently expensive, there's that one dive bar/restaurant with a lounge/etc that's one of the cheapest places in town. Similarly, in areas that are often full of students or otherwise cheap, there's always a couple really overpriced or just upscale places.
I don't really see what you could accomplish with this unless it was tied in to a map inside some yelp-esque app where you could actually see which places in an area were closest to the CBI, and even then wouldn't the "average" be thrown off by either the really cheap, or really expensive places?
What i could see being of use was a cataloging of the price of a specific beer and drink at each place, and then a way to search through that. I.E. "closest bar with $4 wells at happy hour" or "closest bar with pyramid ales for $" kind of thing, crowd-sourced. An average would probably be functionally useless though.
posted by emptythought at 2:27 PM on March 11, 2013
has anyone tried to create a CBI (calculated beer index)?
No, and i don't really think you could. there would always be several curve destroying places. In every neighborhood i can think of near where i live that is consistently expensive, there's that one dive bar/restaurant with a lounge/etc that's one of the cheapest places in town. Similarly, in areas that are often full of students or otherwise cheap, there's always a couple really overpriced or just upscale places.
I don't really see what you could accomplish with this unless it was tied in to a map inside some yelp-esque app where you could actually see which places in an area were closest to the CBI, and even then wouldn't the "average" be thrown off by either the really cheap, or really expensive places?
What i could see being of use was a cataloging of the price of a specific beer and drink at each place, and then a way to search through that. I.E. "closest bar with $4 wells at happy hour" or "closest bar with pyramid ales for $" kind of thing, crowd-sourced. An average would probably be functionally useless though.
posted by emptythought at 2:27 PM on March 11, 2013
At one bar I frequent, the owner charges a dollar less for my beer than the bartender who's usually there on Friday night. I figure if I ask, the owner will charge more, so I just appreciate the occasional discount.
posted by theora55 at 2:28 PM on March 11, 2013
posted by theora55 at 2:28 PM on March 11, 2013
Response by poster: @emptythough, one of the free Chicago 'papers' did that very thing.
posted by sandmanwv at 2:55 PM on March 11, 2013
posted by sandmanwv at 2:55 PM on March 11, 2013
Some places get lower prices for having Bud Light advertising (coasters, etc) and promos. For carrying only Bud products.
As a former distributor of Bud products, I have to say that this is not true, at least in my area. The advertising products were provided to bars and stores free as incentive for them to purchase our wholesale products (and thereby provide marketing to sell their own stocks at retail), not because of some sort of exclusive deal.
I know of bars that were Miller only, or A-B only, because of a price incentive. The retail price was generally 10% cheaper at these places, all other things being equal.
posted by gjc at 3:50 PM on March 11, 2013
As a former distributor of Bud products, I have to say that this is not true, at least in my area. The advertising products were provided to bars and stores free as incentive for them to purchase our wholesale products (and thereby provide marketing to sell their own stocks at retail), not because of some sort of exclusive deal.
I know of bars that were Miller only, or A-B only, because of a price incentive. The retail price was generally 10% cheaper at these places, all other things being equal.
posted by gjc at 3:50 PM on March 11, 2013
This thread is closed to new comments.
posted by restless_nomad at 11:41 AM on March 11, 2013 [5 favorites]