pricing drinks
April 19, 2010 8:20 AM   Subscribe

I am helping my friends open a bar and we are trying to figure out the math behind what to charge for drinks. Is there some sort of formula we should be aware of?

Its a bar in toronto, want prices to be fair, affordable. Rail drinks will be 6 or 7 dollars, but when we get into a scotches and premiums and such how do we price this fairly? for our cost $40 dollar bottle of woodford... what would we charge per oz to the customer? or an $80 bottle of balvenie? Is there some sort of standard mark up or?

any advice from anyone in the industry would be greatly appreciated, or even drinkers in toronto... what do you expect to pay at a low key bar?

posted by butterball to Food & Drink (11 answers total) 5 users marked this as a favorite
Go to a popular bar and see what they charge. Then go to an unpopular bar and see what they charge. Decide where you fit into the marketplace and charge accordingly.
posted by gjc at 8:46 AM on April 19, 2010 [1 favorite]

Seconding need to do some market research, which sounds like a lot of fun. Get a feel for what other bars in the area (that's your main competition) charge for a similar product, and gauge it from there.
posted by nitsuj at 8:47 AM on April 19, 2010

I'm not a drinker in Toronto, but as a drinker and someone who occassionally analyzes prices on things, I would take a survey of your surroundings and target demographics and then work backwards from there. I.e. Will rentbe too high? Do we sell single malts? I generally drink more at home than out but when I ask for a single malt, knowing the wholesale price of the bottle, I don't *not* order it because a short pour and 12$ later I think...hey, that was so unfair. Of course it's unfair! But I know that's not all that I am paying for.
posted by Dick Paris at 8:49 AM on April 19, 2010

Response by poster: we have been doing market research, and gauging prices from the surrounding bars, but are moreso wondering if there is some secret business mark up formula that we should be aware of. haha
posted by butterball at 8:57 AM on April 19, 2010

we have been doing market research, and gauging prices from the surrounding bars, but are moreso wondering if there is some secret business mark up formula that we should be aware of.

Nope, there isn't. The reality is that you're going to have to think of the following:

a) Who you want drinking at your bar;
b) Where they're currently drinking and what they're paying;
c) What they're drinking; checking out what scotches and boozes are being carried elsewhere.

From that, you're going to have to devise your own strategy based on either undercutting other prices, pricing similarly and offering something of value to entice them to change bars or offering products not offered elsewhere as a draw to a higher price scheme.

You can hire people to do market research of this kind (maybe even partnering up with a university business class; offering some kind of prize for the best business proposal) but it's honestly going to require you to sit down and work it out on your own.
posted by Hiker at 9:06 AM on April 19, 2010

Being a bar owner in NYC, I can say that it's more about how you want to position your bar in the eyes of your patrons. If you want to go more down market, you go cheap, if you want to just blend in somewhere in the middle, or go more high end, price accordingly. It's pretty much whatever your desired market will bear.

There is the liquor pour costs percentage, which is a good number to keep track of. It helps you see in a very rudimentary way how much liquor is being used against how much revenue is being made from it. Depending on how simple or complicated your POS system is, this is either taken care of by the system, and is easy to see all relevant details, or if you have a simple cash register system (like my bars), it can tell you how much liquor is being given away, wasted, underpriced, etc. I have a pretty generous buyback policy at my bars, and keep the prices low, so my pour costs are pretty high. I think some bars like to keep them around or under 20%.

When it comes to single malts and more premium liquors, it depends on if you are catering to those customers or just have a basic stock on hand to satisfy the requests.
If you a getting a pretty big selection in to woo the single malt drinkers, you can price them at the higher end, with the more exotic ones at a higher markup up. In general, people who drink single malts are not overly concerned with pinching pennies.
posted by newpotato at 9:14 AM on April 19, 2010

Not sure if this answers your question but owning a bar is more than just pricing drinks. If you have never worked/managed/owned a bar, I suggest working in/managing a bar for someone else first since there is a lot to learn and it is better to learn this stuff on someone else's dime. FYI, when I worked in a bar (eons ago) the most important part of the job was inventorying the alcohol nightly and being aware of employee theft (I never realized there was so many ways for employees to steal both alcohol and money until I worked in a bar). So...good luck with your new business!
posted by MsKim at 9:46 AM on April 19, 2010

Response by poster: we all have a lot of experience in managing and working in bars, but just trying to figure out our drink pricing fairly, and making sure we arent missing something... but we are all very well versed in inventory....
posted by butterball at 9:54 AM on April 19, 2010

I suppose it depends on whether you mean "affordable" as in cheap or within reach. Generally, I wouldn't expect to pay $7 for a rail drink at, as you said it, a low key bar. That is more what I would anticipate at a slightly upscale club or bar. If I were to walk into a bar at random in the Annex or Queen West I would expect to pay something more like $5.50.
posted by fearofcorners at 11:00 AM on April 19, 2010

from my experience, a premium alcohol at a bar that stocks a wide range is generally 20-25% the bottle cost (which is outrageous if you ask me but I guess they have to stock a lot of niche brands). At places with a limited selection of like 7-10 different scotches it's more like 10-15% but I've never seen a cheap dram for under 5 bucks in california, where I am, even if that is 20% bottle cost.

For sub 20 dollar bottles shots are usually 3 bucks here or 5 dollars with a pabst or something.
posted by Large Marge at 12:05 PM on April 19, 2010

Plan to make most of your money on well liquor. You can upcharge much more on it than you can premium spirits. For example, a 15 dollar bottle of well liquor (fairly pricey for a well actually) at five bucks a shot will pay off the bottle in three shots. To do the same thing with a 45 dollar bottle, you'd need to be charging 15 a shot, which is way too high, I'd expect to pay no more than 10, otherwise I'd drink elsewhere.

At the bar I work at the well is mostly McCormick, less than ten bucks a bottle. We charge 4.50 a shot. My most expensive spirit is probably the Oban 14 at 9.50, and that's at least a fifty dollar bottle of liquor (though I'd say that price is too low, probably a good thing I don't have a lot of single malt drinkers).

Also, pricing is a great way to guide people towards the sorts of drinks you want them to be drinking. I'll happily charge 7.50 for a well vodka Red Bull (actually generic energy drink from the soda gun) because I think it's absolute shit and like to penalize people drinking it. I charge the same price for a nice rye manhattan because I think it's a fantastic cocktail that more people should be enjoying (or for a more direct comparison, I charge the same price for my scratch made energy drink, the Rotorstier, that involves muddling ginger, squeezing a lime, adding sugar, bitters, guarana powder, and vodka, then shaking and double straining.)
posted by Jawn at 3:46 PM on April 19, 2010 [1 favorite]

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