< back to resources

Pour Cost Guide & Pour Cost Calculator | Bars & Restaurants

August 17, 2020
|
Scott
Bar inventory software

Calculating pour cost percentage is one of the most effective ways to increase bar profits. That’s because it gives you an extraordinarily clear picture into your profit margins. With accurate information on margins, you can develop strategies to make them bigger or replicate them across your inventory.

Accurate pour cost numbers also reveal potential inefficiencies like over-pouring, spillage, undocumented comps, suboptimal menu pricing, and even theft. It’s a big part of running a profitable bar.

So let’s look into how to calculator liquor pour cost and how to make money selling drinks.

What Is Pour Cost?

Pour cost is the percentage of a drink’s selling price that it costs to make the drink. It answers the question “How much of this drink’s retail price did I spend to make it?” And that answer, in turn, allows bar managers to tweak their wholesale purchases, recipes, and pricing strategies for maximum profit. Pour cost is expressed in a percentage. You can think of pour cost percentage at a drink level and at a bar-wide level.

Here’s an illustration. If your bar has a pour cost of 15%, it means your business makes 85% in gross profit. In other words, for every $1 of liquor that you sell, your bar makes $0.85.

Liquor Pour Cost

Pour cost percentage at the drink level helps bar managers identify profitable drinks. It considers how much a drink’s ingredients cost and how much that drink sells for. Spirits, wine, and beer all tend to have different pour costs. A Hendrinks gin-based cocktail with 8 other ingredients will have a different pour cost than pouring Hendricks neat. Keep in mind this variability as you read about and calculate your pour cost percentage. Liquor pour cost tends to range around 14 to 15%.

Pour Cost For Draft Beer

The average pour cost for draft beer hovers at around 20%, right around the industry average for overall pour cost. The only substantial difference when calculating pour cost for draft beer is dealing with beer keg weight. Being able to accurately weigh kegs and deduce how much is left in them is helpful when sorting out pour cost for draft beer. And setting beer prices. But, other than that, you can follow the pour cost formula below.

Bar Pour Cost

Bar-wide pour cost percentage is similar, but it takes into account every drink a bar makes and sells. It’s a cumulative percentage based on how much inventory the bar uses, in dollars, against the dollar amount of inventory sold. Average pour cost in the hospitality industry is between 18% and 24%. 

Food and Beverage Directors Expect a Pour Cost of ...

Most food and beverage directors expect an average pour cost of, max, 20%. Though the actual number will depend greatly on each bar’s pricing and what drinks are popular.

But a lot of bar managers strive to have their pour cost at around 15%. But a lot of that depends on sales mix—the percentage of total restaurant sales that come from liquor, beer, or wine. And what brands, bottle sizes, and wholesale pricing a bar gets. Food managers will also have to work on reigning in their food cost.

Pour Cost Calculator: How To Calculate Pour Cost

Here we’ll lay out the pour cost percentage formula, then go through a three-step example of how to calculate pour cost.

Pour Cost Formula

The pour cost formula is thus:

Pour Cost = (Inventory Usage ÷ Total Sales) x 100

How to Calculate Pour Cost

Step 1: Determine the Inventory Usage

To calculate a bar’s pour cost, first calculate inventory usage. That’s the amount of product that your bar has used—in dollars—over a given time period. This can be determined using the following formula:

Inventory Usage = Starting Inventory + Received Inventory – Ending Inventory

If you want to calculate the inventory usage in March, your beginning inventory is what you have before service begins on March 1st. And your ending inventory is what you have left on March 31st after closing. You would also need to account for the amount of inventory that you ordered during the month, which is your received product inventory. Let’s now assume your inventory report shows that your bar used $1500 worth of inventory in March.

‍Step 2: Find the Total Sales

Next, find your bar’s total sales in March. That can be quickly pulled from your bar's point of sale system. In the case that you don’t have a POS system in place, calculate the sales number for every item then add them all together. To calculate a product’s sales, simply multiply the amount of product sold during the time period by its selling price. For example, at $5 per bottle of beer, you will have the following:

30 (Number of Beer Bottles Sold) x $5 (Selling Price) = $150 (Total Sales for Beer Bottles)

After calculating this for all products that your bar carries, simply add them together for your bar’s total sales. For our example, let’s assume that your bar’s total sales for March are $3800.

‍Step 3: Use Pour Cost Formula

For the last step, follow the pour cost formula that we shared above to calculate your pour cost with the two values you just obtained:

$1500 (Inventory Usage in $) ÷ $3800 (Cost of Product Sold) x 100 = 39.5% (Pour Cost)

Pour cost is 39.5%. That means it costs the business, on average, 39.5% of a drink’s sale price to make it. The average pour cost that most bar operators strive for is generally between 18% and 24%. Having a pour cost at 39.5% is significantly high. Someone isn't hitting their standard wine pours.

How to calculate liquor pour cost, versus bar-wide pour cost, follows the same steps. Instead of determining inventory usage and total sales for the entire bar, just calculate it for a specific drink.

Bar profitability ebook

Pour Cost Spreadsheet

The 2nd easiest way to calculate pour cost is using this free downloadable pour cost spreadsheet

Once you download it, you can edit the cells and it'll do the calculations for you. Just input volume in milliliters, the price paid for the bottle, and how many ounces are used. You’ll see an example of a costed-out boulevardier cocktail in it for reference’s sake. Once you look at that and understand what’s going on, delete it and start costing your own drinks.

But, of course, the 1st easiest way to calculate pour cost is using a pour cost calculator app.

Pour Cost Calculator App

The pour cost formula is the same regardless of the type of beverage. That means a good pour cost calculator app can be your everything. Your beer pour cost calculator, your liquor pour cost calculator, and your wine pour cost calculator. BinWise Pro does exactly that. It’s our industry-leading bar inventory software system that automatically generates this information.

Another benefit of automating pour cost calculations in a pour cost calculator app is that it’s easier. Sorting out all these numbers and calculations manually is prohibitively time-consuming and error prone.

Book a demo to learn more about how BinWise Pro can help you improve your liquor inventory control. And track your cost of goods sold. And calculate your par levels and variance. And alert you when your pour costs are too high or too low. It never ends.

4 Tips to Lower Your Pour Cost Percentage

You know what pour cost is and you know how to calculate it. But what happens if you’re not pleased with the number on the other side? Here are 4 tips to lower pour cost percentage.

Price Drinks Strategically

One of the easiest ways to reduce pour cost is by pricing drinks strategically. Set a target pour cost first, then set your alcohol pricing and beer pricing accordingly to achieve it. Here’s a handy formula to help:

Drink Price in $ = Ingredient Cost in $ ÷ Target Pour Cost in %

For example, let’s say you want to start serving BinWise Signature Wine as a new item on the menu. The average pour cost for wine is between 30% and 40%. Wine profitability sounds like a lot, but it’s built in to wine bottle pricing. So set your target pour cost for this menu item at 30%. Now let’s assume that you bought the BinWise Signature Wine for $5 per bottle from your favorite distributor. You’ll have the following:

$5 per bottle (Ingredient Cost) ÷ 0.30 (Target Pour Cost) = $16 per bottle (Drink Price)

This means that the ideal price for your BinWise Signature Wine should be $16 or higher. Wine by the glass pricing can be similarly tweaked according to target pour cost.

Manage Variance Effectively

Product variance, or “shrinkage,” is the difference between the amount of product sold and the amount of product used within a given time period. Unless your bartenders know how to free pour perfectly, your variance likely has room to improve. To calculate variance or shrinkage, use a variance formula:

Monetary Value Variance = Cost of Product Sold in $ – Usage in $
Or
Percentage Value Variance =  (Variance in $ ÷ Usage in $) x 100

For example, let’s say you want to determine the variance of BinWise Signature Gin in April. Your records indicate that your bar’s usage was $12,000 but the total cost of product sold was only $8,000. Using the formula, you will have:

$8,000 - $12,000 = $4,000
or
($4,000 ÷ $12,000) x 100 = 33.3%

This simple calculation shows that you lost 33% of the BinWise Signature Gin you bought. Made no money on it. Stuff like this drastically brings down your business’s profitability. Knowing the variance helps you identify potential inefficiencies happening at your bar, from inventory miscounting, over-pouring, and even theft. These are the same issues that cause too high or low a pour cost, so by minimizing your variance, you're helping greatly.

Standardize Pours

To get the most accurate calculations, consider drilling home standard liquor pours and a standard 5-ounce wine pours to your staff. A lot of businesses find that picking up wine pourers, or providing their staff a quick refresher on pouring wine, helps with wine pour costs.

Order Products in Bulk

Ideally, bar operators take their inventory weekly or bi-weekly. This keeps everything trued up and management aware of which products are moving out the door more quickly than others. That, in turn, allows them to make strategic wholesale purchasing decisions. Most distributors prefer to sell more without breaking up cases, so they offer buy-in-bulk deals and specials (also called “volume discounts”). By knowing your usage and ordering smartly, you can easily lower your pour cost by lowering ingredient cost and gives you the opportunity to upsell the products you do have will increase profits.

Bar inventory software

Ensure Accurate Pour Costs Every Time

There are a lot of reasons for high pour cost. Over-pouring, frequent spillage, unrecorded comps, and even theft play a role. At the same time, suspiciously low pour costs can also be symptomatic of a larger problem. Mistakes in the bar inventory process, having inaccurate sales figures, or miscalculating pars and variance can all contribute to that. And screwy pour cost numbers means your purchasing, menu engineering, pricing, and restaurant marketing strategies are screwy, too.

Automating it all with BinWise Pro is a great solution. Let us personally walk you through why. You won’t regret it.