Some businesses like brewpubs and brewery taps produce their own alcohol. Other businesses like pubs, bars, and restaurants typically purchase from a local beverage distributor or a brewery.
Where Do Bars Get Their Alcohol?
Bar owners, bar managers, and beverage directors get their alcohol from a beverage distributor or wholesaler. That's because the wholesale price is much cheaper than the retail price. This helps lower a bar’s liquor cost and increase a bar’s profit margin. The bar will also outline the source of their supplies in their restaurant business plan.
How Do Bars Buy Their Alcohol?
Two ways. One is picking up a phone or firing up a computer and contacting a sales rep for a distributor or wholesaler directly. The second way is using a bar and beverage ordering platform, where all orders are placed directly to distributors through subscription-based software. To use BinWise Pro as an example, you can place all your alcohol orders through one easy-to-use interface. That's the benefit of liquor inventory software. It'll give you complete insight into vendors, order creation date, delivery date, and more.
How Much Do Bars Pay for Alcohol?
When buying from a beverage distributor or wholesaler, bars typically pay 70% to 80% less than what they charge their customers. We reached out and asked an experienced beverage program manager how much bars can expect to spend acquiring alcohol from vendors.
They said small bars tend to spend around $2,500 to $6,000 per month on alcohol, while mid- and large-sized beverage programs can spend anywhere from $6,000 to $13,000 per month. But it's very dependent on inventory turnover and order minimums. It's also dependent on concept.
We work with many high-end concepts with extensive wine collections and higher price points. Our internal data shows a median alcohol spend of around $30,000 per month before the pandemic, and around $10,000 per month after, for bars and restaurants like that.
Most bars will mark up their drinks four or five times more than its cost to cover for the expenses. For example, if a bar pays $1 for a single 12-ounce serving of beer, they should charge their guests between $3.33 and $5 for it. Same goes for beers in kegs, you just have to figure out how many beers in a keg to get your pricing numbers. Keep in mind that this number varies based on many factors.
The area of the bar, what kind of bar it is, and what prices their competitors have, for example. And even who their customers are, what type of liquor they're selling, and what their liquor pour cost is. Which, conveniently, they can find out with a how to calculate beverage cost formula.
Do Bars Get Discounts on Liquor?
The answer is: Yes. Most beverage distributors and wholesalers will have discounts for buying liquor in bulk or for frequent ordering. The reason behind it is quite simple. Distributors want to sell more, but they don’t want to break up cases. Therefore, in order to encourage you to order more products, they will either charge breakage fees or offer bulk shipping discounts.
As a bar owner or manager, this is sometimes the best buying option to keep liquor costs down. The less bars pay for products, the lower their pour cost will be. However, this should not be applied to more expensive products that don’t fly off the shelves quickly.
How Do Bars Price Their Liquor?
When pricing specific liquor types and qualities, most bar owners and managers divide their liquor into three tiers based on quality: well, call, and top shelf. Then they price accordingly. We'll also touch briefly on how bars price wine.
Well liquor is what bartenders use when a guest doesn’t name a specific brand in their drink order. It is typically the most inexpensive liquor at the bar.
This is what bartenders use if a guest requests a specific brand for an orders, like Tanqueray. Call liquor usually has higher name recognition and quality—and thus a hire price. But they're still not the most expensive ones. A few more examples of typical call liquor are Smirnoff Vodka, Beefeater Gin, and Bacardi Light Rum.
Top Shelf Liquor
Top shelf liquor is also called premium. These are usually the most expensive items in a bar, as they carry a more refined reputation. Most bars will have these on display to pique guests’ interest, such as Tennessee Whiskey, Crown Royal Whiskey, or Jose Cuervo 1800 Tequila.
Wine by the glass programs typically price a glass of wine at the wholesale cost of the entire bottle. While wine bottles are marked up between 200% to 400% of their wholesale cost.
Note to bar managers: Don’t feel like you’re being greedy if you have to charge your guests four to five times what the drink actually costs. You have many things that you need to cover aside from just the cost of your liquor. Things like ice, garnishes, glassware, rent, your staff’s salaries, and even more. The list goes on and on.
Ah, So That's Where Bars Buy Liquor!
Sure the heck is! Keep in mind, if bars overprice drinks, or they'll have no business. And if they underprice, they'll make no money. Bars should strive to strike a balance with their alcohol pricing. And be open to making changes when certain things no longer fit.
Another note to bar managers: Maybe you're spending a lot on liquor and not making enough profit to cover it. Before increasing menu prices, work with your distributors for a better deal. Or do your own research to find an alternative liquor option.
If you found this article helpful, contact us to learn more about BinWise Pro. It’s a liquor inventory system that helps save time in taking your beverage inventory and run your bar more successfully.