What is Pour Cost Percentage and How to Calculate it
For those of you new to this whole bar managing thing, or if you’re a bartender who keeps hearing, “Goddammit, the pour cost percentage is too high,” and you find yourself nodding and pretending to know what that means, I’m here to help. In fact, we’re not only going to go over how to figure your overall pour cost percentage, but how to figure it for individual products so you can price them properly. So let’s go ahead and find out exactly what this pour cost percentage crap is all about.
WHAT THE HELL IS POUR COST % EXACTLY?
Pour cost % measures the gross margin of profit on your products and goods. “And what the hell does that mean?”
That means if your pour cost % for your beer, liquor and wine is 21%, that the bar made 79% in gross profit from those products.
In five-year-old terms: At 21% pour cost, for every $1 you sell, the bar gets $0.79.
Got it? I hope so, or you should stop managing bars, or be allowed to participate in society as a citizen in general anymore.
HOW TO FIGURE MONTHLY POUR COST %
Chances are many of you at least have a notion of what pour cost % is and what it measures. Calculating it can be a bit more tricky if you have never done it before, so let’s dive right in.
HOW TO FIGURE POUR COST % FOR INDIVIDUAL PRODUCTS
Being able to figure the pour cost % for individual products is extremely valuable in helping you set your pricing. The good thing is once you have figured out the pour cost % for one product, it will apply to many of your other products as well, so you won’t have to do math for every single brand you carry.
In other words, all 1 liter bottles that sell for $8 per shot will have the same pour cost, so you only need to figure the cost for one bottle with that price point.
Once you have your individual products figured out, you can determine if you need to raise or lower the price to meet your goal pour cost %.
With that said, let’s get to calculating.
The formula for figuring pour cost percentage for a single product is simple:
Wholesale Price / Retail Price x 100 = Pour Cost %
In order to figure the pour cost %, we must know the wholesale cost and retail price of a product, which is easy, but you must make sure to use the same quantity for both. In other words, figure the cost and price for an entire bottle or figure the cost and price for an oz. of that product, but be consistent.
I find doing the entire container is easier, so this is the way I will teach you.
Figuring the wholesale price is the easy part: simply retrieve that information from your invoices.
Figuring the retail price of the product takes a little more effort, which I’m sure you’ll be happy to put forth because you are such an awesome, hard-working manager, so let’s go ahead and discuss what we need to figure the retail price of a single product.
To figure the retail price we must know:
- The size of the container in oz.
- The portion size of the product being served
- The retail price of that portion
That’s it. So here are some common containers and how many oz are in each:
1 Liter Bottle = 33.81 oz.
750 ml Bottle = 25.36 oz.
15.5 Gallon Keg = 1984 oz.
7.5 Gallon Keg = 960 oz.
5.16 Gallon Keg = 660 oz.
Now let’s go over an example of how to figure the pour cost percentage of the following:
1 Liter Bottle of Grey Goose
750 ml Bottle of BV Cabernet
½ Barrel Keg (15.5 Gallon) of Coors Light
Grey Goose → Wholesale Price = $38
Now for the 3 things we need to know
Bottle Size = 1 Liter
Portion (Shot) Size = 1.5 oz.
Retail Price = $9 per shot
Figuring Retail Price of Bottle
33.81 oz. / 1.5 oz. = 22.5 shots per bottle
$9 x 22.5 = $202.50
Pour Cost % = WS ($38) / RT ($202.50) x 100 = 18.77%
BV Cabernet → Wholesale Price = $9
Bottle Size = 750 ml
Portion Size = 6 oz.
Retail Price = $8 per glass
Figuring Retail Price of Bottle
25.36 / 6 = 4.23 glasses per bottle
$8 x 4.23 = $33.84
Pour Cost % = WS ($9) / RT ($33.84) x 100 = 26.60%
Coors Light Draft → WS Cost = $129
Keg Size = 1984 oz.
Portion size = 16 oz
Retail Price = $5
Figuring Retail Price of Keg
1984 / 16 = 124 pints per keg
$5 x 124 = $620
Pour Cost % = WS ($129) / RT ($620) = 20.81%
Make sense? Good. Let’s move on to figuring pour cost percentage for your entire bar using your inventory process.
HOW TO FIGURE OVERALL POUR COST %
The formula for figuring overall pour cost % via your monthly inventory is:
Beginning Inventory + Purchases – Ending Inventory
_________________________________________ x 100
Monthly Bar Sales
Remember, anytime you are doing pour cost %, whether individually or overall, it is wholesale value / retail value or sales.
Let’s give a quick example:
June 1st – You take a full inventory of beer, wine and liquor and the wholesale value = $12,743
During the month of June, $11,500 worth of products are delivered
July 1st – You take another full inventory and your wholesale value = $12,158
Monthly Sales for June = $50,649
So let’s do the math:
Beg. Inventory ($12,743) + Purchases ($11,500) – End Inventory ($12,158)
________________________________________________________ x 100
Total Sales ($50,649)
That’s all, folks. If you don’t know what your pour cost % is for each of your products, as well as your monthly percentage, you aren’t managing and running your business like a professional.
If you would like to read deeper into how pour cost percentage works, read What Should Your Pour Cost % Be?
Cheers, until next time,