Pour cost is the cost of a drink’s ingredients divided by its sale price. It’s a powerful metric for understanding the profitability of your bar, and identifying inefficiencies in your business. This allows you to adopt the strategies to improve it—whether that’s reducing product costs, effective drink pricing, or minimizing product loss.
We’ve shown you how to calculate (and interpret) pour costs. And we’ve discussed ways to improve the profitability of your beverage program. But how do you know if there’s substantial room to improve that profitability? What pour costs should you be targeting?
A handful of industry figures have argued that bar industry pour costs should hover in the 18-24% range; others cite 20% as a useful target. These estimates are problematic for two reasons.
The first is that a business’ total pour cost depends on the balance of product categories that it sells. For example, spirits and cocktails almost always sell at lower pour costs than wines do. If you run a wine-heavy bar, then your cumulative expected pour cost may differ from industry standards.
The second issue with these targets is that they’re based on individuals’ anecdotal industry experiences. Very few data-driven analyses of pour costs exist. And while some observers say that an individual bar’s historical metrics are the only reliable benchmark for an “ideal” pour cost, it’s hard to argue that a bar’s operations are efficient when its comparable peers are achieving much higher profit margins.
We took an empirical look at our customers’ profitability data to find what pour costs bars and restaurants are achieving in reality. We then drilled down by product category and business size to get better-tailored estimates for your bar. Let’s take a look at what we found.
Of course, we know that the size of a bar changes the operational realities of managing its beverage program, and that one of these size-dependent factors may be pour cost. So, we’ve segmented our data by each bar’s annual sales to see how much the pour cost distribution changes as a result.
Remember: On $500,000 in sales, every 1% reduction in your pour cost is an extra $5,000 back in your pocket, every year!
Like us, you’re probably surprised to see wine pour costs for these establishments at such high levels. When we dug in, we found that many bars with higher values for such metrics were usually beer and spirit-heavy businesses that maintained very small wine selections. Such bars skewed the wine pour cost distribution upwards, but weren’t much affected by their poor profitability in this category. So, these numbers shouldn’t be considered representative of wine-heavy beverage programs of the same size.
This data provides some really valuable insights into how bars and restaurants around the country operate. For more insights into the beverage industry, subscribe to our blog below to follow the results—we release new data regularly.
Need some more personal advice on how you could improve your bar? Schedule a chat with one of our product specialists, and find out how BevSpot can help you.