What is a Good Pour Cost?Yours is Almost Certainly Too High!
We get asked this question all the time.
The fact is that there is no such thing as an industry standard “good” pour cost that works for every bar. You often hear or read that if your pour cost is in the low 20% range, you are in good shape. That is simply nonsense—and dangerous nonsense at that!
Whether or not your current pour cost is good or bad depends on your pricing and what drinks your customers order. Both factors vary greatly from one bar to another. The better question is: “What is the right pour cost for your particular establishment—and for this particular month?”
An upscale restaurant selling lots of expensive wines is always going to have a higher pour cost than a bar that sells mostly cheap wine by the glass. That’s because expensive wine carries much higher pour costs.
On the opposite end of the spectrum, I’ve worked with a hotel with 15% liquor pour costs despite enormous (hidden) losses. In fact, that hotel should have been running an 11% liquor cost; which might sound impossible. However, the hotel is in Hawaii and almost half of their sales were poolside Mai Tai’s with a 37¢ cost and an $8 selling price (which results in a 5% ideal pour cost on that drink)—so an 11% pour cost makes sense.
Here is the thing: you can’t really compare the pour cost in one establishment to that of another because every bar has different pricing and a different sales mix.
Is Your Pour Cost Too High?
What about the pour cost in your bar? It is too high? Yes it is. Almost certainly.
That is because virtually every bar has enormous losses from over-pouring and theft. But those losses are often hidden by traditional pour cost analysis. So, most operators think that their pour costs are just fine, only because they don’t know about these losses and don’t realize that they have been satisfied with a pour cost that is probably two or three points too high.
The losses are hidden because most operators are happy if their pour cost is stable and as good as, or better than, it’s been in recent months.
One of our newer clients was sure they were running very efficiently because their pour cost was below 21% on liquor for the month of September—which was in the lower range of their recent history (see chart).
The bar owner was convinced that with such a “low” pour cost he couldn’t possibly have significant amounts of theft and over-pouring.
The owner’s position was that as long as their liquor pour cost was in the 21% to 23% range, he was happy. This may seem logical, but it was dangerous because the bar owner’s complacency was preventing him from seeing what was really going on in his bar.
Over the past 25 years, tens of thousands of bar owners have hired us to help them make more money. Our audits have found that 24 out of 25 bars in Canada are missing 15% of their alcohol (or worse) because of over-pouring and lost sales that have previously gone undetected.
We discover that by weighing every open bottle or keg and counting all the full containers to find out exactly how much alcohol has been used from every brand—down to 1/30th of an ounce. We then compare this usage to the number of drinks that were rung up into the POS system. That way we can identify exactly what has been over-poured or stolen. We also calculate an ideal pour cost for every category (liquor, wine, beer bottles, draft) which shows our client what their pour cost really should be each month.
The client with the 20.9% liquor cost was surprised to discover that his bar was no different—they had significant over-pouring and lost sales. As a result, their pour cost in September should have been 18.1%, not 20.9%.
Our client realized that their bartenders had been routinely over-pouring and not running up drink sales, for months, years, and probably decades. His focus on keeping the liquor cost in the 21% to 23% range was counter-productive. It had actually prevented them from discovering the high losses and from making more money.
How Much Money are you Missing?
“Well,” our client asked, “how much money am I throwing away? What is the 2.8% difference in liquor cost actually costing me?” In his case, it was $4,000 in profit every month. But that, too, varies from bar to bar depending on the reason for the losses.
For example, if the bartender pours a $5 pint, collects the money for it, but doesn’t ring it up, you are out the full $5 (plus the cost of the beer). Such retail losses typically make up about a third of the problem. If you throw out a pint of foamy beer, then you are only out about $1. Losses at cost typically make up less than a quarter of the problem.
Over-pouring is by far the biggest problem at most establishments. And eliminating over-pouring usually has a surprisingly large effect on profits. At first glance, one would think that over-pouring results in a loss at cost. If your bartender pours an extra ½ ounce of Hendricks, you would think that you lost out on the $1 cost of that extra ½ ounce. And sometimes that is true.
More often, though, over-pouring ends up being a loss at retail. In San Diego, I recently ordered a Hendricks gin on the rocks. The bartender charged me $7 and I gave him $10. But instead of pouring me 1-½ ounces, he completely filled the rocks glass. It was more than a double, probably a triple.
As a result, I never ordered another drink. Whereas I likely would have bought three drinks for $21, I only spent $7 on one drink. The bar owner lost out on the other $14. Ironically, the “generous” bartender also lost out because he only received a $3 tip on one drink instead of $9 on three drinks over the course of the evening.
How Can You Reduce your Pour Cost?
You could raise your prices, although that has the obvious down-side of driving away some guests. Your guests could order cheaper drinks, which would reduce your pour costs alright, but you would lose money because you actually make more money on Grey Goose than on well vodka despite the higher pour cost on Grey Goose. In fact, you want your guests to order drinks with higher pour costs because you put money in the bank, not percentages.
The best way to reduce your pour cost is to focus on eliminating the over-pouring and lost sales that plague virtually every bar in the world.
The first step would be to find out exactly how much alcohol you are missing by calling in an independent third-party company to undertake a discovery audit for you.
Only with the correct information can you be sure your pour costs are as low as they should be.
Ian Foster is VP National Accounts at Sculpture Hospitality. He can be reached at email@example.com.