Dec 24, 2023
The Impact of Beverage Prices on Your Business’s Profitability

How Beverages Prices Can Affect Your Bottom Line

When beverage prices are set at an unreasonable rate, it can really hurt your bottom line. This is why it is important to analyze drink sales and costs on a regular basis.

Start by establishing a set time frame for analysis. This could be every 28 days, bi-weekly or monthly.

Alcohol

Alcohol is one of the main revenue streams for most bars and restaurants. It is important to have a well thought out pricing strategy for your beverage program.

Over the last three decades, per capita consumption of alcoholic beverages has risen steadily. The increase may be attributed to many factors, including reduced minimum drinking ages and the fact that alcoholic beverages are now sold in more places, such as restaurants, cafeterias, sports arenas and theaters.

Food and beverage directors typically expect a pour cost of 18-24% with an 80-85% profit margin. This is a great starting point for your bar’s pricing strategy, but remember that different establishments have different indirect and fixed costs that aren’t included in their liquor costs. For example, rent in New York City is significantly higher than rent in rural Nebraska.

Water

In many countries, tap water is perfectly safe to drink and much cheaper than alcoholic beverages. The cost of bottled water, however, has been rising due to high production costs and a shortage of raw materials.

A University of Otago study claiming that some alcohol in New Zealand is cheaper than bottled water on a ml-for-ml basis generated a lot of press coverage. However, a visit to a local liquor store quickly revealed that the research was flawed.

If you sell your soda, wine and draft beer in bottles and kegs, knowing the cost per ounce can help you accurately price drinks and maximize your profit margins. Use this calculator to find the true cost of your beverage products, including taxes and deposit. You can even input your specific bottle or keg size for more precise calculations.

Coffee

Coffee is more than just a beverage, it’s a culture, an economy and an art. From the roasting to the brewing, there’s a lot that goes into making a perfect cup of coffee.

Coffee’s popularity in the United States grew during the latter half of the 19th century. During this time, many coffee adverts were geared towards families and featured images of hard-working fathers and dutiful mothers and rosy-cheeked children.

The popularity of coffee is mainly attributed to its invigorating effects, which are derived from the alkaloid caffeine. However, in 2018, one US state passed legislation requiring coffee to be labeled with a cancer warning due to its high levels of acrylamide, an inedible substance created by roasting starchy foods like potatoes and chips.

Tea

Tea can be extremely cheap or expensive, depending on the quality. Good teas such as Silver Needle, Darjeeling and oolong can be very expensive, while instant tea bags and cheaper Chinese blacks are relatively cheap.

In some countries such as Japan, high-end tea is considered a symbol of status and wealth, so it can cost a lot. Tea prepared at home can also be quite inexpensive.

It is interesting to compare the price of tea to other beverages such as coffee and juice. While the price of tea may seem a bit high, it is still cheaper than most soft drinks and offers many health benefits. Tea is also a great alternative to coffee as it has less caffeine. Tea can be consumed alone or in various drinks such as iced tea, herbal tea, and bubble tea.

Juice

The price of juice is soaring due to weather-related issues as well as the fast-spreading orange disease known as greening. Florida produces most of the country’s oranges for juice, and those crops have been slashed by hurricanes, early freezes, and now, this disease.

Juice from the store is pasteurized, which heats it to destroy bacteria. But a lot of beneficial enzymes and micronutrients are also killed in the process. Making your own is cost-effective, but requires a juicer and can be time-consuming.

But the aspirational nature of this wellness trend, like boutique fitness classes or matcha lattes, carries a cachet with it, and consumers are willing to spend more to feel that they’re making healthy choices. That’s a big reason why these drinks are pricier than water or coffee.

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