Liquor Inventory Case Study #8

Liquor Cost. Change Your Perception.

The case study below is a clear example of how a bar’s liquor cost can be a good deal lower than what many people in the bar industry believe to be an acceptable liquor cost. Looking towards the bottom of the figure below you will notice the column titled ‘Actual Liquor Cost’. Our reports break down liquor cost into draft beer, bottled beer, liquor wine, and miscellaneous. On the bottom row the total liquor cost is provided and you can see that this client operated with an overall liquor cost of 15.9 percent.

Often times we will hear bar managers and owners say that an acceptable liquor cost is anything less than 23 percent but as you can see more ambitious bar owners and managers are quite capable of performing well below that 23 percent mark. Obviously a 15 percent or lower liquor cost is a mark that any bar would want to reach but there are a couple of prevalent factors that keep this goal from being achieved. The first factor is acknowledging that such a low number is possible. This case study clearly demonstrates that a liquor cost in the teens IS achievable. The second factor is knowing what affects liquor cost and how to manipulate those aspects to lower liquor cost. The client from the figure below clearly has a grasp of how to control liquor cost and they do so by ordering their alcohol intelligently, incorporating smart mixology, and carefully setting pricing. Ordering can be used as a money saving strategy when a bar uses volume discounts effectively to lower the price they pay for product. Our liquor inventory reports also work as an ordering tool by providing the bar a ‘dynamic par’ based on recent historic use and comparing the dynamic par against current inventory. Mixology affects liquor cost when inexpensive spirits are mixed or infused to make drinks that are capable of commanding a higher price.

Although the bar in the figure below is very successful, their liquor cost could be lower, as illustrated by the ‘performance gap’ which you can see in the figure. The ‘performance gap’ is a metric we use to illustrate the difference between a bar’s actual liquor cost and its achievable liquor cost. The Achievable liquor cost is what the bar’s liquor cost would be if they experienced zero liquor inventory shrinkage. So, even a bar as successful as this one has room for improvement. How about your bar? Does your liquor inventory software provide actionable data about your liquor cost and show you how low it could be?

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Posted in Bar Liquor inventory case studies