Product pricing is funny. It is the most immediate and consequential step in the bar design process - at 90% science and 10% art, pricing can almost be dialled down to a formula - yet somehow it is still overlooked!
As a rule in any business - your selling price should be higher than your purchase price. Your revenues should be greater than your operating costs. If you can manage this you will operate ‘at a profit’, and will likely make it into the 20% of restaurants who survive into their fifth year of business.
As you can see in the chart below from Lightspeed (one of our favourite POS systems), margins are tight - so despite being a straightforward process, you are often one bad decision or mistake away from operating ‘at a loss’.
Our goal in this part of the series is not to inform business strategy regarding the cost of utilities, labour, rent, or taxes (we can cover that in an extra-serial post). Our goal is to provide an actionable guide to product pricing, specifically as it relates to combating shrinkage. So we will take the costs as constants, and focus on the variables themselves - portion and price.
Drink Standards
In a ideal world, human bartenders would enjoy infinite memory, perfect accuracy, and total recall. They might be able to calculate and pippette minute fractions of a millilitre of alcohol and prorate the price for the customer quickly and accurately. In this world portions would be continuous. One customer could ask for a rum and coke designed specifically for their weight. Another could order a vodka cranberry tailored to their individual metabolism. A machine with sufficient information could create an individual drink program where a customer could maintain their level of inebriation throughout the night, and schedule when to stop drinking and switch to water to avoid a hangover, or electrolytes and caffeine earlier for a safer drive home. One could imagine a combination of biometrics from an Apple iWatch and a SmartServe system working in tandem to deliver this result. Indeed some startups are working towards this end, even if it is in the gimmick phase.
Until we reach that topos, the jobs of human bartenders are safe, and the granularity of service is limited by human memory and dexterity. So instead we settle for discrete quantities of alcohol. If you are in a hurry, and couldn’t care less for explanation, you can price your product according to the portions in the following table. This will work for 9/10 bars, is versatile, and will satisfy most customers.
If you are in the mood to nerd out on drink portioning, read below.
Spirits
<1 oz Shot
I have never seen a bar sell product in quantities smaller than 1 oz. In theory I suppose it is possible? I can imagine a situation where you might have a $15000+ bottle of Macallan that you would want to fractionalise the experience amongst 50 guests - but in that situation it is doubtful the customers would be price sensitive. The true benefit coming from being someone special enough to taste such a rare whiskey, which evaporates the minute the tasting party turns into a circus… Nevertheless, the product below exists so someone somewhere must be drinking ‘half-ounce shots’ of alcohol.
At these quantities we are testing the limits of bartender margin of error. Each pour introduces shrinkage risk, so it is likely not worth it to serve these quantities unless you are running a bar for midgets or children, which is obscure and/or unethical.
1 oz Shot
Typically this is the smallest amount of product you can purchase, in any category. Most bars will serve their spirits (~40% ABV) in this quantity. I have never seen anyone serve wine or beer in a shot glass - and I don’t think it would serve any purpose except perhaps as a low-brow way to provide a sample.
This shot amount has been standardised so much in the market that drinkers are finely attuned to its volume. They will be able to detect if they are being shorted with a ‘0.75 oz’ glass, and will be surprised if they take a shot with a greater amount.
The 1 oz shot is ubiquitous, and is likely to stick around for a long time. We recommend it as a firm starting point for your liquor portions.
>1 oz Shot
1.5 oz, and even 2 oz shot glasses exist. Bar owners often carry them unknowingly, and and will sell the contents for the price of a single ounce. This makes a big impact on shrinkage score - a litre bottle can pour 33-34 shots when measured correctly. When using one of these ‘gimmick’ shot glasses you will be run half way into a second bottle, if not two bottles deep with a 2-oz pour.
Liquor distributors know this, so they frequently give away oversized promotional shot glasses. It is a bit of dark magic on their part to do this. They specify that the glasses should only be used for their product, which has the effect of bar owners offering a 25-50% price cut on their brand, which will greatly increase consumption and purchasing. By the time the bar owner realises this (often never), it is too late.
1.5 oz Single
1.5 oz of 40% ABV is a standardised unit of a ‘drink’. The strength of the drink is affected by the alcohol:mixer ratio, with light spirits tasting weaker, and heavy spirits tasting stronger. The standard ratio is 1.5 oz Spirit : 4.5 oz Mixer, or 1:3.
Bars that are looking to increase their profits or give the appearance of more alcohol can play with this ratio. They can serve the same amount of spirits in a smaller glass, thereby reducing the mixer ratio. Or they can reduce the amount of spirit to 1.25 oz or even 1 oz in a smaller glass and maintain the ratio. This is dangerous territory as customers are fairly well attuned to the standard 10 oz ‘rocks’ and 12 oz ‘lowball’ sizes. Bars that serve their cocktails in 8-9 oz cups often generate a reputation for being stingy.
We recommend serving 1.5 oz of spirits as your standard ‘single’ portion, in a 12 oz glass for most bars (1:3 mix ratio), or a 10 oz glass (~1:2.3 mix ratio), if you have more upscale clients who will appreciate a stronger drink.
>1.5 oz Single
Bars can choose the quantities they want to serve. It is common in ‘out island’ bars, or ‘country’ bars, to up the standard pour to 1.75 oz or even 2 oz. Locals who are used to drinking strong drinks at home will demand it, if you are to coax them into frequenting your establishment. Regarding ratio, if your standard glass is 14 oz or greater it is necessary to serve higher quantities (though we would recommend against such a standard glass in most cases).
Whatever quantity you choose as your standard pour, it is important to make it easy to measure and pour accurately - any discrepancies will either show up negatively on the shrinkage report or the face of your customer (who has been shorted on his measure). It is also important to leave space to upsell to your 'double’.
2.5 oz Double
If you can believe it, most bars and restaurants forgo having a ‘double’ price for their alcohols. Whether this is due to lack of knowledge, consideration, or sheer laziness, is beside the point. If you fail to price for a double, you will lose out on inventory or sales. Consumers are wired for their sense of value. Western consumers in particular, intuitively understand that if you buy more you get a discount. Doubles build the guest a golden bridge. They can increase the strength of their drink, enjoy the cliché of saying ‘make it a double’, and bask in the status of having the strongest cocktail at the bar - all with the pleasure of knowing they saved money with a discount.
The more savvy mathematicians will note that 2.5 oz is not a ‘true double’. This is a correct but irrelevant distinction. The same way a 2x4 of lumber is actually 1.5” thick and 3.5” wide. What is important is that the price for the double is less than two singles, and your COGS (cost of goods sold) as a percentage of revenue goes up (as little as possible). This locks in the discounted rate, makes sense to the customer, and empowers your bartenders to improve the service experience and increase revenues on every sale.
We strongly recommend using 2.5 oz as your standard double pour.
>2.5 oz Double
Pouring a greater than 2.5 oz double is appropriate in two scenarios. If your single is 2 oz, or you run an illegal bar that caters exclusively to raging alcoholics.
A standard 12 oz glass carries 6 oz of fluid when filled with ice. Serving 3 oz of spirits returns you a liquor:mixer ratio of 1:1. A 4 oz pour would give a 2:1 ratio. Pours of this size are rare and popular if you can find them, usually a well-kept secret in hole in the wall dive bars, or 90% of bars in The Bahamas.
The problem with large pours like these is the customer will not want to pay the markup for the extra alcohol, being accustomed to ‘a reasonable price for a drink’. This will lower your pour cost. Your patrons will be so inebriated after two or three of these concoctions that they won’t buy a fourth. This will kill your revenues. It isn’t profitable to sell alcohol in this way, and it is illegal in most countries.
This woman should be in prison:
Bottle Sales
Without a touch of irony, the very same countries (Western Europe) that regulate alcohol measure with rigour that would make a guard at Auschwitz blush, also permit bottle sales. Why is it permissible to sell a litre of Grey Goose to a guest at a ‘table’, while a bartender gets fined £5,000.00 for overpouring a rum and coke? I haven’t figured out the justification for this, but it’s Europe so we may never know.
Regardless, selling liquor by the bottle is good business. As a high-ticket item your customers can ‘peacock’ around the proles ordering doubles, and in a single sale you can generate revenues equal to 20-30 shot sales. The pricing on bottles is inelastic - patrons are willing to pay for their plumage. It takes very little of your bartender’s time, shifting the workload to the lower-skilled and more importantly lesser-paid 'server (same business logic as lawyers shipping out work to the paralegal). Customers haven’t wisened up to the fact that they are paying for the privilege to pour their own drinks!
The final and greatest benefit (to shrinkage of course), is that a bottle is a clean unit. It is impossible to overpour on this sale, making it an auditor’s dream. We love and support bottle sales. It is your job to design your bar/restaurant/nightclub as a place where quality customers would want to be seen enjoying a bottle.
Beer
Cans & Bottles
Beer comes in a variety of containers. From the tiny 7 oz ‘Pony’ to the larger 24 oz ‘Tall Boy’. The most common vessel is the 12 oz bottle, made popular by larger American breweries like Anheuser-Busch with Budweiser and Michelob Ultra. Brewers prefer cans because they function like ‘mini-kegs’, and keep the beer fresher and more flavourful for longer. Regardless of what beers you choose to serve, selling the whole container as a unit makes service and inventory a breeze.
Multiple Cans & Bottles
There is only one thing better for inventory control than selling entire closed units of alcohol, and that is multiple closed units. Adding incentives as small as a dollar in savings will influence customers to buy a beer for their friend, neighbour, or the cute girl at the end of the bar.
Popular upsells include:
Buy one get one free
Three for ?$
Bucket (5 beers)
The more you can sell at once, the better. If you can get creative with it you can sell half or even a whole case…
Fractions of Cans & Bottles
If for some reason you choose to sell the container of beer in parts, it is good practice to incentivise the customers to buy all the part at once. This can be done with ‘twofer’ or ‘threefer’ sales. A classic and common example of this is any bomb shot, where a shot of alcohol is dropped into a glass of beer, then swiftly chugged. For the Irish Carbomb shot, which contains a shot of Jameson with Bailey’s layered on top of it, ‘bombed’ into Guinness beer, you may only serve half of the can or bottle. The bartender will then stick it in the cooler, forget about it, and end up with a dozen or so half-bottles at the end of the night. Losing all carbonation and taste, they will contribute to shrinkage.
The solution might look something like this -
Irish Car Bombs: 1 for $9 | 2 for $15
Training the staff to upsell in this way will ensure the drinks are fresh, made to spec, and help lower your shrinkage. This is a very effective customer-side hack, but is redundant if you have…
Draft Beer
Draft machines, when maintained well and used responsibly, are fantastic. They elevate the customer experience, and allow the bar owner to serve beer in any quantity.
Popular quantities include:
Flight Glass (4 oz)
Half-Pint (8 oz)
Pint (16 oz)
Half-Pitcher (32 oz)
Pitcher (64 oz)
It does not strictly matter what quantities you choose, but it is helpful to be consistent, and serve the right quantity for the right glass (don’t serve half-pints in full pint glasses etc). In this way you can eliminate most bartender error.
We covered shrinkage fairly comprehensively in an earlier piece, Shrinkage in Hospitality, but it is worth repeating here. Draft beer is consistently the biggest sources of shrinkage. If not properly maintained, kegs will foam during pouring. If not routinely audited, staff will take the flow of beer for granted - becoming sloppy with either pour or sales. It is even common for bartenders to give away beer, they will cheekily refer to it as ‘the free beer machine’. Detecting a missing pint from a 676 oz keg is difficult even for more experienced managers.
Keg service is fully useful, but only when used fully!
Wine
Bottle Sales
It is always best when possible, to sell the bottle. This is true for beer and liquor, and especially true with wine due to its perishability. No matter how expensive or elaborate your wine sealing mechanisms are (and they can get quite expensive and elaborate), your wine will go bad after opening.
This is why the tried and true method for any successful restaurant or wine cellar is to sell the bottle.
5 oz Glass
When not dining, most customers will only want a glass of wine. Bars and restaurants have found catering to the casual wine drinker to be quite profitable. How do they handle the shrinkage problem? In two ways.
Select a few ‘affordable’ wines as your house wines. Having just a red and a white open at any one time ensures that you sell the bottle off before it perishes. Properly sealed you might be able to get 2-3 days out of a bottle, and this can be managed simply with recorking and refrigeration.
Serve the wine in 5 oz portions. The standard size for a bottle of wine is 750 mL, or 25.36 oz. Through the use of proper glassware and training your bartenders can learn to pour a consistent 5 oz glass of wine. The 0.36 oz remainder is just enough of a buffer for margin of error in pouring.
<5 oz
Some cocktail recipes call for a touch of wine - for colour, flavour, or as a float. One of the most popular being the New York Sour. Philosophically this is where inventory control becomes a nightmare. Why? Well, if you are pouring 1 - 2 oz of cabernet sauvignon on top of a whiskey sour, then you are either cracking open a new bottle, or breaking the 5 glass per bottle balance. Nevertheless, sours cocktails with red wine floats are visually striking and delicious, so we manage thus -
If there is less than a glass of wine in a bottle, prioritise that bottle for wine cocktails, even to the point of keeping it closed in the fridge. Customers are less sensitive to the taste of oxidation if it is in a cocktail surrounded by other scents and flavours. It is a serious faux pas to ‘split bottles’, in that you finish off the dregs of a bottle in a wine glass, then top it off to 5 oz with a new bottle. It is best practice to open up a new bottle completely for glass pours.
The Takeaway
Having created the cocktail programs for quite a few bars and restaurants, I have strong opinions on pouring standards. My reasoning with spirits is that the ‘1, 1.5, 2.5, bottle’ works. You get 20+ drinks out the bottle. It is recognisable and intuitive to customers, and easy to process for bartenders and servers. Unless you have a good reason to deviate, I would recommend it for your bar too.
The truth of portions and shrinkage is that the quantities of the standards don’t strictly matter. What matters is the fact of having standards. If your staff don’t know what they are supposed to pour in a given situation, they cannot be over or under. As a sort of variation of Parkinson’s law, your staff’s pours will increase to fill the size of the ambiguity in your restaurant protocol.
If you own a bar and would like help standardising your pours and prices, you can reach out to us here. With that said, we’re on to everyone’s favourite step - Cocktail Menu + Recipes.