The Smart Way to Properly Price Your Drink Specials

From BarBusinessOwner.com

Many bars offer theme specific drinks as well as theme specific drink pricing when running promotions.
 
In your promotion planning you should spend some time deciding what type of drink specials and discounts you will be offering.
 
Decide on drink pricing
 
Unfortunately, many bar owners have no clue how many more drinks are needed to be sold in order for the drink specials to make sound business sense.
 
In most instances, you want to run reduced price drink specials on items you have the highest margin on. By doing this, you don’t have to sell as many additional drinks to offset your price discounts.
 
For sake of an example, let’s use some common gross profit margin industry averages (of course your bar’s gross profit margin may be different):
 
-Liquor: 81%
-Frozen drinks: 80%
-Keg beer: 70%
-Bottled beer: 65%
-Wine: 35%
 
Let’s say you run a half price promotion. You’ll need to sell:
 
-Liquor: 161% more to offset the price discount
-Frozen drinks: 166% more
-Keg beer: 250% more
-Bottled beer: 333% more
-Wine: you lose money because the industry average gross profit margin is 35%
 
To make your drink special the most profitable, you should focus on liquor based drinks and keg beer.
 
If you decide to run drink specials on bottled beer and wine, then you need to run a much smaller price discount.
 
As you can see, not knowing the effects of price discounting can impact you bottom line profits significantly, especially if the same mistake is repeated over and over.
 
Take some time and use the below calculator to “run the numbers” on your most common drink specials and calculate how this is affecting your profits.
 
If you find the numbers unacceptable in any scenario, then take action and make adjustments to maximize your profits.