Check-in app Foursquare claims during the first week of the shutdown, check-ins at bars increased by over 50 percent. But over time, bars returned back to or below pre-shutdown levels, and more people were going to dive bars than usual.
Will Gordon did and so he questioned several Boston-area bar managers to find out where drink prices come from, then wrote about it on Deadspin, a sports website.
Gordon points out that Boston is a relatively expensive city, but the underlying percentages and equations invloved in determining the final drink price to customers are similar around the country.
The first thing that impressed Gordon was that bars don’t get as much of a volume discount as you might expect, and as usual, the biggest places get the best prices.
That said, Gordon says the following numbers are compiled from a medium-sized neighborhood bar in Boston.
A case of Budweiser costs the bar $20.55, or 85 cents per bottle. (At the closest liquor store, it’s $24.99.) The bar sells those bottles for $3.75 apiece, which makes their cost 23 percent of the customer’s price. The standard industry goal is to keep liquor cost at around 20 percent, which makes a Bud bottle a relatively good deal for the drinker.
This is fine by the bar, because a bottle of beer is the easiest thing to serve. It comes in its own container and requires no mixers or garnishes, and it takes the bartender five seconds to complete the transaction.
You can also only mark up a bottle of beer so much, because we can all do the math in our heads. We know what a bottle of Bud costs retail, and we correctly assume that it’s at least somewhat cheaper wholesale. So the bar settles for a modest 341 percent markup (yup, this is low).
The bar pays $93 for a 15.5-gallon keg of Bud (plus a refundable deposit, which I’m stripping out of all keg prices). That keg theoretically holds 124 16-ounce servings, although some could be lost to foam run-off when the keg is first tapped and what not.
Foam takes up about four times more of a glass’s volume than straight beer anyway, so a properly poured one-finger Bud head reduces your 16 ounces down to 15ish, which means a tightly run ship can squeeze damn near the full 124 servings out of a keg without ripping anyone off.
At 124 pints per $93 keg, the bar is paying $.75 for the pint it sells for the same $3.75 it gets for a Bud bottle (it’s common practice for a 16-ounce draft beer to cost the same as a 12-ounce bottle; bottles are for suckersand for people drinking in dirty bars where the tap lines and pint glasses can’t be trusted).
So the markup on a Bud draft is 400 percent, giving the bar the magic 20 percent liquor cost. Draft beer takes a little bit more work from the bartender and it requires glasses, which are breakable and need to be washed.
And, in theory anyway, you sell less Bud to a pint drinker than to a bottle man, as the former gets his hypothetical fill of 48 ounces in three transactions to the latter’s four. From the bar’s point of view, these minor draft hassles on their end combine with the added novelty value to the customer to justify the slightly higher vig.
What if you’re too damn something-or-other to drink crappy beer? The bar gets 15.5-gallon kegs of several different craft beers for $150 (plus deposit)Lagunitas IPA, Brooklyn Lager, and Mayflower Porter were all on the invoice I saw. That’s $1.21 for a pint they sell for $5.75, which makes the markup 375 percent and the product cost 21 percent.
Low-end house wine is simple. The bar tries to get one glass to pay for the bottle, for a relatively low 300 percent markup (25 percent product cost). They make up for that with more expensive bottles, where pricing policies get a bit wonky, but where the high raw numbers make the percentage less important: If you charge a measly 50 percent markup on a bottle of wine that cost your bar $100, you just made $50 for twisting a corkscrew.
Pricing for basic liquor drinks is a bit more complicated, but we can still break down the basics. The bar pays $27.50 for a one-liter (33.8-ounce) bottle of Stolichnaya vodka. If we assume a standard 1.5-ounce shot, that means you get 22.5 Stoli-and-whatevers per bottle, for a price of $1.22 per serving. The bar charges $6.75 per dose, so when dealing with Russians or other masochists, the liquor cost is a mere 18 percent.
But most people don’t drink shots of vodka. All the other crap that goes into a standard mixed drinksoda, ice, straws, lime wedgesis cheap for the bar but free to the consumer. Five gallons of Coca-Cola syrup costs about $80.
The syrup is reconstituted into soda at a ratio of 5 parts water to 1 part goo; if you start with a 10-ounce glass, that leaves 4 ounces of soda after the liquor and ice are added, which is about 8 cents of Coke per mixed drink.
If you figure another nickel for other accouterments, you’re up to $1.35 worth of ingredients for a $6.75 Stoli and Coke, for a 400 percent markup (20 percent product cost).
The worst deal for the consumer is bottom-shelf liquor. The bar can get a liter of generic vodka for $7; now they’re down to 31 cents worth of booze per drink as opposed to the $1.22 they shell out for Stoli. Throw in the 13 cents worth of soda and nonsense and it’s 44 cents for a drink they sell for $5.75.
That’s a markup of 1,206 percent, with the cost to the bar only 7.6 percent of the customer’s price. The bar actually makes a slightly lower net profit per drink that way (they pay 91 cents less for ingredients that they sell for a dollar less), but it’s still a great deal for the house because the opportunity cost is so much lower on a bottle of cheap vodkathey have less money tied up in unsold inventory and lower exposure to loss, theft, and breakage.
And that’s just the math of it; quality counts, too. Although a TON of marketing and hype and bullshit goes into the mid- to high-end liquor game, the true bottom-of-the-barrel stuff really is markedly inferior. If you’ve got a glass of Barton’s or some similar garbage instead of Stoli, you haven’t really saved one dollar; you’ve pissed away 5.75 of them.