BEVERAGE COST

At the end of the period the learner should be able to :

1. Use sales histories and standardized recipes to develop a beverage purchase order.
2. Compute the value of bar transfers both to and from the kitchen.
3. Compute an accurate cost of goods sold percentage for beer and spirits.
4. Understand and appreciate the importance of beverage costing in Food Industry.

BEVERAGE COST are those related to the sale of alcoholic beverages. It is interesting
to note that it is common practice in the hospitality industry to consider beverage costs
of non - alcoholic nature as an expense in the food cost category. However for alcoholic
beverages, cost category include beer, wine and liquor This category may include the
costs of ingredients necessary to produce these drinks such as cherries, lemons, olives,
limes, mixers like carbonated beverages and juices and other items commonly used in
the production and service of alcoholic beverages.

ALCOHOLIC BEVERAGES are simply those products that are meant for consumption as
a beverage and that contain a significant amount of ethyl alcohol. These products are
generally classified as :
1. Beer - a fermented beverage made from grain and flavored with hops
2. Wine - a fermented beverage made from grapes, fruits or berries
3. Spirits - fermented beverages that are distilled to increase the alcohol
content of the product.
 Many operations include alcohols a major component of the products they offer to
guests. There are three types of operations that serve alcoholic beverages. These can
be grouped as :
1. Beverage Only
In this facilities, snacks such as pretzels, chips and nuts are served but
beverage service is clearly more important. Beverage only bars are oftentimes
neighborhood gathering places.
Examples:
Neighborhood bars, taverns, Hotel bars, airport bars, bus terminal bars,
breweries and wineries.
2. Beverage and Food
Beverage and food operations are the predominant type of beverage
operation. Restaurants serving wine, beer and liquor as well as bars that serve
light meals are examples of this type of service. Many alcoholic beverages were
created because they are enjoyed most when combined with
food.
Examples:
Beverage and food operations can include quick service restaurants,
full service restaurants, self service and cafeterias, airport bars, sports complex
such as areas and stadiums, grocery store carryout, brew pubs, hotel room
service , banquet halls & country clubs.
3. Beverage and entertainment / activity
This exist because many people want to eat something while they consume their
favorite alcoholic beverage. There is enormous variety in the types of
entertainment and activities that can accompany beverage service, ranging
from dartboards and pool tables to elaborate stage shows in nightclubs and
cabarets.
Examples:
Beverage and entertainment / activity operations can include comedy clubs,
taverns, entertainment clubs , sports complexes, full service restaurants, brew
pubs, night clubs, country clubs, dance & music clubs and bowling alleys.

FORECASTING BEER SALES

 Alcoholic Beverages can forecast sales either by :
a. By the bottle / can
b. By the glass

FORECASTING SALES BY THE BOTTLE / CAN

Forecasting sales by the bottle is essentially the same as forecasting any regular
menu item. That is, given a choice of beverage products, some percentage of your
guests will likely choose beer. However, the questions you must answer to effectively
manage your costs are, “What percentage of my guests will choose beer?” and “Which
kind of beer?” and “In what packaging format will they choose that beer?”.
By either manual tracking you will know exactly which beers by brand and
packaging form you have sold in a bar on a daily basis. A tally of guests will also furnish
you with the same information but such a system is labor intensive, time consuming and
subject to inaccuracy. Regardless of the tracking method used, the goal is the same as
that of tracking a food item sale. That is, with a good idea of what guests have purchased
in the past, we are better prepared to order the products in their proper packaging form
that we believe this guests will purchase in the future.
To determine the sales of each product beer it is important to know the unit cost
either by the bottle or by the case since most of the time, bar owners purchase beer by
case and not by piece for the reason that it is cheaper to buy in bulk rather than by
buying per piece.
In the example below, assume that the product beer have the following prices
per case, and 1 case contains 24 bottles or 24 cans, therefore sales for these product
can be determined thru conversion.

Example : Al Fresco Bar Beer Sales

Determine the percentage sold for each of the products listed below.
 Beverage Sales Date: July 1 -8
Product Number of Bottle Sold Percentage Sold
Budweiser Bottle 45
Coors Bottle 18
Miller Cans 61
Budweiser Draft in Can 68
Coors can 115
Harps Draft 93
Total

Example:
Determine the sales for each product given the number of bottle sold in the previous table
Product Unit Price / Case (PhP) Sales
Budweiser Bottle 915.00
Coors Bottles 1,350.00
Miller Cans 925.00
Budweiser Draft in Can 750.00
Coors Cans 890.00
Harps Draft 820.00
Total

COST OF BEVERAGE SOLD AND BEVERAGE COST PERCENTAGE

Similar to finding the cost of Food Sold and its equivalent percentage, the cost of
beverage sold can be determined through Inventory Method, that is by summing up all
the beginning Inventory Value, Purchases, Borrowed stocks and Subtracting from it the
Ending Inventories, Products that are transferred from the bar, breakages among others.

Using the data of a Bar and considering some other data given below, Beverage Cost
Percentage is computed using the formula :

% Beverage Cost = Cost of Beverage Sold

________________________ x 100
Sales
Other Data:
Beginning Inventories
Budweiser Bottle 6 cases
Coors Bottle 3 ½ cases
Millers Cans 14 cases
Budweiser Draft 9 cases
Others P21,316.00
Transfer from Other Store 5 cases Miller cans
Transfer to Other Store 12 cases Budweiser Draft
Breakages 6 bottles Harps draft
12 Miller bottles
Ending Inventory P 14,350.00

It is important to note that the Marginal Profit in Beverage business is generally

much higher than in food business. The proper computation of beverage cost
percentage is identical to that of cost percentage with one important difference.
Typically, there is no equivalent for employee meals since the consumption of alcoholic
beverage products by employees who are working should be prohibited. Thus
employees drinks would never be considered as a reduction from all beverage cost

FORECASTING WINE BY THE GLASS

Generally, forecasting the sale of house wines, wine served to a guest who does
not stipulate a specific brand when ordering or any wine sold by the glass is done in a
manner similar to that used in forecasting beer sales. However , forecasting SPIRIT BY THE
GLASS is very difficult and tracking maybe somewhat complicated largely because they
may be ordering the same brand but distinct items and flavorings. What is important here
is that, the operator must be able to carry out the recording of each item sold for
monitoring and computation purposes. Examples are Kahlua on the rocks, kahlua and
coffee, kahlua and cream and kahlua and coke.
Consider a 750 ml wine at P950 / bottle. How many servings would there be if
each shot contains 1.5 oz. What is the cost per shot or per serving? If the product is sold
80% higher than its the original cost, What is the estimated profit? (Assume 1L = 33.8
ounces) .

Beverage Sales Date : Jan. 1 to 8

Product Number Sold by Percentage Sold
Glass
Chardonnay 30
Merlot 16
Zinfandel 62
House Zinfandel 52
TOTAL 160

BEVERAGE PURCHASE ORDER

As a general rule, wine, beer and spirits are purchased by the case. Beer of
course may also be bought by full or reduced size kegs. As with food products, small
container size usually results in higher cost per ounce . It is important to remember that
quality product and size of the container are critical when deciding what to buy.

RECEIVING BEVERAGE PRODUCTS

The skill required to receive beverage products is somewhat less than what is
needed for receiving food. The reason is that beverage products do not vary in quality
in he same manner food products do. As with food, the receiving clerk needs proper
location, tools and equipment. In addition proper delivery schedules must be
maintained. The training required in beverage receiving however, is reduced due to the
consistent nature of the product received. A case of freshly produced Coors beer for
example will be consistent in quality regardless of the vendor. And if the product is freshly
produced, that is the date is stamped on the product to indicate its freshness, very little
inspection is required to ensure that the product received is exactly what was ordered.
When receiving beverage products, the following items are of concern and should be
verified :

KEY BEVERAGE RECEIVING CHECKPOINTS

a. Correct Brand
b. Correct Bottle Size
c. No broken bottles or bottle seals
d. Freshness dates ( beer )
e. Correct Vintage, or year produced (wine )
f. Refrigerated state ( if appropriate )
g. Correct Unit price
h. Correct price extension
i. Correct Invoice total

If errors are detected, a credit memo should be filled up and signed by both the
delivery person and the receiving clerk.

Sample Problem:
Operating Data - Rigg's Bar
Beverage Sales P250,000.00
Beginning Inventory 24,405.00
Ending Inventory 18,741.25
Purchases 21, 986.40
Transfers to bar 2,140.00
Transfers from bar 1, 572.00
Breakages 872.00

% Beverage Cost is computed similar to the computation of % Food Cost, however,

different variables are being used.

Unit Name : Rigg’s Bar

Accounting Period: _______ to__________
 Beginning Inventory P 24,405
Purchases + 21,986

Goods Available for Sale 46,391

Ending Inventory - 18,741
27,650
Transfer Out - 1572

Transfer In + 2140

Cost of Beverage Consumed 28,218

Breakage - 872
Cost of Beverage Sold P 27346

% Beverage Cost = Cost of Food Sold

_____________________ x 100
Sales

= P 27, 346
________________ x100
P 250,000

= P 10.94 %