c4 Managing Beverage Cost

Chapter 4
Managing the Cost of

Beverages
© 2011 John Wiley & Sons Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Main Ideas
 Serving Alcoholic Beverages
 Forecasting Beverage Sales
 Standardized Drink Recipes and Portions
 Purchasing Beverage Products
 Receiving Beverage Products
 Storing Beverage Products
 Bar Transfers
 Computing Cost of Beverages
 Special Features of Liquor Inventory
 Sales Mix
 Technology Tools
Edition
Serving Alcoholic Beverages
 Alcoholic beverages – a significant amount of ethyl

alcohol content is present.
 Alcoholic beverages are generally classified as beer,
wine or spirits.
Edition
 Beer is a fermented beverage made from grain

and flavored with hops.
 Wine is a fermented beverage made from
grapes, fruits, or berries.
 Spirits are fermented beverages that are
distilled to increase the alcohol content of the
product.
Edition
 These products will be specified, ordered,
received, and stored much like food products.
However, there are control issues that are much
more difficult to handle.
 Such controls must be modified to meet the
characteristic and inherent increased responsibility
created by the sale of alcoholic beverages.
Edition
 Dramshop laws, passed in many states, shift the

liability for acts committed by an individual
under the influence of alcohol from that
individual to the server or operation that
supplied the intoxicating beverage.
 License states versus control states
Edition
Forecasting Beverage Sales
BEER
 Forecasting beer sales is basically the same as
forecasting any regular menu item - use sales
histories.
 Keg beer is also known as draft beer, or beer in
a form of packaging in which the beer is shipped
to you in multi-gallon units for bulk sale.
Edition
Figure 4.1 LeRae's Bar Beer Sales
Beverage Sale Date: 1/1-1/8
Product: Beer Number Sold Percentage Sold
Budweiser Bottles 45 11.25%

Coors Bottles 18 4.50
Miller Cans 61 15.25
Coors Cans 68 17.00
Budweiser Draft 115 28.75
Harp’s Draft 93 23.25
Total 400 100.00
Edition
WINE
 Forecasting wine sales is divided into two parts:
1. bottled-wine sales
2. wine-by-the-glass sales.
 When forecasting sales by the bottle or glass -
use sales histories.
 House Wines – wine served to a guest who does
not stipulate a specific brand when ordering.
Edition
Figure 4.2 LeRae's Bar Wine-by-the-Glass Sales
Beverage Sales Date: 1/1-1/8
Product:
Wine by-the-Glass Number Sold Percentage Sold
Fabiano Chardonnay 30 18.75%
House Merlot 16 10.00
Bolla Soave 62 38.75
House Zinfandel 52 32.50
Total 160 100.00
Edition
SPIRITS
 While the number of people who order a mixed
drink can be tracked, the exact item the guests
request is very difficult to determine.
 One method categorizes all drinks based on the
spirit that forms the base of the drink.
 Spirit sales can also be tracked by generic
product name, specific product name, or
specific drink requested.
Edition
Figure 4.3 LeRae's Bar Spirit Sales
Beverage Sales Date: 1/1-1/8
Product: Spirits Number Sold Percentage Sold
Scotch 210 13.1%

Bourbon 175 10.9
Vodka 580 36.3
Gin 375 23.4
Kahlua 175 10.9
Tequila 85 5.3
Total 1,600 100.0
Edition
Standardized Drink Recipes and Portions
 Control is more important at the bar than in the

kitchen because the potential for waste and theft is
greater.
 For example:
 Beverage operations are subject to tax audits
 Beverage operations can be closed down for violations
 Employees may bring their own products to sell
 Detecting the disappearance of small amounts of
beverage products is very difficult
Edition
 The following is the beverage cost % formula:
Cost of Beverage Sold

Beverage Sales = Beverage Cost %
Edition
 Measuring devices – jigger, free pour, spout control,

automated device
 A standardized recipe sheet should be prepared for
each drink item for costing purposes.
 While standardized recipes (including step-by-step
prep methods) may only be necessary for a few
drinks, recipes that detail alcoholic portions should
be strictly adhered to.
Edition
Figure 4.4 Beverage Cost Competition
Beverage: Bourbon Container Size: One liter (33.8 oz.)

Product cost: $24.80/liter
Number Total
Portion of Liter Portion Selling Beverage Beverage
Size Portions Cost Cost Price Sales Cost %
1.00 oz. 33 $24.80 $ 0.75 $8.50 $280.50 8.8%
1.25 oz. 26 24.80 0.95 8.50 221.00 11.2
1.50 oz. 22 24.80 1.13 8.50 187.00 13.3
1.75 oz. 19 24.80 1.31 8.50 161.50 15.4
Edition
Purchasing Beverage Products
 Beer product request log should be maintained so that guest
requests that cannot be filled are noted and monitored by
management.
 Beer is typically sold in cans, bottles or kegs.
 Draft beer (beer from kegs) is often the preferred choice and
cheaper for operators to serve. However, special equipment
and serving techniques are required.
 The shelf life of keg beer is the shortest of all packaging types,
ranging from 30 to 45 days for an untapped keg and even
fewer days for a tapped (opened) keg.
Edition
Figure 4.5 Beverage Product Request Log
Date Item Requested Entry By

1/1 Lowenbrau Beer P. J.
1/1 Cherry Schnapps L. T.
1/2 Rolling Rock Beer on Draft T. R.
1/4 Lowenbrau Beer P. J.
1/5 Soave Wine L. D.
1/6 Any Texas Wine S. H.
1/6 Lowenbrau Beer T. R.
Edition
 Wine must also be selected according to product

and packaging.
 Operators generally sell wine by the glass, bottle,
and split or half bottle.
 If wine is also purchased for cooking, it will
generally not be of the same quality as that
purchased for drinking.
Edition
Figure 4.6 Draft Beer Containers
Size (US Size No. of 12 oz. No. of 16 oz. No. of 20 oz.

Common Name
gal) (liters) drinks drinks drinks
Mini Keg /(single-

1.32 5 14 10 8 -
use/recyclable)
5 18.9 53 40 32 Home Keg
5.23 19.8 55 41 33 Sixth Barrel
6.6 25 70 52 42 "Half Barrel" (Europe)
7.75 29.3 82 62 49 90 lbs. Quarter Barrel / Pony Keg
Import Keg (standard

13.2 50 140 105 84
European "Barrel")
140 -
15.5 58.7 165 124 99 Half Barrel / Full Keg
170 lbs.
Edition
 As a good manager, you will build a wine list
that fits your own particular operation and guest
expectations.
 In developing a wine list, operators must offer
choices for guests who want to spend a lot or a
little.
 A vintner is a wine producer.
 Wines should either complement the food or, in
the case of a bar, are popular with the guests.
Edition
Figure 4.7 Wine Bottle Sizes
Bottle Size (Capacity) Common Name Description

0.100 Liters Miniature (mini) A single serving bottle
0.187 Liters Split 1/4 a standard bottle
0.375 Liters Half-bottle 1/2 a standard bottle.
0.750 Liters Bottle A standard wine bottle
1.5 Liters Magnum Two bottles in one
3.0 Liters Double Magnum Four bottles in one

Note:
1 U.S. quart = 0.946 liters
1 U.S. gallon = 3.785 liters
Edition
Figure 4.8 Sample Wine List
Toliver’s Terrace
Sparkling Wine and Champagne $ per Glass/

$ per Bottle
101 Gloria Ferrer, Brut Sonoma County $7.00/$26.00
102 Pommery, Reims, France $43.00
103 Jordon "J", Sonoma $48.00
104 Moet Chandon, Epernay, France $55.00
105 Dom Perignon, Epernay, France $125.00
Chardonnay
201 Kendall-Jackson, California $5.00/$20.00
202 Camelot, California $6.00/$22.00
203 St. Francis, Sonoma $7.00/$26.00
204 Cartlidge & Browne, California $30.00
205 Stag's Leap, Napa Valley $52.00
Other White Wines
206 Fall Creek, Chenin Blanc, Texas $5.00/$18.00
207 Max Richter, Riesling, Germany $6.00/$22.00
208 Honig, Sauvignon Blanc, Napa Valley $7.00/$25.00
209 Tommasi, Pinot Grigio, Italy $7.00/$25.00
210 Santa Margherita, Pinot Grigio, Italy $34.00
Cabernet Sauvignon
301 Tessera, California $5.00/$20.00
302 Guenoc, California $7.00/$27.00
303 Sebastiani Cask, Sonoma $35.00
304 Franciscan, Napa Valley $38.00
305 Chateau Ste. Michelle, Cold Creek, Washington $45.00
Merlot
306 Talus, California $5.00/$20.00
307 Tapiz, Argentina $6.00/$22.00
308 Ironstone, Sierra Foothills $7.00/$26.00
309 Solis, Santa Clara County $35.00
Pinot Noir
310 Firesteed, Oregon $6.00/$23.00
311 Carneros Creek, Carneros $31.00
312 Iron Horse, Sonoma $39.00
313 Domain Drouhin, Willamette Valley, Oregon $55.00
Edition
 Avoid the temptation to offer too many wines

on a wine list – increases costs.
 Wait staff should be trained to be
knowledgeable but not intimidating to guests.
 Generally, if operators are having trouble
selling wine, the difficulty lies in the delivery
of the product rather than with the product
selected.
Edition
 Distilled spirits have an extremely long shelf

life, therefore, a wrong purchase is not
usually a disaster.
 While packaging is not a major concern of
the operator selecting a product, brand quality
is crucial.
Edition
Figure 4.9 Spirit Bottle Sizes and Capacities
Common Bottle Name Metric Capacity Fluid Ounce

Capacity
Miniature 50 ml 1.7
Half-pint 200 ml 6.8
Pint 500 ml 16.9
Fifth 750 ml 25.4
Quart 1.0 Liter 33.8
Half-gallon 1.75 Liters 59.2
1 Liter equals 1000 milliliters
Edition
 In general, operators will select spirits in two major

categories, well and call liquors.
 Well liquors are those spirits that are poured when
the customer does not specify a particular brand
name.
 Call liquors are those requested by brand name;
extremely expensive call liquors are sometimes
referred to as premium liquors.
Edition
Figure 4.10 Spirit Cost Percentage
Original Portion Cost

Number Portion Total Selling Total Beverage
Spirit Sold Cost Cost Price Sales Cost %
Well 50 $0.90 $45 $5 $250 18.0%
Call 50 1.20 60 6 300 20.0
Total 100 105 550 19.1
Figure 4.11 Spirit Cost Percentage
Reduced Portion Cost

Number Portion Total Selling Total Beverage
Spirit Sold Cost Cost Price Sales Cost %
Well 50 $0.60 $30 $5 $250 12.0%
Call 50 1.20 60 6 300 20.0
Total 100 90 550 16.4
Edition
 Operators generally charge a higher price for call

or premium liquors.
 Remember, guests who order well liquors may be
price conscious, but that does not mean they are
not quality conscious also.
 Quality spirit products at fair prices build
customer loyalty.
Edition
 Depending on the state and county, special laws
may influence how beverage purchases are to be
made or paid for.
 The goal in purchasing beverages is to have an
adequate, but not excessive amount of product on
hand at all times.
 Organic spirits available include Vodka, Gin,
Tequila, Scotch and Rum. While more expensive
than non-organic versions of the same product,
these items are increasingly available for
purchase.
Edition
 Concerns about costs can plague green beverage
initiatives because organic product costs are
historically higher. Today, however, using seasonal
and local produce and juices for drink production can
help moderate every operation’s costs while
increasing quality.
 A broken case occurs when several different brands
or products are used to completely fill the case.
 As a general rule, wine, beer, and spirits are
purchased by the case.
Edition
Receiving Beverage Products
 Since beverage products do not vary in quality, as

does food, skill required to receive beverages is
somewhat less.
 As with food, the receiving clerk needs a proper
location, tools, and equipment.
 Proper delivery schedules must be maintained.
 When matching the purchase order to the vendor
invoice, only quantity ordered and price must be
verified.
Edition
Receiving Beverage Products
 If beer is fresh dated, that is, a date is stamped on the
product to indicate its freshness, very little inspection
is required.
 Key beverage receiving checkpoints are: correct
brand, correct bottle size, no broken bottles, freshness
dates (beer), correct vintage (wine), correct unit price,
correct price extension, and correct invoice total.
 If errors are detected, a credit memo should be filled
out and signed by both the delivery person and the
receiving clerk.
Edition
Storing Beverage Products
 Storage areas should be clean, free of infestation, and

large enough to allow for easy rotation of stock.
 Security is crucial. A two-key system is often used;
the individual responsible for the beverage area has
one key while the other key is kept in a sealed
envelope in a secured area. In the event of
emergency, the envelope can be opened.
Edition
 Spirits should be stored in a relatively dry storage

area between 70 and 80F (21 to 27C).
 Beer in kegs or unpasteurized containers should be
stored at refrigeration temperatures of 36 to 38F
(2 to 3C).
 Canned beer should be covered when stored to
prevent dirt from accumulating on the rim.
 Pasteurized beer should be stored in a cool, dark
room at 50 to 70F (10 to 21C).
Edition
 The three components critical to wine storage are

temperature, light, and cork condition.
 Generally, wines should be stored at a temperature of
50 to 65F (10 to 18C).
 Heat is an enemy of effective wine storage.
Edition
 When storing wine, it should be exposed only to the
minimum amount of light necessary.
 The cork protects wine from its greatest enemy,
oxygen. Oxidation occurs when oxygen comes in
contact with bottled wine – it smells somewhat like
vinegar.
 Wine should always be stored in such a way that the
cork remains in contact with the wine to stay moist,
usually on its side.
 Storage should keep the cork, and thus the wine, cool,
dark, and moist.
Edition
Bar Transfers
 As far as sprits are concerned, nonalcoholic food

products may be served as a part of the drink order
and must be transferred from the kitchen to bar.
 If transfers are not controlled and recorded, the
restaurant’s food cost percentage will be inflated.
 Total beverage cost percentage will be understated.
 Likewise, bar items may be used in the kitchen and
must also be properly noted.
Edition
Edition
Computing Cost of Beverages
Beginning Inventory
PLUS
Purchases
=Goods Available for Sale
Less
no “employee meals”
Ending Inventory
Less
Transfers from Bar
Plus
Transfers to Bar
= Cost of Beverage Sold
Edition
Figure 4.13 Cost of Beverage Sold
Unit Name: Rio Lobo’s Accounting Period: 1/1 to 2/1
Beginning Inventory $24,405.00

PLUS
Purchases 21,986.40
Goods Available for Sale $46,391.40
LESS
Ending Inventory 18,741.25
LESS
Transfers from Bar 1,572.00
PLUS
Transfers to Bar 2,140.00
Cost of Beverages Sold $28,218.15
Edition
Special Features of
Liquor Inventory
 Opened containers must be counted. Three

inventory methods are commonly in use to
accomplish this goal. They are:
1. Weight
2. Count
3. Measure
Edition
Figure 4.14 Specific Gravity of Selected Liqueurs
Liqueur or Cordial Color Specific Gravity
Kirsch Clear 0.940

Sloe Gin Red 1.040
Rock and Rye Amber 1.065
Triple Sec Clear 1.075
Peach Brandy Peach 1.085
Blue Curacao Blue 1.120
Crème de Cacao Brown 1.150
Crème de Cassis Purple 1.170
Crème de Banana Yellow 1.180
Edition
Sales Mix
 Sales mix is defined as the series of guest purchasing

decisions that result in a specific food or beverage
cost percentage.
 Guests can contribute to major changes in the food or
beverage cost percentages, due to sales mix.
Edition
Figure 4.15 Raider Resort
Monthly Beverage Percentage Report
Location Cost of Beverages Beverage Sales Beverage Cost %

Banquets $20,500 $80,000 25.6%
Surfside Bar 10,350 45,500 22.7
Harry O’s 16,350 67,000 24.4
Total 47,200 192,500 24.5
Edition
Sales Mix
 To analyze the beverage sales mix, the item % of total

beverage sales must be calculated, as follows:
Item Dollar Sales

Total Beverage Sales = Item % of Total Beverage Sales
Edition
Figure 4.16 Raider Beverage Outlets
Monthly Beverage Percentage Recap
# 1 Outlet Name: Banquets Month: January
Cost of Beverage Sales Beverage Cost %

Product Beverages
Beer $ 2,500 $10,000 25.0%
Wine 12,000 40,000 30.0
Spirits 6,000 30,000 20.0
Total 20,500 80,000 25.6
#2 Outlet Name: Starlight Bar
Product Cost of Beverage Sales Beverage Cost %

Beverages
Beer $ 3,750 $15,000 25.0%
Wine 1,500 5,000 30.0
Spirits 5,100 25,500 20.0
Total 10,350 45,500 22.7
#3 Outlet Name: Harry O’s
Product Cost of Beverage Sales Beverage Cost %

Beverages
Beer $11,250 $45,000 25.0%
Wine 2,100 7,000 30.0
Spirits 3,000 15,000 20.0
Total 16,350 67,000 24.4
Edition
Figure 4.17 Raider Resort
Beverage Sales Percentage Recap
Unit Beer Wine Spirits Total Sales

Banquets 12.5% 50.0% 37.5% 100%
Starlight Bar 33.0% 11.0% 56.0% 100%
Harry O’s 67.0% 10.5% 22.5% 100%
Edition
Technology Tools
 For those operations that sell a significant amount of

alcoholic beverage products, there are a variety of
programs designed to discourage theft and carefully
monitor product sales and expenses.
 In fact, the software and hardware available to help
you in the beverage service area is generally more
sophisticated than that found in most food-related
areas.
Edition
Technology Tools
 Programs available in the beverage area
include those that can help you:
1. Monitor product sales.
2. Monitor product (inventory) usage.
3. Calculate actual and targeted pour percentages.
4. Adjust product costs for happy hours and
specials, as well as product transfers to and from
the kitchen.
5. Maintain adequate levels of product inventory.
6. Establish par stock quantities and values.
Edition
Technology Tools
7. Generate purchase orders.

8. Schedule employees based on forecasted sales
levels.
9. Create and print customized wine lists and
specials menus.
10.Maintain sales histories.
11.Maintain drink recipe files.
12.Project the impact of sales mix on beverage cost
percentages
Edition
Technology Tools
 It is important to realize that some bar-related

software may be dependent on specific and
sometimes expensive automated beverage dispensing
systems.
 Other software is either stand-alone or designed to
operate in conjunction with many of the basic POS
systems currently on the market.
Edition
Summary
 Serving Alcoholic Beverages
 Forecasting Beverage Sales
 Standardized Drink Recipes and Portions
 Purchasing Beverage Products
 Receiving Beverage Products
 Storing Beverage Products
 Bar Transfers
 Computing Cost of Beverages
 Special Features of Liquor Inventory
 Sales Mix
 Technology Tools
Edition

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Chapter 4

Managing the Cost of

 Alcoholic beverages – a significant amount of ethyl

 Beer is a fermented beverage made from grain

 Dramshop laws, passed in many states, shift the

Beverage Sale Date: 1/1-1/8

Product: Beer Number Sold Percentage Sold

Budweiser Bottles 45 11.25%

Beverage Sales Date: 1/1-1/8

Beverage Sales Date: 1/1-1/8

Product: Spirits Number Sold Percentage Sold

Scotch 210 13.1%

 Control is more important at the bar than in the

 The following is the beverage cost % formula:

Cost of Beverage Sold

 Measuring devices – jigger, free pour, spout control,

Beverage: Bourbon Container Size: One liter (33.8 oz.)

Date Item Requested Entry By

 Wine must also be selected according to product

Size (US Size No. of 12 oz. No. of 16 oz. No. of 20 oz.

Mini Keg /(single-

5 18.9 53 40 32 Home Keg

5.23 19.8 55 41 33 Sixth Barrel

6.6 25 70 52 42 "Half Barrel" (Europe)

7.75 29.3 82 62 49 90 lbs. Quarter Barrel / Pony Keg

Import Keg (standard

Bottle Size (Capacity) Common Name Description

0.187 Liters Split 1/4 a standard bottle

0.375 Liters Half-bottle 1/2 a standard bottle.

0.750 Liters Bottle A standard wine bottle

1.5 Liters Magnum Two bottles in one

3.0 Liters Double Magnum Four bottles in one

Sparkling Wine and Champagne $ per Glass/

 Avoid the temptation to offer too many wines

 Distilled spirits have an extremely long shelf

Common Bottle Name Metric Capacity Fluid Ounce

 In general, operators will select spirits in two major

Original Portion Cost

Figure 4.11 Spirit Cost Percentage

Reduced Portion Cost

 Operators generally charge a higher price for call

 Since beverage products do not vary in quality, as

 Storage areas should be clean, free of infestation, and

 Spirits should be stored in a relatively dry storage

 The three components critical to wine storage are

 As far as sprits are concerned, nonalcoholic food

Unit Name: Rio Lobo’s Accounting Period: 1/1 to 2/1

Beginning Inventory $24,405.00

 Opened containers must be counted. Three

Liqueur or Cordial Color Specific Gravity

Kirsch Clear 0.940

 Sales mix is defined as the series of guest purchasing

Monthly Beverage Percentage Report

Location Cost of Beverages Beverage Sales Beverage Cost %

 To analyze the beverage sales mix, the item % of total

Item Dollar Sales

Monthly Beverage Percentage Recap

# 1 Outlet Name: Banquets Month: January

Cost of Beverage Sales Beverage Cost %

Product Cost of Beverage Sales Beverage Cost %

Product Cost of Beverage Sales Beverage Cost %

Beverage Sales Percentage Recap

Unit Beer Wine Spirits Total Sales

Starlight Bar 33.0% 11.0% 56.0% 100%