Author: Roger Grimm, AccuBar CEO
Pouring cost is one of the most important, and most misunderstood, figures in the world of bar management. PC, as it's known in the industry, is a crucial benchmark used to help management gauge whether a bar is generating an acceptable and consistent profit. Operating a bar without a firm grasp of the number is like flying a plane without an fuel gauge; you might be able to get by, but sooner or later you're bound to have some serious problems.
Simply put, PC is what you paid for an item divided by what you sold it for. But when I've asked bar managers what their PC is, I've gotten responses ranging from the incredible (7%) to the impossible (28,000), just to mention a few. An overall beverage PC under 20% is generally good, although that depends to some extent on your business philosophy. There is no single number that fits all businesses. (More on that later.)
Here's an example of PC:
- Liquor A costs you $10 per bottle.
- You sell 17 drinks from the bottle for $3.50 each.
- $3.50 x 17 = $59.50. $10 divided by $59.50 = 17%. That is your PC for that bottle.
If that sounds simple, not so fast. Many factors have an effect on PC, including:
- Your purchase price for the item: If your costs rise, your PC will also.
- The selling price: If your patrons pay high prices for their drinks, your PC will naturally be lower. If you have happy hours, your PC for that time of day will be higher than it is for other parts of the day.
- The amount of the product in the drink: In the above example, consider what would have happened had your bartender overpoured. If you had only gotten 15 drinks out of that bottle of liquor, your PC would have been 19% instead of 17%. Overpouring is a common culprit in the battle to control PC.
- The mix of beer, liquor and wine in your operation: Each of these categories, by their nature, will yield a different PC. Wine, for instance, cannot be sold for a margin that is the same as liquor. If you buy a bottle of wine for $10 and sell it for $20 you have a 50% PC. In the Liquor A example, remember, that $10 cost made you $59.50 and got you a PC of 17%.
- Slippage: If you're suffering from a high PC, you definitely need to look into ways to minimize how much of your inventory escapes unsold. This can happen by overpouring, giving away free drinks, employees drinking on the job or after hours, or any of the numerous other ways your beverage items can get away from you.
- Supplier issues: If you're not watching your suppliers closely, items you purchase will start to go undelivered or under-delivered (you buy 1 liter bottles and 750s show up, for instance).
So how do you use PC to help manage your bar? The key is not to calculate your PC randomly or occasionally, but to do so on a frequent, consistent basis. Most successful beverage operations take weekly liquor inventory at a minimum and calculate their PC on a weekly basis; some even do it daily. Any change in your weekly PC should prompt you to investigate. Start with these questions:
- Do you have a new bartender who may be overpouring?
- Did you have a special event that had an effect?
- Is there a new bartender?
- Did you change drink prices?
- Did your costs go up?
- Is someone not making the drinks per your recipes?
- Do you have staff drinking?
- Is someone stealing from you? (even if you think it's impossible, it's not)
- Has a bartender learned a new trick?
- Did you do a thorough inventory, or did you miss something?
- Did you make mistakes while entering data from count sheets?
(not if you own AccuBar :-)
Keep in mind that a high PC is not always an indicator of a problem, just as a low PC does not always mean success. A place that intentionally keeps drink prices low, possibly to generate restaurant business, will naturally have a high PC. And a place, such as a resort, that can charge an inflated price for its drinks might have a low PC; but that doesn't mean it isn't having serious problems with slippage that are pushing its PC higher than it should be. As I mentioned before, it all depends on what you want from your bar.
Date: December 11th, 2008