Computing Ideal Beverage CostMost restaurant and bars do have their managers on some kind of performance based incentive program, but unfortunately for the managers the establishments are still computing the cost percentages based on some kind of magic number that they have either learned, or fits their income sheet expectations. Beverage costs can be tricky but finding a true beverage cost is essential. 
Computing beverage cost Cost percentages are computed by dividing the cost paid for a product by the selling price of that product. Using wine as an example, for a whole month or given period wine cost (or beverage cost) is the total amount spent on wine divided by the total revenue from wine (wine sales). That is the correct way to do it, but is it telling you the whole story? If you are using the actual wine cost (or beverage cost)and comparing in to a stated goal percentage lets say 35% then it is not! It may fit the owner’s spreadsheet nicely, but quite frankly a higher percentage could even be better. To find out you need to move away from actual wine costs and move toward ideal wine costs. What? Ideal Wine costs (or beverage cost)? Ideal vs, real costs Going back to the example of selling wine, say you have two bottles of cabernet, one that you sell for $30.00 and the cost you paid for the bottle is $10.50. The second bottle sells for $40.00 and the cost on it is $16.00. Lets do some quick math to figure out the wine costs on these two bottles:
Well, if you were held to that magical 35% wine cost you would want to sell bottle 1 all day long wouldn’t you? But are you right? Well, yes, you would be, but your owner would be missing the boat! They would probably tell you that they wanted to run a 35% cost and that it would make since to sell bottle 1 too, but right then would be the time to show him just how smart you are (thanks to foodandbeverageunderground.com that is). If you were to sell bottle 1 you would certainly make your 35% goal, and the establishment would make a profit of $19.50 ($30-$10.50). If you were to have sold bottle 2 however, you would have blown your The moral of the story here is that you should always run an ideal cost and then compare it to the actual costs. To do this you should set up a spreadsheet and put the items you sell down the first column, the number you sold of each item from your product mix over the same period and the cost per item. Well, maybe there is an easier way to save you some time. Go to the resources page and you will be able to download our ideal cost spreadsheet. We’ve done the work for you! Although we have used wine in this example the same situation exists for food, liquor, and beer too. It can also be compiled to do the entire beverage cost. You may be fighting a never ending battle with your owner if they are holding you to unrealistic numbers so going this will make those real numbers real, and these ideal numbers your savior! Go from Beverage Cost to Labor Cost Go to…
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