1. Beverage Cost Control: Managing for Profit
Chapter 19
Beverage Cost Control:
Managing for Profit

2. Chapter Objectives Compute the cost of beverages sold.
Determine prices using product cost percentage and contribution margin methods.
Understand the variables that influence beverage menu pricing and their effects on profits.
Understand beverage pricing methods for banquets and other catered events.
Understand the importance of standardized recipes and how they influence profits.
Understand the difference between keeping a physical and perpetual inventory.
Employ techniques to track and control beverage costs.

3. Cost of Beverages Sold
Cost of beverages sold ÷ Beverage sales = Beverage cost percentage
The formula represents the ratio between the beverage department’s product cost and its sales.

4. Product Cost and Contribution Margin
Product cost method: Cost of product ÷ Desired cost percent = Selling price
Contribution margin method: Selling price ̶ Cost of product = Contribution margin

5. Variables That Influence Pricing
Prices paid to purveyors
Market demands
Competition pricing
Cost controls
Loss leaders
Geographic location

6. Pricing Banquets
Per person per hour: Total beverage charge determined on a per person/per hour fee.
Pre- and post-function inventory: A pre- and post-inventory is conducted; client is charged on actual usage of product consumed.

7. Standardized Recipes Ensure consistency in drinks produced
Ensure costing of product is accurate
Ease the preparation process once bartenders are trained
Assist in setting par levels
Aid the purchasing and storing process

8. Source: U.S. Department of Labor (June 2001)
Keeping Inventory
Physical Inventory: Normally conducted monthly. A full count of product on the premises is conducted and the product valued.
Perpetual Inventory: Additions to and deletions from inventory are accounted for as they occur. Utilized for more expensive product.

9. Tracking and Control Set par levels Set purchasing procedures
Determine receiving and storing policies
Set issuing guidelines
Use standardized recipes

10. CONCLUSION