Chapter 19
Beverage Cost Control:
Managing for Profit
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed.
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
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.
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
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.
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
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
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
Variables That Influence Pricing
Prices paid to purveyors
Market demands
Competition pricing
Cost controls
Loss leaders
Geographic location
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
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.
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
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
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
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.
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
Tracking and Control
Set par levels
Set purchasing procedures
Determine receiving and storing policies
Set issuing guidelines
Use standardized recipes
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
CONCLUSION
Schmid: The Hospitality Manager’s Guide to Wines, Beers, and Spirits, 2nd ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved.
