These financially challenging years have delivered a trail of alarming headlines related to inflation, and one oft-named disproportionate expense remains going out for cocktails. Even as inflation has fallen from its zenith in 2021 and 2022, there is a lingering perception amongst consumers that drinking in bars is extravagantly expensive.
Cocktail prices increased on average by $1 between 2021 and 2022, according to a CGA by NIQ report. A $14 drink grew to $15, a rise of seven percent, consistent with inflation rates at that time, but for more expensive cocktails, the increase of a single dollar represents a smaller percentage increase in price. Whether or not the price of cocktails inflated disproportionately, prices have gone up for a variety of reasons, a spike in the cost of booze and labor amongst them, and regardless, the perception alone has an impact on consumer behavior.
“I think the issue is people are so aware of [inflation,] it’s part of the zeitgeist,” says Laura Unterberg, the beverage director of The Fox Bar and Country Club in Nashville, Tennessee. “People assume things are too expensive without even looking.”
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With that in mind, many bars and restaurants have sought strategies to keep cocktail prices consistent or price increases to a minimum, while maintaining workable profit margins in these difficult economic conditions. SevenFifty Daily spoke to bar professionals and industry analysts about the state of the cocktail economy today.
A Changed Financial Landscape
According to a Coresight Research study conducted in February 2024 and authored by analyst Sujeet Naik, while inflation overall has finally moderated, inflation for bars and restaurants is still considerably higher than other related industries, particularly food and beverage retail, or the “food-at-home” (FAH) sector. “‘Food-away-from-home’ inflation remains notably higher, at 5.1 percent year-over-year growth in January 2024, compared to 1.2 percent at grocery stores,” the report states. “With this unfavorable pricing gap, restaurants need to be careful of increasing menu prices, as this increases the risk of outsized traffic declines with more consumers choosing FAH.”
Whereas other sectors have been able to bounce back, restaurants and bars have faced a bigger challenge when it comes to pricing. “Most [on-premise businesses] wanted to preserve their profit margin because of the loss they experienced during the pandemic,” says Naik, noting that cocktails are frequently one of the most profitable menu items, and therefore most subject to pricing scrutiny among operators. For those that were forced to raise prices consistent with inflation rates, “they were a bit reluctant to decrease those prices for consumers [as inflation cooled], even when prices [in other industries] were going down.”
The double-edged sword for the restaurant and bar industry is that inflated prices are partially driven by consumer willingness to spend money—to a point, according to Naik. In this post-inflation moment, beverage and bar directors are tasked with finding the sweet spot of pricing cocktails to encourage rather than dissuade consumers from partaking, yet neither limiting their potential profit or incurring a loss. “We can charge $20 for a cocktail,” says Sara Gabriele, the owner of Gabi James in Redondo Beach, California, whose cocktail menu prices typically range between $13 and $16. “But if someone buys a $20 cocktail, are they going to be less open to buying that second cocktail? Or is it better to keep them at $17, and then they might get two?”
Cocktail Inflation Is a Nuanced Challenge
Each state, region, or even city has its own factors when it comes to cocktail pricing in any economic landscape. Across the country, however, drastic cocktail price increases are as often a factor of increased labor rather than supply costs, which are typically higher for restaurants than retail outlets. Labor costs are also subject to frequent legislative changes. In Denver, for example, required incremental wage increases exacerbated the problem of inflation for bar managers, like Chad Michael George, a bar consultant and the founder of Denver’s Proof Productions. “Our labor costs are going up anywhere from eight to 10 percent a year just based on minimum wage,” he says. Minimum wage has doubled since 2018 in Denver, and is still on the rise. This has made a noticeable impact on cocktail prices for the area. “I can think of multiple spots that, in 2019, were serving $12 to $14 cocktails, and now they’re $16 to $18.”
Markets with an established cocktail culture can buffer higher prices to a degree, whereas emerging markets can be less tolerant of price increases, creating challenges for beverage directors in those areas. “Considering median household income, when people are going out in New York, the difference between $22 and $24 isn’t much,” says Karl Góranowski, the beverage director for Bata and its associated bar and restaurant projects in Tucson, Arizona, “whereas here, the difference between $11 and $13 is a major shift.”
Category shifts also influence cocktail prices, such as the massive surge in demand for agave spirits. “Anything that increases in popularity that quickly, takes a long time to catch up in terms of production,” says Unterberg. She, and everyone else profiled here, noted price increases of at least 25 percent for adequate, ideally additive-free tequilas of the price bracket that can support usage in cocktails.
Product Swaps and Menu Revamps
Despite various challenges to keeping cocktail prices static, however, many bar and beverage managers consider price increases only as a last resort. “I almost view a price increase as the easy way out,” says Patrick Smith, the senior beverage manager for New York’s Union Square Hospitality Group. “Instead I’m leveraging my expertise, my skill set, and my time in the industry to try to find every saving and pass those savings on to the guest.”
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Ingredient substitutions are frequently necessary when spikes in specific product prices force the question of whether to raise a cocktail’s price. The alternative is to look across the breadth of a cocktail menu for other potential savings, rather than at a specific cocktail and its ingredients. “We have had to have difficult conversations about the products that we’re using,” says Smith. “Is there a way we can use a premium ingredient in a certain cocktail and make adjustments to other cocktails?” This is one way he’s succeeded in keeping Union Square Hospitality Group’s cocktail prices mostly consistent across various restaurant concepts over the past several years, while still maintaining a favorable average profit margin across the entirety of the menu. “If it’s a linchpin ingredient that is really definitional to what it means for your program to exist in a way that you’re proud of, then you’re gonna look everywhere else [for savings] first,” he says.
Some product swaps are doable; when the price of Campari increased in 2022, many beverage directors looked to other bitter Italian liqueurs such as Contratto or Meletti for potential cost savings. However, more difficult considerations may involve dropping some cocktails outright, or overhauling the menu in a major way. “We had to reinvent or remove quite a few things about a year ago,” says Gabriele. “Sazerac Company’s whole catalog moved to a beer distributor in Los Angeles, and their price minimums made them cost-prohibitive.” This change was compounded by labor shortages in the distribution sector, further hiking pricing. “We would have had to charge $19 for certain cocktails,” she says, which is untenable in a neighborhood where her experience has shown that price tolerance for cocktails tops out around $16.
Garnish and waste are also opportunities for scrutiny when repricing cocktails. For a lot of bartenders, garnishes aren’t necessary for every cocktail and offer a cost-saving. “This trend of dehydrated citrus wheels over the past few years drives me nuts because I see it in a lot of programs that say they’re zero waste,” says George. He advises bar clients to rethink these choices; the cost of citrus is especially volatile, and dehydrated wheels are wasteful by definition, as they have no additional value for juicing or twists.
Renegotiating with Suppliers and Brands
Not every business has the ability to negotiate liquor prices, depending on state or local liquor laws, but relationships with distributors or suppliers are often instrumental in finding potential savings. “I try to do more tastings to see what else is out there, and what could be a better price that maybe I’m not aware of,” says Carolyn Kao, a Bay Area bar manager (formerly of Good Good Culture Club in San Francisco), whose bar traffic was seriously impacted by massive tech layoffs in recent years. In doing so she ended up switching from a more expensive, well-known brand to Casco Viejo tequila. Based on a taste test and recommendation from the distributor, she found it to be a quality choice for cocktails, and half of what she was previously paying for tequila, staving off unnecessary price increases for some of the top-selling cocktails.
Unterberg also relies on increased communication with her suppliers for her extensive cocktail list, which changes monthly. “I used to check in with our distributors once a year about price increases, and now I check in once a quarter,” she says. It can be arduous to sort through, but, given the volatility of the market, it’s worthwhile in order to avoid unexpected invoices and maintain competitive prices.
Whether or not to include spirit brand names in cocktail menu descriptions has different implications in different markets, but also represents a strategic factor that beverage directors consider when repricing a cocktail list. “We don’t include any brand names whatsoever on any of our menus,” says Góranowski. “So as long as we have good well [spirits] at a certain level, we can still use them and be value-focused when it comes to designing drinks.” This strategy, while not applicable at every bar, also makes it easier to accommodate product changes when necessary. He characterizes Tucson as being price-conscious more than brand-conscious, which isn’t necessarily the case in every market.
For Unterberg, including brand names on her menu, which has options between $13 and $24, she can appeal to the widest variety of budgets. “Our menu lists every single spirit ingredient by brand name,” she says, “so you know you’re getting what you paid for.”
Dispatch
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