The Martini Markup

[johnder]

The local gossip paper here in NYC the New York Post ran an article today entitled: $3 Drink $13 Martini in which it talks about the profit margin on a Martini.

I don't agree with the article, as they are taking the easy way and just listing the prices of the actual ingredients in the drink, not really counting the glassware, labor and other costs aside from a quick mention at the end of the article. It just adds fuel to the fire that people perceive cocktails are overpriced.

To figure how much the martini really costs, we used a standard dry recipe from the International Bartender's Guide - 2 1/2 ounces of vodka and 1/4 ounce dry vermouth. Based on a local restaurant distributor's price by the case, and doing the math, premium Grey Goose in one-liter bottles worked out to almost exactly $1 per ounce, or $2.50 per martini. The small amount of Noilly Prat vermouth factored in 5 cents. Three olives from another distributor's gallon jar containing 152 large specimens added 36 cents. Total material cost: $2.91.

That's a markup of $10.09.

I will ignore the fact that they are using Vodka for the comparison and not gin, but that is another issue.

Which is about right, says Allen Katz, mixologist for Southern Wines and Spirits, a different local distributor.

The traditional markup on food and wine is three times the value, he says, and "I think now oftentimes you might see things even approaching four times, and part of that is simply what the market will bear."

Of course, restaurants must pay for far more than ingredients - for things like salaries, equipment and skyrocketing real estate costs.

When I am at Pegu or Death and Company people always seem to be talking about the price of the drink -- $12. Look over any reviews of these places on citysearch or yelp and there are numerous mentions (complaints?) about prices. While I agree going into a club or some horrible mega restaurant and paying $16 for a hap-hazardly made cocktail is outrageous, but spending $12 for a well made, carefully prepared cocktail isn't. Especially when I know the amount of time and labor that is involved in making a martini well.

[jsmeeker]

while the article may omit some things, there certainly is a lot of validity. There *are* a lot of drinks out that that have excessive markups over the cost of the ingredients that are hard to justify.

You're example of some trendy club or mega restaurant is good. If I order a magartia at $12 bucks and get something made with a commerical mix and Jose Cuervo Gold, I'm getting ripped off no matter where it is, no matter how nice the glass is, no matter how fancy the room is.

But in many cases, yes, a $12 drink is not totally outrageous. First of all, it must be well prepared and served properly. If it's done in an elegant/refined atmosphere, you have to pay for that too.

[eje]

Well, we've talked about Pour Costs, before. More recently, I wondered about the Cost of Cocktails in historical terms. There's even this ancient topic, What's Behind that $15 Martini? which covers much of the same ground.

Not to be judgmental or anything; but, if you're buying a Grey Goose or Ketel One Martini (or even better, "French Martini",) you've already passed beyond the pale for me.

To me, calling for premium vodka is, pure and simple, a status or appearance thing, and if you're doing it at a hotel, upscale restaurant, or bar in Manhattan, (Chicago, San Francisco, London...) and then complaining about the price, uh, well, maybe you should have stayed home with the kids.

Is that too harsh?

Edited May 16, 2007 by eje (log)

[jsmeeker]

To me, calling for premium vodka is, pure and simple, a status or appearance thing, and if you're doing it at a hotel, upscale restaurant, or bar in Manhattan, (Chicago, San Francisco, London...) and then complaining about the price, uh, well, maybe you should have stayed home with the kids.

Is that too harsh?

←

Probably not.

But one thing that really strikes me is the variability one sees in drink prices when made from identical ingredients (i.e. the same premium vodkas or whatever). Hotel A sells it for $15 while a simlar hotel in the same town sells it for $10. Or something like that.

[eje]

One thing I didn't see noted, is that I don't think bars price out every drink to reflect its exact cost.

Isn't it, more or less, a single price for a rail cocktails, another price for cocktails with call brands, and then another set for exceptions, like extremely expensive Cognacs and Whisk(e)ys.

It seems like there has to be a range of costs for cocktails within those categories, and some cocktails are going to be big money makers, and others not.

[angusw]

Of course the big thing that they are missing is that the cost of the ingredients is only one small aspect of a drink's price in a bar... you must also factor in regular business expenses such as:

labour cost

Equipment and Depreciation

Insurance for staff and customers

water

power

variance

etc etc...

Anyone can work out the Gross Profit of a drink but that is very very different from the net profit of the bar business...

markups are too high tho in general but that is down to many operators not being good businessmen and guests being sheep.

aw

[thirtyoneknots]

One thing I didn't see noted, is that I don't think bars price out every drink to reflect its exact cost.

←

Where I work, the prices are somewhat peculiar, and sometimes reflect the tastes and opinions of the staff and/or management. For example, the bar manager despises Crown Royal and is disgusted that customers demand that we keep it in stock, ignoring probably the best American whiskey selection in town (and most likely winning the Scotch category, too). For some reason people around here get downright belligerent when we are out of Crown. His solution: keep it in stock, but raise the price $2. Either people will realise that it costs more and try something a little more interesting*, or we make much more profit. I don't think Crown Royal sales have suffered any so far.

-Andy

*No offense intended to our Canadian friends, but surely you agree there are more interesting drinks than the "Crown 'n Coke" that seems to be the house cocktail of College Station, Texas.

Edit to fix CApitalization issues

Edited May 16, 2007 by thirtyoneknots (log)

[fatdeko]

What our intrepid journalist is also completely missing is that the "Martini" for which he is calculating the cost is most likely not the "Martini" he is getting in the bar. While his "Martini" is 2 1/2 oz of Vodka and 1/4 oz of Vermouth, the $13.00 "Martini" he is getting in the bar is probably along the lines of 3 /12 oz - 4 oz of Vodka and some inconsequential amount of Vermouth. Now the cost of his drink is closer to 4 bucks and a 300% mark-up is totally in line.

If he really wants to tilt at windmills, he should wonder why the mark-up for a domestic bottle of beer at his local pub is the same as the mark-up for liquor at a bar.

It's not as much a class thing as he might think--it's economics, stupid.

myers

[Kent D]

Don't forget the tip for the server/bartender, too.

The two chief reasons I rarely drink while dining out is 1) I'm generally driving and I'm responsible in that way and 2) I refuse to pay hundreds-of-percent mark-up plus a tip on top of that for one drink that in some rare cases approaches the cost of the entree served. Oh, and I'm notoriously cheap.

[scubadoo97]

I remember when we had reservations at Mamas in Maui and waiting for our table. Of course there was a wait even with reservations, but I stood watching one of the many bartenders mixing Mai Tais one after another. She did around a dozen in around 2 mins at $12 each. I was astounded by the math of the number of bartenders doing the same thing generating that kind of cash every 2 mins and we weren't talking quality rum. Factor in the barware if you want. Those thick glass tumblers were filled mostly with ice. I'm in the wrong business.