Posted on | January 23, 2014
Written by | Jack Robertiello
Despite its reputation as one of America’s costliest cities, there are bargains galore to be found in New York City; however, an inexpensive drink usually isn’t one of them.
Set aside, for the moment, trophy drinks such as The World Bar’s World Cocktail—a $50 mélange of Rémy XO, Pineau des Charentes, Veuve Clicquot, et al., mixed tableside on a silver tray in the shadow of the United Nations. Take what’s currently available at the busy Chipotle Grill in Union Square. The unit is one of the 900 or so Chipotle Grills serving Margaritas—here charging $8.47 for one made with Patrón and $5.98 for Sauza.
If that’s the going rate at just about the least atmospherically inviting drinking spot in the city, then it’s no surprise that $12 for a cocktail of any type has become the baseline upon which many beverage menus are built today. Even in Long Island City in Queens, hardly a high rent district, the house cocktails at the newly-opened Alobar’s are all priced at $12 or $13.
Maybe New York isn’t the best standard by which to gauge cocktail prices today. But wherever you are, a consistent national price creep may be reaching the upper limits of what the market will bear.
In a recent national survey by the research firm Technomic, comparing the same three-month period in late 2012 and 2013, the average Margarita price moved from $9.30 to $9.64, and the generic Martini grew from $9.37 to $9.46. Bloody Marys showed slight price reductions, but that’s perhaps due to brunch menu discounting and other deals that have been used to drive traffic lately in the daytime.
According to Donna Hood Crecca, senior director for Technomic, independent operators were more likely to say they have raised alcohol menu prices in the past year than chain operators (34% vs. 29%), and have greater expectations of taking prices up in the year ahead (47% vs. 22%). “Bear in mind also that it’s the higher end of the product spectrum that’s growing on-premise,” she says. “Many consumers appear to be gravitating to the more expensive products, particularly in spirits and beer. Today’s imbibers are looking for that ‘affordable indulgence.’”
The current pricing trends allows a chain such as Bonefish Grill to price winter specials like a White Cosmo made with Stolichnaya at $7.90, depending on location, and a Ketel One Dirty Martini at $8 to $8.50, and still be below the industry average.
The upward price creep is being watched warily. “In general, I think pricing is pretty fair in most cocktail bars and restaurants, given locations, styles of drinks, etc.,” says Tad Carducci, who, with partner Paul Tanguay, currently oversees beverage programs for Chicago-based Mercadito Hospitality. “But I have been shell-shocked from time to time, like everybody has. No Pisco Sour should ever cost $22 anywhere.”
The house Margarita at Mercadito Chicago, made with El Jimador, Grand Marnier, agave syrup and fresh lime juice, goes for $10.50—not high for the market. “We try to keep the value for our guests as high as we can, while keeping an average percentage of 18 to 19% cost,” he says.
Carducci is concerned about the growing use of higher-end spirits and their impact on pricing: “It’s very hard to justify to an unknowing consumer who is perusing a drink menu that a cocktail should cost $18. On the other hand, putting out a product with a big cost and pricing it to remain attractive to consumers can be disastrous to margins and bottom lines.”
COST VS. INDIFFERENCE
Charging more than your own average price should signal some step up to customers—featuring more luxury ingredients or a more challenging flavor profile, says Jackson Cannon, bar director of Boston’s Eastern Standard and Island Creek Oyster Bar, owner/bartender of the Hawthorne and now designer of his own bar knife. An $18 cocktail is not for everyone, he notes: “A higher price can act as a stop sign that gives us time with the guest to make sure this is a good choice for them.”
The upward pricing trend, though, has allowed indifferent drink makers to push their prices up as well. Noted bartender Tony Abou Ganim (aka the Modern Mixologist) says, “Premium spirits, fresh, seasonal ingredients, a crystal glass, great ice, fabulous, professional and fun service; these are all things I am happy to pay for. What I can’t tolerate is being overcharged for inferior spirits, artificial ingredients and pretentiousness, no matter how hip the joint of the minute might be.”
What customers understand from drink prices, though, is not always clear-cut, even within one market. “I hear comments across the board about my charging $12 for a cocktail,” says Toby Cecchini, cocktail writer and owner of the newly opened Long Island Bar in Brooklyn. “People who think nothing of dropping $18 on a glass of wine at one of Danny Meyers’ places in Manhattan wax furious in Brooklyn at the same prospect, as though Brooklyn isn’t part of the same city, in the same market, with the same enormous costs.”
Of course, as Cannon says, what the clientele will bear matters most. David Commer, Texas-based restaurant beverage consultant at Commer Beverage Solutions, says chain operators exposed to what some mixology bars charge can lose sight of their customers’ needs. Serious gaps in pricing have opened, he says: “Ten or 12 dollars for a drink might not be a lot in New York City but in Dallas it’s still a lot. [Clients] see it and think they can do it, too. And as they feature higher and higher cost brands, because of the way they do the metrics they have to charge more. When the drinks sell, their menus get top heavy and end up with a whole lot of high end.”
Then those same operators will discount deeply at some times, but generally have no lower-priced or middle-tier drinks featured on the menu. That can lead to customers ordering a single $12 drink, instead of two at, say, $7. The result? Better pour cost percentage but fewer dollars banked. Commer notes that getting a second drink order at any establishment is important for profitability, and certainly better than the customer nursing one $12 cocktail.
Other options mentioned that might slow pricing inflation and still pick up spending include offering small portions of cocktails in tasting flights, or building a multi-tier pricing scheme based on different brands.
Of course, if customers continue to shell out at current levels and spirit suppliers take more price increases, pricing will only keeping inching upward. That is, until the day a certain vodka maker issues a brand extension called Golden Goose. Then we’re all in trouble.