Are Alcohol Prices Fair?

“Wait, how much was that drink?”  Ever ask yourself that when your bill comes after ordering a round?  I was out last night in Boston, MA and as the drinks kept coming, I couldn’t help but notice my money magically disappearing.  It seems to be a trend now.  I go out on the weekend with cash and it magically goes away once I enter a club or bar.

The prices are getting ridiculous.  It’s one thing when you’re underage because you’ll pay anything for it.  That actually makes sense because you’re not supposed to have it (legally) when you’re 18 and going to prom.  Once you’re 21 and can legally drink, it really doesn’t make sense to still be paying a ridiculous amount.  I’m 23.5 years old, so I’m in my prime of drinking out at social settings and know what I’m talking about.  There’s a few things to look at on this topic: (1) Why bars set prices that high? (2) How are prices effecting people’s drinking? (3) How are these prices effecting your safety?

Bars Setting Prices

Every bar (or business for that matter) needs to turn a profit or there’s no point in being open.  As far as drink and alcohol pricing goes, the industry really has no set standard.  Some night club owners will work on a 25% liquor cost.  Although many will work on a 20% liquor cost, or lower. Here’s an example: If you buy a bottle of liquor and it actually costs you $0.70 per ounce, and you are pouring a one ounce shot, you liquor cost is $0.70.  You would need to charge your customer $2.80 for that drink for you to have a 25% liquor cost ($0.70 x 4). For that same drink, if you wanted to work on a 20% liquor cost, you would need to charge your customer $3.50 ($0.70 x 5).  That’s not what they charge though. If bars did charge $3.50 for a liquor drink, I’d still have money in my wallet today and head would be throbbing.  Instead they charge over double this.  Most clubs and bars around Boston will sell a mixed drink from $7.00 to $15.00 (top shelf bottle or not).  This leaves people wondering:  If I just spent $20 on 2 drinks, why didn’t I just buy my own handle and party at home?  Paying for status.

It’s all about that “rock-star” status at most clubs and bars, so money isn’t supposed to be an issue… right?  You wouldn’t want to look like the cheap guy drinking waters and eating the free bar food.  Whether you have cash or not, you want to appear to have money to people and be that Rockstar!  Reach that status.  Bars know that people (typically 20-25) will pay any price to earn that status.  Fact.  This is why they mark bottles up the way they do.

Prices Effecting People’s Drinking

Even with a bad economy, the percentage of people drinking has actually gone up, but everyone is simply purchasing cheaper alcohol and less pricey brands. A report also shows that people are drinking more at home and less in pricier bars and restaurants. “Industry growth slowed in 2009, with the amount of liquor sold by suppliers up 1.4%. That’s the smallest increase since 2001 and below the 10-year average of 2.6%.  Last year, the lowest-priced segment, with brands such as Popov vodka that can go for less than $10 for a fifth, grew the fastest, with volume rising 5.5%, after edging up 0.6% in 2008. Meanwhile, the most expensive price range, roughly $30 or more for a 750 ml bottle (think Grey Goose, owned by Bacardi), fell the most, tumbling 5.1%.”

The industry’s goal is to keep people drinking no matter what the price.  As soon as the economy recovers, people will be buying more of the higher-priced drinks again.  Manufacturers really don’t care because most of them own a wide variety of alcohol brands with all different pricing.  For example, industry giant Diageo, based in London, makes vodka brand ranging from cheap Popov to midpriced Smirnoff to expensive Ketel One and Ciroc. Not only are people purchasing the cheaper brands, but people are also buying alcohol in bulk from places like Costco to help save money.  I can go to Costco and pay $36 for 1.75 liters of Maker’s Mark bourbon, rather than $25 for less than half that at my local liquor store.  The savings is huge buying in bulk and more and more people are starting to purchase alcohol this way.

Safety

The expensive prices for drinks at bars is  really increasing the amount of “pre-gaming” going on, which is a big problem if you have to drive.  Obviously people are going to be drinking before going out.  That’s just how the world works.  The increasing prices of alcohol are motivating people to drink A LOT more before going out so they don’t have to send as much to get drunk at clubs.  Sounds crazy, but it’s the truth.  I know plenty of people who will try to get hammered before going out so they don’t drop a lot of cash at the bar.  It actually backfires though.  Typically they get too drunk and start buying rounds for everyone, but that’s another story.

The point is that alcohol prices are effecting the number of drunk drivers there are and when they’re driving.  With high prices at bars, people will drink a lot more before going to the bar and may drive drunk to get there.  If prices were lowered significantly, people may show up less intoxicated, but may consume a lot more and drive home drunk.  It really all has to do with how responsible people are, which is why every brand, no matter what type of alcohol, reminds everyone to “please drink responsibly.”

Please leave comments and share your thoughts on alcohol prices