Data Shows Bar Beverages Up 5% vs. 2007.

Food Items Show a More Modest 2% Increase

BOSTON -- It costs 5% more to consume alcoholic beverages this year than it did last year, according to research published by Intellaprice([R]) (www.intella-price.com), a Boston-based pricing intelligence firm. The study, conducted among casual bar and restaurant chains across the country, compares the prices of over 2,100 beverages this year to those of a year ago. The study concentrated on 19 different beverages including beer, vodka and tonics, cosmopolitans and margaritas. Intellaprice also studied food items, reviewing thousands of entrees, appetizers, and dessert prices, which increased on average 2%.

"While the 5% increase in bar beverage prices is not surprising based on trends in other restaurant segments, it's the differences among various types of drinks that are interesting," said Leslie Kerr, President of Intellaprice. "Soft drinks are up on average $.13, and top shelf margaritas are up $.79 on average." Kerr noted that there were exceptions to this pattern. "We found that a House Margarita increased by $.38, while a Belvedere and Tonic is up $.28 on average, which is a bit counterintuitive" Kerr explained. "House brands command lower prices, whereas premium brands cost more. These increases suggest that restaurants believe they can pass on higher increases for the lower-priced item."

"On the whole, it's price increases that influence the findings. Not only are price increases more frequent than reductions, but their magnitude is also bigger," Kerr said. "Comparing prices this year vs. last year for specific drinks at specific concepts, 52% increased, while only 3% decreased, with the remaining 45% unchanged. Moreover, when prices went up, they did so by $.65 on average, yet when they went down, they did so by $.58 on average."

The average 2% food price increase observed in the study is in line with what industry players expect to see. According to Kerr, "Operators typically seek to drive traffic by offering customers value through core menu items, so we expect lower increases on food than on beverages, which are rarely priced on the menu. Drink prices typically aren't communicated as part of a deliberate strategy to encourage consumers to purchase without worrying about the cost, whereas with food items, consumers often make conscious menu choices based on price."

Other interesting findings from this study include the following:

* A top shelf margarita is the most expensive bar beverage available, averaging $8.83.

* It costs on average $1.23 to upgrade from a bar brand of Vodka/Tonic to an Absolut/Tonic, a $.05 increase since 2007. For a Belvedere and Tonic, the up charge is $2.45.

* Comparing drink items across markets reveals that the New York metro area most often shows the highest average drink prices, whereas Washington, DC earned this distinction in Intellaprice's 2007 Study. DC ranks 2nd in 2008 for high-priced drinks. For the least expensive drinks, Oklahoma City and St. Louis tie, whereas last year Oklahoma City was in a class by itself.

* Among food items, price changes vary by category. Healthy options saw the highest increase, at 5%, while combo meals were down vs. 2007 by 3%. Kerr indicates that these findings point to the perception that consumers will pay a premium to eat healthy foods and that combo price decreases again point to restaurants' need to convey a value message and offer meals at price points that appeal to consumers.

* Looking at pure dollar increases reveals that prices are up for meat entrees more than most menu categories, with an average increase of $.49. While this translates to just a 3% jump, it's among the higher dollar increases observed.

About Intellaprice([R])

Intellaprice is a full-service pricing intelligence firm serving the restaurant and beverage industries. Intellaprice publishes The Intellaprice([R])Report, which is syndicated pricing intelligence on quick service and casual dining segments. Intellaprice specializes in pricing, profitability, and marketing analysis, to help organizations increase sales, grow profit, and reduce competitive intelligence costs. Intellaprice was founded by restaurant industry veteran Leslie Kerr and is based in Boston. For more information visit www.intella-price.com.