Alcohol in general tends to be very reasonably priced in the Algarve (in fact, probably considered cheap compared to most countries), with bottles of wine from as little as 1€ in the supermarkets! The prices of drinks in bars and restaurants can be very reasonable, a glass of wine €1 or €2, spirits (normally good sized measures) about €3 and small draft beers from €1 to €1.50, however they can also be a bit extortionate, especially in popular bars in tourist season, up to €6 for a spirit and mixer. For some of the best prices, stop at one of the many local cafés because they are a lot cheaper than the bars - one near us seems to charge €1 for everything and with a wonderful view of the marina! With so many orange trees across the Algarve, its not suprising that fresh orange juice is widely served in cafes, bars and restaurants; a glass can cost as little as €2 but may be as much as €4, but it is well worth it!
A lot of the wine sold in the Algarve comes from other parts of Portugal (for example from Bairrada in the north, Estremadura near Lisbon and Alentejo) but the Algarve does also produce its own wine, most of which comes from the Lagoa, Portimão and Tavira areas. Most restaurants will only have Portuguese wines on their wine list.
The 'house' wine ("vinho da casa") in white ("branco") and red ("tinto") is nearly always a local Portuguese wine and good value. You can also opt for "vinho verde" which is a young 'green' wine, slightly sparkling, light and refreshing and goes very well with fish and chicken dishes, or rosé - Mateus rosé being the best known.
If you prefer to drink beer ("cerveja"), there are really just three national brands that you will become familiar with: "Sagres" (named after the Algarve’s Sagres, but it isn’t produced there), "Super Bock" and "Cristal". You will also find, a number of imported beers and lagers that you are used to drinking at home, but these may be a little more expensive. If you are ordering draft beer, then ask for “um imperial” if you would like a regular glass and “uma caneca” if you would like half a litre.
After the meal you may want to try a glass of port, Portugals best known drink. Produced from a blend of wines, port is available in ‘ruby’ (a young and full-bodied sweet port), ‘tawny’ (a lighter port, best served chilled) and ‘white’ (which is dry and better served over ice as an aperitif). The Algarve is also famous for its spirits - there are two main ones to look out for when you come, "Aguardente" and "Medronho", but be warned, for both you need to have a very sturdy palette! Aguardente is a rough Portuguese brandy, which is guaranteed to warm your cockles, with a throat-burning sensation turning to warmth in your stomach. Medronho (or ‘fire water’ as it is perhaps better known) is made from the strawberry like fruit of the arbutus and can literally bring tears to your eyes as you sip it. It is said that this potent spirit can knock grown men off their legs after one too many!