Tap water is safe to drink in Iceland and it is one of the countries with cleanest water in the world. Coffee is easy to find and is comparable to what is found throughout Europe. Juices are generally imported and made from concentrate.
Alcoholic drinks are very expensive compared to the UK and USA - as an example, half litre of Viking beer in a bar will cost approximately ISK 900. Liquor can be purchased at licensed bars, restaurants, or VÃnbÃºÃ°in (http://www.vinbud.is/), the state monopoly locally known as RÃkiÃ°: "the state" liquor bought there is much cheaper than at bars, there you pay ISK 350 for the same beer you payed 900 for at the bar. The local Icelandic drinks such as BrennivÃn "Black death" contain a fairly high alcohol content, so pace yourself while at the bars.
The local beer brands are:
Egils (http://www.egils.is): Lite, Gull, Pilsner, Premium, El Grillo
VÃfillfell (http://www.vifilfell.is): Thule, Gull, Lite, VÃking
BruggsmiÃ°jan (http://bruggsmidjan.is/pa...): Kaldi
Ãlvisholt Brewery (http://www.brugghus.is/): SkjÃ¡lfti
ÃlgerÃ° ReykjavÃkur (http://www.olgerd.is/): Gullfoss
MjÃ¶Ã°ur BrugghÃºs (http://www.mjodurehf.is/): JÃ¶kull, SkriÃ°jÃ¶kull
Visitors arriving by air should note that there is a duty-free store for arriving passengers where they can buy cheap alcohol at least cheap compared to Iceland. To find the duty-free store, just follow the Icelanders. No Icelander in their right mind will pass the duty free store upon arrival! Import allowances can be found on the customs website: (http://www.tollur.is/defa...).
The drinking age in Iceland is 20 for all alcoholic beverages; while there are no penalties for underage possession or consumption, any alcohol possessed can be confiscated.