A single miscalculated VAT rate on your €4 house beer costs you €0.27 in hidden margin per glass. Alcoholic beverages carry 21% VAT while food gets 9%, and this difference destroys profit calculations across thousands of drinks. Most restaurant owners calculate everything at 9% and wonder why their beverage margins disappoint.
The difference between food and drinks: VAT rates
Here's where calculations frequently break down: many hospitality entrepreneurs apply 9% VAT across all products. That's wrong.
- Alcoholic beverages: 21% VAT (beer, wine, spirits, cocktails)
- Non-alcoholic in restaurant: 9% VAT (soft drinks, coffee, tea)
- Food for consumption on premises: 9% VAT
⚠️ Note:
A beer for €3.00 on your menu contains €0.52 VAT, not €0.25. This difference of €0.27 per beer adds up quickly at high volumes.
From menu price to price excluding VAT
Your menu always displays prices including VAT. For cost price calculations you need the price excluding VAT.
Formula for alcoholic beverages (21% VAT):
Price excl. VAT = Price incl. VAT ÷ 1.21
Formula for non-alcoholic (9% VAT):
Price excl. VAT = Price incl. VAT ÷ 1.09
? Example alcoholic beverage:
Wine on menu: €6.50 (incl. 21% VAT)
- Price excl. VAT: €6.50 ÷ 1.21 = €5.37
- VAT amount: €6.50 - €5.37 = €1.13
For cost price calculation you use €5.37
? Example non-alcoholic:
Coffee on menu: €2.75 (incl. 9% VAT)
- Price excl. VAT: €2.75 ÷ 1.09 = €2.52
- VAT amount: €2.75 - €2.52 = €0.23
For cost price calculation you use €2.52
From cost price to minimum selling price
If you know what a drink costs and you've set a target profit margin, you can calculate the minimum selling price.
Formula:
- Calculate minimum price excl. VAT: Cost price ÷ (Pour cost % ÷ 100)
- Add VAT: × 1.21 (alcohol) or × 1.09 (non-alcohol)
? Example cocktail:
Ingredient costs cocktail: €2.80
Target pour cost: 22%
- Minimum price excl. VAT: €2.80 ÷ 0.22 = €12.73
- Price incl. 21% VAT: €12.73 × 1.21 = €15.40
Menu price minimum: €15.40
Calculate pour cost (like food cost for drinks)
Pour cost represents the percentage of your selling price that covers drink costs. It's the beverage equivalent of food cost.
Formula:
Pour cost % = (Drink costs ÷ Selling price excl. VAT) × 100
? Example beer:
Draft beer, cost per glass: €0.85
Selling price: €3.50 incl. 21% VAT
- Price excl. VAT: €3.50 ÷ 1.21 = €2.89
- Pour cost: (€0.85 ÷ €2.89) × 100 = 29.4%
That's on the high side. Standard for beer: 18-25%
Standard pour cost percentages per drink type
From tracking this across dozens of restaurants, these ranges work for most establishments:
- Beer: 18-25%
- Wine per glass: 20-28%
- Spirits/cocktails: 18-22%
- Non-alcoholic: 15-25%
- Coffee: 10-20%
⚠️ Note:
With cocktails count all ingredients: spirit, mixers, garnish, even the ice. The bartender's time also factors into your cost price.
Practical tips for drink prices
1. Monitor your purchase prices regularly
Suppliers increase prices, but your menu often remains static. Review monthly to see if your pour cost still makes sense.
2. Include everything for cocktails
Not just the gin, but also the tonic, lime, ice and garnish cost money. Add everything up for the real cost price.
3. Vary prices for different periods
Happy hour prices can accept a higher pour cost to drive volume. Balance this with regular prices during peak times.
Related articles
How do you calculate drink prices correctly? (step by step)
Determine the cost price of your drink
Add up all ingredients: main product, mixers, garnish and decoration. For a beer this is simple, for cocktails you count everything down to the straw.
Choose your desired pour cost percentage
For beer 18-25%, for wine 20-28%, for cocktails 18-22%. This is your profit margin on drinks, comparable to food cost for food.
Calculate the minimum price excluding VAT
Divide your cost price by your desired pour cost percentage. For example: €2.00 cost price ÷ 0.20 (20%) = €10.00 excl. VAT.
Add the correct VAT
Alcoholic beverages: × 1.21 (21% VAT). Non-alcoholic: × 1.09 (9% VAT). This becomes your minimum menu price.
✨ Pro tip
Audit your wine list pricing every 12 weeks by comparing current bottle costs against menu prices. Distributors often substitute allocated wines with pricier alternatives without notifying you.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Calculate it yourself?
Our free food cost calculator does it in seconds.
Was this article helpful?
Frequently asked questions
Why do alcoholic beverages have 21% VAT and food 9%?
Should I include VAT in my cost price calculation?
What's a realistic pour cost for my establishment?
How frequently should I review my drink prices?
Can I use different pour cost targets per drink category?
Do I need to factor in spillage and waste for my drink costing?
Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
More in this category
Related questions
Explore more topics
Calculate your cocktail costs down to the ml
Drink margins seem high, but spillage and free pours eat them up. KitchenNmbrs calculates the exact cost price of every cocktail and drink. Try it free.
Start free trial →