73% of bars fail within their first three years, often due to poor drink pricing strategies. Many bar owners guess at cocktail markup, bleeding money with every pour. The right markup calculation protects your profit margins and keeps your doors open.
What is markup on cocktails?
Markup shows the relationship between ingredient cost and selling price. It's different from margin — markup measures what you add on top, while margin shows what percentage you keep.
- Markup: How many times more expensive than cost
- Margin: What percentage of selling price you retain
💡 Example:
Mojito ingredients cost €2.50. You sell it for €10.00.
- Markup: €10.00 / €2.50 = 4x
- Margin: (€10.00 - €2.50) / €10.00 = 75%
The formulas you need
Cocktails follow the same pricing principles as food, but VAT calculations matter more:
Pour cost % = (Ingredient costs / Selling price excl. VAT) × 100
Markup = Selling price excl. VAT / Ingredient costs
⚠️ Note:
Alcoholic beverages carry 21% VAT, not 9% like food. Always calculate excluding VAT for accurate cost pricing.
Calculate your desired markup
Start with your target margin and work backwards:
💡 Example calculation:
You want 25% pour cost on an Old Fashioned:
- Ingredient costs: €3.20
- Minimum price excl. VAT: €3.20 / 0.25 = €12.80
- Price incl. 21% VAT: €12.80 × 1.21 = €15.49
- Markup: €12.80 / €3.20 = 4x
Standard pour cost by drink type
Different cocktail categories require different margin targets:
- Premium cocktails: 18-22% pour cost
- Standard cocktails: 20-25% pour cost
- Wine by the glass: 22-28% pour cost
- Draft beer: 20-25% pour cost
Include all ingredients
Bartenders often overlook small-cost ingredients, but they add up fast:
💡 Complete Mojito cost:
- Rum (5cl): €1.80
- Lime (half): €0.25
- Mint (sprig): €0.15
- Sugar: €0.10
- Soda water: €0.15
- Ice: €0.05
Total: €2.50
At €12.00 selling price (€9.92 excl. VAT) you achieve exactly 25% pour cost.
Adjusting for price increases
Liquor costs fluctuate constantly. Based on real restaurant P&L data, bars that don't track monthly see margins drop 3-5% annually. Monitor your main cocktails every 30 days:
- Premium spirits climb 5-15% yearly
- Fresh fruit varies seasonally
- Energy costs impact ice expenses
⚠️ Note:
If ingredient costs rise 10% but you don't adjust selling prices, your margin drops from 25% to 22.5%. That's €2.50 less profit per bottle of premium gin.
How do you calculate the right markup? (step by step)
Calculate exact ingredient costs
Add up all ingredients: spirits, mixers, fruit, garnish, ice. Don't forget any component, not even the small ones like sugar or salt on the rim.
Determine your desired pour cost percentage
Choose 20-25% for standard cocktails, 18-22% for premium. This depends on your concept and target audience.
Calculate minimum selling price
Divide ingredient costs by desired pour cost. Multiply by 1.21 for VAT. This is your minimum price to achieve your margin.
✨ Pro tip
Audit your 3 highest-volume cocktails every 2 weeks during peak season. These drinks represent 60-70% of your bar revenue — nail their margins and your profit stays protected.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Should I include VAT in my pour cost calculation?
No, always calculate excluding VAT. Alcoholic beverages carry 21% VAT, and you need to base pour cost on the actual revenue you receive after tax.
What's a realistic markup for cocktails?
Standard markup runs 4-5x ingredient cost. At €2.50 in ingredients, you'd sell for €10-12.50. This delivers 20-25% pour cost, which works for most bar operations.
How often should I adjust cocktail prices?
Review your top 5 cocktails monthly. Adjust whenever pour cost exceeds your target percentage due to rising ingredient prices.
Should I include ice and garnish in cost calculations?
Absolutely. Ice requires energy, garnishes cost money. A lime wedge seems insignificant, but at 200 cocktails weekly, those costs accumulate quickly.
What if my desired markup prices out my customers?
You've got two choices: accept lower margins or reformulate with cheaper ingredients. Selling below cost isn't sustainable long-term.
How do I handle seasonal ingredient price swings?
Build seasonal menus around cheaper ingredients during peak pricing periods. Switch from fresh berries in winter to citrus-based cocktails to maintain margins.
Should craft cocktails have different markup than well drinks?
Yes, craft cocktails can support 18-22% pour cost due to perceived value, while well drinks typically need 22-28% pour cost to stay competitive.
📚 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
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (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.
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