Most bar owners don't realize they're leaving thousands on the table every month. You're probably pushing your least profitable drinks while your money-makers collect dust. A margin impact analysis reveals exactly how much profit you're missing and shows you the path to turn it around.
What is margin impact of menu engineering?
Margin impact shows how much extra profit you can make by optimizing your drink menu. It's not about creating new cocktails, but about smarter steering of what you already serve.
💡 Example:
A café sells per week:
- 150 beers at €2.50 (pour cost 20% = €0.50 profit per glass)
- 20 premium cocktails at €12.00 (pour cost 22% = €9.36 profit per glass)
Beers: 150 × €0.50 = €75 profit
Cocktails: 20 × €9.36 = €187 profit
If you convert 10 beers to cocktails: +€84 extra profit per week
The 4 categories of menu engineering
Every drink falls into one of these categories based on popularity and profitability:
- Stars: Popular and profitable (promote these heavily!)
- Plowhorses: Popular but low margin (raise price or lower cost)
- Puzzles: High margin but low sales (promote better)
- Dogs: Low popularity and low margin (consider removing)
Calculate pour cost per drink
Pour cost is the bar equivalent of food cost. It shows what percentage of your selling price goes to purchasing ingredients.
Formula: Pour cost % = (Cost of goods / Selling price excl. VAT) × 100
⚠️ Note:
Alcoholic drinks have 21% VAT, not 9%! A beer at €3.00 is €2.48 excl. VAT.
💡 Example cocktail cost:
Mojito selling price: €9.50 (= €7.85 excl. 21% VAT)
- Rum (5cl): €1.20
- Lime: €0.30
- Mint: €0.20
- Sugar + soda water: €0.15
- Ice cubes: €0.05
Total cost: €1.90
Pour cost: (€1.90 / €7.85) × 100 = 24.2%
Measure popularity and categorize
Collect sales data from the last 4 weeks. Rank all drinks from highest to lowest sales volume. The top 30% are 'popular', the bottom 70% are 'less popular'.
For profitability: calculate the pour cost of each drink. Drinks under 25% pour cost are 'profitable', above 25% are 'less profitable'.
Calculate margin impact
The impact calculation shows how much extra profit is possible through shifts between categories. This is a pattern we see repeatedly in restaurant financials - small changes in mix create massive profit swings.
💡 Impact calculation:
Current situation per week:
- 200 beers (Plowhorse): €0.50 profit = €100
- 50 wines (Star): €3.20 profit = €160
- 30 cocktails (Puzzle): €6.80 profit = €204
Scenario: Convert 20 beers to wine
Loss from beers: -20 × €0.50 = -€10
Gain from extra wine: +20 × €3.20 = +€64
Net profit: +€54 per week = +€2,808 per year
Actions per category
- Promote Stars: Place them prominently on the menu, train staff to recommend them first
- Improve Plowhorses: Raise price by €0.50 or find cheaper suppliers
- Push Puzzles: Make them more visible, offer them as daily specials
- Evaluate Dogs: Remove them or replace with more profitable alternatives
A system like tools such as menu engineering software helps make these calculations automatically and tracks your pour cost per drink without Excel headaches.
How do you calculate margin impact of menu engineering? (step by step)
Collect sales data and cost prices
Note for each drink: number sold per week, selling price and cost price of ingredients. Calculate the pour cost percentage per drink using the formula (cost price / selling price excl. VAT) × 100.
Categorize all drinks into 4 groups
Divide based on popularity (top 30% vs rest) and profitability (under 25% pour cost vs above 25%). This gives you Stars, Plowhorses, Puzzles and Dogs per drink.
Calculate impact of shifts
Choose realistic scenarios such as 10% fewer Plowhorses, 10% more Stars. Calculate the difference in profit per drink × number of shifts × 52 weeks for the annual impact.
✨ Pro tip
Track your margin impact weekly for 6 weeks after implementing changes. You'll see which promotions actually shift customer behavior versus which ones just sound good on paper.
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
What is a good pour cost for different drinks?
Beer: 18-22%, wine: 20-28%, spirits: 15-20%, cocktails: 20-25%. These percentages are guidelines - in trendy neighborhoods you can often command higher margins.
How often should I do menu engineering?
Check your numbers monthly, but update your menu at most quarterly. Too many changes confuse guests and staff.
Should I include VAT in the pour cost calculation?
No, always calculate excluding VAT. Alcoholic drinks have 21% VAT, so a beer at €3.00 is €2.48 excl. VAT for your calculation.
Can I always remove Dogs from the menu?
Not always. Some Dogs are necessary for completeness (like basic mixers) or have strategic value. Focus first on promoting Stars and Puzzles.
📚 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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