Here at BevSpot, we love data.
Especially the kind that reveals trends about the bar and restaurant industry.
Our previous analyses of bar profitability data looked at our customers’ overall profitability metrics. We found that pour cost, the preferred measure of efficiency for beverage programs, is around 15% for spirits & cocktails; what you could draw from this conclusion is that before paying wages and rent, the median BevSpot bar is getting an 85% gross profit margin on their Moscow Mule.
Actually, in reality, that number turns out to be a bit off. The 15% aggregate pour cost measures general profitability for individual establishments, but it represents an average of all the various drinks being sold by those bars. Costs and pricing can vary widely between drinks, especially cocktails: the profit margin on a bar’s Negroni recipe almost certainly won’t be the same as that of an Old Fashioned.
Knowing the costs and profit margins of various recipes is critical for designing and pricing a successful drink menu. In a new running data series, we’ll be crunching these numbers for a range of common cocktails. To make comparing between drinks easy, we broke these recipes down based on the liquors that they contain.
To find the profit margins that BevSpot users are pricing into their menus, we compared their drinks’ list prices to their unit costs before adjustments for spillage and comped drinks. We also estimated the basic cost of each recipe by comparing users’ unit costs after those adjustments. Doing this allows cleaner comparisons between each cocktail on two metrics: typical profit margins, and typical unit pour costs.
We’ve taken a look at sales data from nine metro areas across the United States to see which popular cocktails are the most and least profitable for bars. Here’s what we found for six whiskey-based classics.
Keep in mind that pour cost is equal to your product usage divided by your sales, or 1 minus your gross profit margin. (Here’s a more in-depth primer on calculating pour costs for the uninitiated.) A 15% pour cost means that 15% of a drink’s price goes to paying for the drink itself; the other 85% goes to employee wages, rent, and other operating expenses. A higher pour cost makes a drink more relatively expensive for the bar, while a lower pour cost makes a drink relatively more profitable.
Of the six cocktails covered here, the Manhattan turns out to be the most costly for your bartender to serve and the Old Fashioned to be the most profitable.
It’s also worth keeping in mind that pour cost is a ratio. If a bar is pricing all of its drinks to have similar profit margins, drinks that are more costly to make would be more expensive. The data show that this isn’t the case: while the Manhattan and Sazerac have similar product costs, one tends to be sold at a higher price point. For the bar, both cost and price are indispensable metrics. Pour cost becomes useful, because it uses both measures.
The Manhattan is about 60-70% whiskey by volume. It’s the most important part of the drink, so customers want that whiskey to be a quality brand - preferably rye, due to both consumer flavor preferences and the 19th century roots of the drink. This can’t be hidden. That results in a recipe where the drink itself is entirely made of alcoholic components (as opposed to being watered down or filled with juice), which results in a product that’s relatively costly for the bar.
Like the Manhattan, this 1930s New Orleans creation is mostly rye whiskey and sweet vermouth by weight, with a couple dashes of bitters and a piece of fruit for garnish; it mainly diverges by substituting cognac for half of the Manhattan’s rye volume. Accordingly, the drinks have quite similar average unit costs, with the Manhattan being only 7 cents more costly.
Their 1.3 percentage point difference in pour cost comes from their pricing: the average Vieux Carre is sold at a 44 cent higher price, possibly due to some combination of the difference in recipes and the extra labor required to produce a slightly more complex recipe.
The typical Sazerac has the same rye or cognac content as a Manhattan or Vieux Carre. But it substitutes these peers’ full ounce of sweet vermouth with a quarter ounce (or in some cases, less) of absinthe. This substitution is about neutral in cost terms—the average Sazerac costs about as much to make as a Manhattan or Vieux Carre, even at a diminished serving size.
In this case, the difference in pour cost comes from higher pricing: the average sale price of a Sazerac is just under $10.50 in our data set, making it the highest-priced cocktail in this list. Esquire has referred to this drink as the “Connoisseur’s Choice” for mixed drinks—and whenever that’s the case, the connoisseurs pay for it.
This bourbon-based cousin of the Negroni is around 50 cents cheaper to produce than the cocktails previously discussed. Much of this is due to the substitution of 2 ounces of rye with 1.5 ounces of bourbon - a smaller volume of whiskey, usually at a lower unit cost. In fact, while the rye constituted most of the previous drinks’ costs (commonly around $1.50 of it, to be precise), the Campari in this recipe actually constitutes most of its cost: while the Campari accounts for about $1 of the total $1.68 unit cost, the bourbon is responsible for fewer than 50 cents.
Since the Boulevardier’s $9.60 average price tag is around that of the Vieux Carre, this means that it comes at a much lower pour cost for the bar.
Unlike most of the household names of the whiskey cocktail world, this drink follows a template common among the low-pour-cost members of the vodka and rum kingdoms: a liquor base, masked with fruit juice and/or syrup. In such cases, the quality of that liquor base is much more flexible - the bar can often produce a functional drink without reaching for the top shelf.
And, given that juice and syrup are always cheaper than vermouth and bitters, this recipe is almost the highest-margin drink on this list - even at by far the lowest average sale price.
Simple, classic, and economical, the classic whiskey cocktail of old has a pour cost to match its traditional austerity. In addition to the relatively high profit margins it generates, this drink is among the highest-selling cocktails among BevSpot bars, making it one of the biggest cash cows of any product in our data set. Not that that’s a surprise.
This data was sourced from BevSpot customers located in nine metropolitan areas across the continental United States. Product cost and revenue estimates represent sales-weighted averages of typical drink costs and pricing.