As our users know, we at BevSpot care a lot about data. What we’ve found in the past was that pour cost, the preferred measure of efficiency for beverage programs, is around 15% for spirits & cocktails. Under these results, we came to the conclusion this means that, before paying wages and rent, the median BevSpot bar is getting an 85% gross profit margin on their Moscow Mule.
As we’ve dug a little deeper, that conclusion actually turned out to be inaccurate. The 15% aggregate pour cost represents an average of all the various drinks being sold by those bars. Veteran bar owners and managers will know that 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.
As part of a continuing series on the profitability of cocktails based on spirit, we dive into the world of gin and take a hard look at the profitability of some textbook gin-based cocktails.
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 9 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 8 gin-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. (We’ve provided a handy explainer.) 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 8 cocktails covered here, the Last Word is the most costly for your bartender to serve; the Long Island Iced Tea, 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 Gimlet and Long Island Iced Tea 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.
You might want to make this Depression-era creation the last word for the end of your menu, but do so with caution. Almost half of the recipe’s cost comes from its green Chartreuse, a historic and high-end liqueur produced by monks; this and the drink’s Maraschino liqueur means that half the drink’s volume comes from very specialized ingredients, which tends to lead to higher costs.
Despite its high unit cost, the Last Word tends to be priced at about $8.96, below average for the gin cocktails covered here. This makes for a disproportionately high average pour cost - the last thing any bar should highlight on its menu.
As we mentioned in our analysis of whiskey cocktail data, the Negroni is a cousin of the Boulevardier; yet though they’re similar, the former has an average pour cost of 20.5%, while the latter has an average pour cost of just 16.4%. Where does that 4.1 percentage point difference come from?
The first reason is that the Negroni traditionally uses an ounce of gin instead of an ounce-and-a-half of bourbon that some bars in the data set used. The second reason is that the Negroni is more popular, and often sold in bars that don’t really sell Boulevardiers. These bars often have high cocktail pour costs - skewing the average.
You probably know that this drink first appeared in 1953’s Casino Royale, the first of Ian Fleming’s many James Bond novels. Like his character, Fleming was a prolific drinker with a taste for good liquor, and it shows: this recipe is over 90% gin and vodka by volume, so liquor quality is key. This is especially true if the customers who want it have discerning taste buds. Even with higher pricing, cocktails with more liquor by volume often have higher pour costs, and this is no exception.
This cocktail’s reliance on gin and vodka makes it relatively costly overall - but since it emphasizes these over the Negroni’s Campari and vermouth, it does not become an outlier.
As cocktails go, the Martini is one of the most ubiquitous in popular culture. James Bond’s usual drink of choice is somewhat above average when it comes to pour costs for bars. It’s a veritable work horse, but to be a true cash cow, the margins need to be higher.
The Gimlet has an average pour cost of around 15%, which is pretty close to the median spirit & cocktail pour cost we’ve seen before. Like many of the lower-pour-cost cocktails we’ve seen before, this drink manages to be cheaper because of its use of juice and syrup; for such a drink, however, it is relatively high in its liquor base by weight. Not particularly cheap, not particularly costly.
Sweet yet acidic, this drink manages to be mostly liquor by volume, and still cost a relatively measly $1.31 to produce on average.
Like the Vesper, the Long Island Iced Tea doesn’t fit neatly into this list because it contains more than one liquor type. Still, it’s a perfect drink for summer, when the data show vodka, rum, and tequila consumption spike. If you’re building a vodka and tequila-dominated cocktail menu for warm weather, it’s worth considering this drink’s relatively low pour cost - though with 8 or more possible ingredients, you might want to consider the associated labor costs.
This drink is loaded with components that are commonly used to water down liquor in low-pour-cost cocktails: water, lemon juice, syrup. Its 12.4% pour cost makes it one of the highest-margin drinks for which we have good data; on average, it costs about as much to produce as a margarita, but at a higher sale price. A recipe for profit as straightforward as the recipe of the drink itself.
Did the results surprise you at all? Personally, we were a little shocked to find out actually how expensive a Last Word could be for a bar program or exactly how profitable a Tom Collins really is. Let us know in the comments what your thoughts were and subscribe to get first notice on future installments in this series as we cover the rest of the spirits (tequila/mezcal and rum).
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.
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