In previous analyses of bar profitability data, we found that pour cost, the preferred measure of efficiency for beverage programs, is around 15% for spirits & cocktails. However, upon further investigation, we found that, while the 15% aggregate pour cost measures general profitability for individual establishments, it also represents an average of all the various drinks being sold by those bars.
As most bar managers and owners will tell you, 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. 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 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 5 tequila-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 5 cocktails covered here, the Long Island Iced Tea is the most costly for your bartender to serve; the Paloma, 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 Paloma and Tequila Sunrise have similar product costs, one tends to be sold at a much higher price point. For the bar, both cost and price are indispensable metrics; pour cost becomes useful because it uses both measures.
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.
The most popular of tequila cocktails is represented in our data by a large diversity of flavors and recipe variants. So, while the most traditional recipe listed here is certainly common, we have taken into account these variants while calculating our expected cocktail pour cost.
Yet the 13.1% average pour cost we observed is almost 2 whole percentage points below the average bar’s spirit & cocktail pour cost. Considering that the Margarita is higher in liquor content than most of the other classic tequila cocktails we evaluated, this is probably indicative of tequila’s robustness as a spirit for a beverage program’s bottom line.
As you might have guessed, this drink is a tequila-based variant of the Bloody Mary. It has a pretty similar average pour cost to the original cocktail, but as we noted in our vodka cocktail list, this average masks wide variation in margins due to differences in how bars build their recipes. The same drivers of lower pour cost are also true of this drink: lower liquor content, strong flavors overpowering the taste of the alcohol, and a high time cost of labor that businesses may be pricing in.
The high ratio of juice to tequila in this recipe keeps the liquor cost low. Its most typical recipes also add a dose of syrup, making it even sweeter than many other juice-loaded drinks. Bars can use pretty much any tequila they want to keep Tequila Sunrise drinkers happy - which, unsurprisingly, resulted in low pour costs across the board.
The Paloma isn’t yet very popular in the United States. That’s a shame. The cocktail is easy-to-make, and its use of grapefruit may improve upon the common pairing of lime with tequila. Grapefruit soda is also similar to fruit juice when it comes to bars’ bottom lines: it provides a distinct flavor that balances out the liquor in the drink, and is also relatively cheap by volume. Maybe it really is about to take the States by storm.
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.