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; this means that before paying wages and rent, the median BevSpot bar is getting an 85% gross profit margin on your Moscow Mule.
Actually, that’s a lie. 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 this and a few upcoming articles, 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 6 rum-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 6 cocktails covered here, the Mai Tai is the most costly for your bartender to serve; the Mojito, 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 Dark ‘n Stormy 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.
Of the 6 rum cocktails discussed here, the Mai Tai has a pour cost 3.3 percentage points higher than the next most costly. In our sample, it also tends to be the highest priced at $10.51. What gives?
For starters, most lists of essential rum cocktails are dominated by recipes that call the tropics to mind; this list is no exception. Such recipes call for fruit juice, and plenty. The Mai Tai distinguishes itself from its tropical peers with its disproportionately high alcohol content: while the other drinks described here are at most half liquor by volume, 70% or more of a typical Mai Tai will be made of rum and orange liqueur. As a result, this drink becomes relatively more costly to make, especially compared to the next drink on this list.
This is one drink where the managers at Bevspot bars might be splurging a bit more, to their patrons’ benefit (or detriment). While a quick Google search yields Piña Colada recipes that call for 1 part rum and 4 parts juice and cream, our data tends to have recipes that call for 2 parts rum and 4 parts juice.
When paired with an average sale price ($9.00) that is the lowest of any cocktail on this list, the more rum-heavy recipes yield an average estimated pour cost of 15.8%. Water down your drinks with their non-liquor components, and you might see a pour cost more akin to those of the following drinks.
While it lacks the fruit juice content of more traditionally “tropical” rum-based cocktails, the Dark ‘n Stormy’s murky origins definitely involve Bermuda to some extent - making it more authentically tropical than the California-derived Mai Tai.
The drink’s traditional recipe has a composition similar to that of the Piña Colada: 4 parts a sweet non-liquor component, 2 parts rum. The difference is in the pricing: while the the Dark ‘n Stormy and Piña Colada both had average unit costs of around $1.45, the former tended to sell for above $8 a unit, while the latter sold for closer to $7.50 a unit.
As we’ve noted before, the Long Island Iced Tea doesn’t fit neatly into a single spirit specific list because it contains more than one type of liquor. Still, it’s a perfect drink for summer, when the data show vodka, tequila, and rum consumption spike. If you’re building a 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’s simplicity is a key element of its enduring appeal. That also makes it a lucrative one for bars: 3 ingredients mixed together in a shaker, all of them staples of any cocktail program. Cheap to produce, easy to assemble. It manages it have an average pour cost of less than 14%, even with one of the lowest average sale prices of its peers.
Bartenders are probably disappointed to see this item at this point in our list. And for perfectly valid reasons: it’s time-consuming to make, the mint is irritating to stock and keep fresh, and orders for the cocktail spreads like wildfire among inexperienced drinkers.
In protest, some bartenders have taken to refusing to prepare the problem drink. But practically speaking, a waste of bartenders’ time becomes a productive use if they and the bar are properly compensated. With an average cocktail pour cost of 13%, it seems like BevSpot bars have the right idea.
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.