How drink pricing works at a bar

If you price a drink too low, each sale leaves the bar less money than it needs. If you price it too high, guests order something else or go to another bar. A price set by habit, or copied from another bar, has no link to what the drink costs you. So check each price three ways: its cost, the dollars it leaves and what bars near you charge.

Price a drink from its cost

First, cost the spec line by line, including syrups and garnish. A Margarita uses 2 oz (60 ml) of tequila at $2.40, plus lime and triple sec at $0.60, so it costs $3.00 to make.

Then divide that cost by your target pour costThe cost of a drink's ingredients divided by its menu price, as a percentage.. At 20%, the Margarita sells for $3.00 ÷ 0.20 = $15.00.

Menu price before tax = drink cost ÷ target pour cost

A commonly cited starting point for cocktail pour cost is 18 to 24%, a range from Jeffrey Morgenthaler, but the right target depends on your bar's costs, prices and sales mix. See where it comes from. Across that range, the Margarita sells for $12.50 (at 24%) to $16.67 (at 18%). Your rent, your labor and what your guests will pay decide where in the range you should be. Beer and wine use the same formula, each with its own target. Start with one target to work out an initial price for each drink. Then adjust individual prices according to what the drinks earn and what guests will pay.

Check the dollars each drink leaves

But one pour cost for every drink causes problems at both ends of your menu. A Bijou, made with an expensive liqueur, costs $3.90 to make. At 20%, it sells for $19.50, $4.50 more than the Margarita, so guests may order something else. A Daiquiri costs $1.76 to make. At 20%, it sells for $8.80 and leaves only $7.04. As the next step shows, that is well below what the bar needs from an average drink.

So also check gross profitThe menu price of a drink minus what its ingredients cost.: the dollars a drink leaves after its cost. Say your costs other than drinks (labor, rent and everything else) are $3,000 a night, and you want $600 a night of profit. That is $3,600 a night. At 300 drinks a night, the average drink must leave $3,600 ÷ 300 = $12.00.

Average gross profit per drink you need = (costs other than drinks + profit you want) ÷ drinks sold
Menu price at that gross profit = drink cost + average gross profit per drink you need

Use the same period for all three numbers: a night, a week or a month. Your own figures are in the bar's P&L, its profit and loss statement.

This gives you an average target across all 300 drinks, not a minimum that every cocktail has to meet. Some drinks will earn more than $12 after ingredients and some will earn less. What matters is how many you sell of each and whether they earn enough together to cover your costs and profit goal.

For a first comparison, you can add $12 to each drink's ingredient cost. That shows what each drink would sell for if they all left the same gross profit. You can then decide where to charge more or less based on demand and the rest of your menu.

The Margarita gets $15.00 both ways: $3.00 of cost plus $12.00 is $15.00. The Daiquiri sells for $13.76 to leave $12. The Bijou at $15.90 runs at a 24.5% pour cost ($3.90 ÷ $15.90). That is over target, but it leaves the same $12 as the Margarita.

So use the pour cost method for a first price. For your cheapest and most expensive drinks, check it against the gross profit price before you choose.

If a drink leaves good gross profit but rarely sells, try a better place for it on the menu before you change its price (menu engineering).

Check what bars near you charge

Your costing and profit calculations give you a starting point. Nearby bars help you judge what guests are likely to accept. Compare bars competing for the same customers, with a similar level of service and experience. Pick the drinks guests compare: a Margarita, an Old Fashioned, a draft beer and a glass of house wine. Then write down their prices at 4 or 5 nearby bars that your guests choose between. A signature drink has nothing to compare it to, so you have more room to price it.

If your calculated price is well above the market, don't just copy the cheapest competitor. Look at whether the spec is too expensive, whether the drink belongs on your menu and whether other drinks earn enough to support it.

Prices also rise over time, so repeat this check. In the US, for example, the government's price index for alcoholic drinks sold away from home, in bars and restaurants, rose 29% from August 2019 to August 2026. It covers all alcoholic drinks, not cocktails alone.

Round up to a menu price

Round each price up to the step your menu uses, such as whole dollars or 50 cents. On a whole-dollar menu, the Daiquiri's $13.76 becomes $14, which leaves $12.24 ($14 − $1.76). At $13, it would leave $11.24, 76 cents below the $12.00 average. Round down only on purpose, when you know how much gross profit each sale loses.

How to price liquor at a bar

Price a neat pour or a highball the same way, from the cost of the pour. Take a whiskey that costs $30 for a 750 ml bottle. That is $0.04 per ml, so a 2 oz (60 ml) pour costs $2.40. At a 20% pour cost, the pour sells for $2.40 ÷ 0.20 = $12.00.

Price of a pour = bottle price ÷ ml in the bottle × ml poured ÷ target pour cost

But one price for each bottle gives a back-bar menu dozens of prices. So group the bottles into a few price tiers by cost per pour. Price each tier from its most expensive pour, so no bottle in the tier goes over target. For example, whiskeys that cost $2.00 to $2.40 a pour can all sell for $12. The $2.00 ones run at a 16.7% pour cost ($2.00 ÷ $12), under target.

Check how guests perceive the bottles within each tier. A familiar house whiskey and a recognized premium label may deserve different prices even when their costs are similar. Cost gives you a starting point, but it doesn't tell you what guests value.

Prices with VAT or GST included

If your menu prices include tax, take the tax out before you check the pour cost, and add it last when you set a price. In Great Britain, menu prices must include VATValue-added tax: a sales tax that is included in menu prices in many countries.. In Australia, a price must be one total that includes GST, the goods and services tax.

Say you check the pour cost of a drink that costs £3.00 and sells for £18 with 20% VAT. Before VAT, the price is £15, so the pour cost is £3.00 ÷ £15 = 20%. Dividing by £18 gives 16.7%, which looks better than it is.

To set a price, add the tax last: £3.00 ÷ 0.20 = £15.00 before VAT, and £15.00 × 1.20 = £18.00 on the menu. In Australia, a drink that costs A$3.00 is A$15.00 before GST, and A$15.00 × 1.10 = A$16.50 with 10% GST.

Menu price = drink cost ÷ target pour cost × (1 + tax rate)

UK bars often call gross profit "GP" and give it as a percentage of the price before VAT. A 20% pour cost is an 80% GP.

A US menu normally shows prices before sales tax, which is added at the register. If yours includes it, take it out too.

Try targets, rounding steps and tax on your own drinks with the menu price calculator. It gives the price to print and the pour cost it runs at.

How to raise drink prices

In the week a bottle's price goes up, re-cost every drink that uses it. Say the tequila goes up from $30 to $32.50 a bottle. The Margarita's 2 oz (60 ml) of tequila now costs $2.60 instead of $2.40, so the drink costs $3.20. At $15, it runs at a 21.3% pour cost ($3.20 ÷ $15) and leaves $11.80. You then have three choices for each drink: go back to your target pour cost, keep its gross profit or leave its price alone. Back at your 20% target, the Margarita sells for $3.20 ÷ 0.20 = $16.00, which leaves $12.80. To keep its $12.00, it needs $3.20 + $12.00 = $15.20, rounded up to $16. So the first two choices both give $16.

How many Margarita sales can you lose before the new price costs you money? The Margarita sold 640 in four weeks. At $15 with the new cost, those 640 sales leave 640 × $11.80 = $7,552. At $16, only 590 sales leave the same amount ($7,552 ÷ $12.80).

Share of sales you can lose = 1 − (gross profit per drink before ÷ gross profit per drink after)

At $16, you could sell 50 fewer Margaritas over four weeks and still earn the same amount from that drink after ingredients. That's a 7.8% drop in sales.

But that only tells you what happens to Margarita sales. If guests switch to another cocktail, you need to account for what those drinks earn too. The important question is whether the price change improves the gross profit of the whole menu.

How many sales you will really lose is harder to know. A 2009 review of 112 studies found that each 1% rise in the price of spirits meant people drank 0.8% less on average. But that measures whole markets, not one cocktail at one bar.

Test a rise on a few drinks before you change the whole menu:

• Change one price, and leave the drinks next to it alone.
• Compare the drink's sales over four weeks with the four weeks before. If the season changed, use the same four weeks last year. Then compare the sales you lost with your break-even.
• Watch the drinks next to it. If Margarita sales fall and Paloma sales rise by the same number, guests switched drinks. They did not leave.

Questions

Sources

1. Jeffrey Morgenthaler, How to Price a Cocktail Menu. June 2011. The 18 to 24% range and the two-drink menu example.
2. US Bureau of Labor Statistics, via the Federal Reserve Bank of St. Louis, Consumer Price Index for All Urban Consumers: Alcoholic Beverages Away from Home in U.S. City Average (CUUR0000SEFX). Not seasonally adjusted. August 2019 355.739, August 2025 445.685, August 2026 459.143.
3. Alexander C. Wagenaar, Matthew J. Salois and Kelli A. Komro, Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies. Addiction, 2009, 104(2), 179 to 190. Simple means of reported elasticities, in the abstract.
4. Sybil S. Yang, Sheryl E. Kimes and Mauro M. Sessarego, Menu price presentation influences on consumer purchase behavior in restaurants. International Journal of Hospitality Management, 2009; author copy on Cornell eCommons. Its introduction summarizes Naipaul and Parsa (2001), Cornell Hotel and Restaurant Administration Quarterly 42(1), on 9 and 0 price endings by type of restaurant.
5. UK legislation, The Price Marking (Food and Drink Services) Order 2003. Article 1(2): food means food and drink for human consumption; article 4(4): a price indication for food subject to VAT shall be inclusive of the tax. Made under the Prices Act 1974.
6. Australian Competition and Consumer Commission, Price displays. The single total price, the menu wording for a restaurant or cafe surcharge, and the end of card-payment surcharges on Visa, Mastercard, American Express and eftpos from 1 October 2026.
7. Australian Government, Federal Register of Legislation, Competition and Consumer Act 2010, Schedule 2 (Australian Consumer Law), section 48. Compilation No. 167 of 16 September 2026, volume 4 (Schedule 2). Section 48(1): the single price as a single figure; 48(7)(b): it includes any tax on the supply, with GST as Example 2.