How drinks margins are calculated
UK wholesalers, retailers and bars all quote margin on their selling price excluding VAT. Retailers and bars sell to consumers, so take the VAT off the shelf or menu price first. That's the step most people miss. Wholesalers sell to the trade, so their prices are usually quoted ex VAT already.
Margin = (selling price ex VAT − buying price) ÷ selling price ex VAT
Maximum buying price = shelf price ÷ 1.2 × (1 − margin)
Example: a retailer wants 30% margin on a £20.00 shelf price. £20.00 ÷ 1.2 = £16.67 ex VAT. £16.67 × 0.70 = £11.67 is the most they can pay you.
Wholesalers
A wholesaler buying at £28.56 and selling to bars at £34.82 makes £6.26 a bottle, an 18% margin on its selling price.
Bars and restaurants
The on-trade calls margin "GP" (gross profit) and prices by the serve. A 70cl bottle gives 28 × 25ml or 14 × 50ml serves. At a 50ml menu price of £12.00 inc VAT and a 75% GP target, the bar can pay up to £12.00 ÷ 1.2 × 14 × 0.25 = £35.00 per bottle.
Margin vs mark-up
Margin is profit as a share of the selling price. Mark-up is profit as a share of the cost. A 30% margin is a 42.9% mark-up, so always check which one a buyer means.
| Margin | Mark-up |
|---|---|
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 35% | 53.8% |
| 40% | 66.7% |
| 50% | 100.0% |
| 75% | 300.0% |