How to calculate GP on drinks (with worked pub examples)

GP is the number your brewery, pub company, accountant and bank manager all ask about, and it's the easiest one to get wrong. The most common mistake is working it out on the price including VAT, which makes every drink look more profitable than it is.

This guide shows the formula, then works through a pint, a spirit and mixer, and wine by the glass and by the bottle, with real-looking UK numbers. The costs are illustrative: use your own supplier prices.

The formula

GP % = (net selling price − cost per serve) ÷ net selling price × 100

Where:

• Net selling price is the till price with VAT taken off.
• Cost per serve is what you paid the supplier, excluding VAT, divided by the number of serves you actually get from it.

GP in cash is simply net selling price minus cost per serve. Keep an eye on both: a drink with a lower GP % can still put more pounds in the till.

Step 1: take off the VAT

HMRC's catering guidance says you must always charge VAT at the standard rate when you supply food and drink for consumption on the premises. The standard rate is 20%. So if you're VAT-registered:

Net price = till price ÷ 1.2

Note that dividing by 1.2 is not the same as taking off 20%. £5.20 less 20% is £4.16, which is wrong. The VAT is 20% of the net price, so it's one-sixth of the till price.

Not VAT-registered? Then you don't charge VAT, and the till price is your net price.

Step 2: work out the cost per serve

Use your supplier price excluding VAT (if you're VAT-registered you reclaim the VAT on purchases), and divide by the number of serves. Legal measures matter here: draught beer and cider are sold in thirds, halves, two-thirds and multiples of a half pint; gin, rum, vodka and whisky in 25ml or 35ml and multiples (not both on the same premises); still wine by the glass in 125ml, 175ml and multiples.

Worked example 1: a pint of lager

• Keg: 11 gallons (88 pints), costs £150 + VAT
• Theoretical cost per pint: £150 ÷ 88 = £1.70
• Till price: £5.20, net £4.33

GP = (£4.33 − £1.70) ÷ £4.33 = 60.7%, or £2.63 cash per pint.

Allowing for wastage

You never sell all 88 pints. Line cleaning, fobbing, the first pint after a barrel change and the odd spill all take some. Say you sell 84 pints from the keg:

• Real cost per pint: £150 ÷ 84 = £1.79
• GP = (£4.33 − £1.79) ÷ £4.33 = 58.8%

That 2-point gap is exactly what a stock-take picks up. Our pub stock-take guide shows how to measure it.

The VAT-inclusive mistake

If you'd worked it out on £5.20: (£5.20 − £1.70) ÷ £5.20 = 67.3%. That looks 6.6 points better than reality, and if your target was 62% you'd think you were comfortably ahead when you're actually short.

Worked example 2: a spirit and mixer

• Gin: 70cl bottle at £16.00 + VAT, 28 × 25ml measures
• Cost per 25ml: £16.00 ÷ 28 = £0.57
• Tonic: 200ml bottle at £0.45 + VAT
• Till price for a single gin and tonic: £5.50, net £4.58

GP = (£4.58 − £0.57 − £0.45) ÷ £4.58 = 77.7%

On its own, a single gin at £3.80 (net £3.17) would be (£3.17 − £0.57) ÷ £3.17 = 82.0%. Mixers pull the GP down, which is why many pubs price the mixer separately or build it into a "perfect serve" price.

Don't forget garnish and ice if you want to be precise: a slice of lemon and a scoop of ice add a few pence per drink.

Worked example 3: wine by the glass and the bottle

• House red: 75cl bottle at £7.50 + VAT
• 175ml glass: 75 ÷ 17.5 = 4.29 glasses, so cost per glass = £1.75
• Glass price £7.00, net £5.83: GP = (£5.83 − £1.75) ÷ £5.83 = 70.0%
• Bottle price £26.00, net £21.67: GP = (£21.67 − £7.50) ÷ £21.67 = 65.4%

The bottle has the lower GP %, but look at cash: a bottle makes £14.17. Four glasses and a bit make about £17.50, if you sell every glass. An open bottle that goes off on a quiet Tuesday wipes that out. Wine by the glass needs a preservation routine and a rule about when opened bottles are binned.

Pricing to a target GP

Turn the formula round:

Net price = cost per serve ÷ (1 − target GP), then × 1.2 for the till price.

Then round to a price that looks right on the board and compare with what pubs nearby charge. Our menu price calculator and GP margin calculator do the sums for you.

GP vs markup

People mix these up all the time.

• GP (margin) = profit ÷ selling price. The pint above: £2.63 ÷ £4.33 = 60.7%.
• Markup = profit ÷ cost. The same pint: £2.63 ÷ £1.70 = 154.7%.

Breweries, pub companies and most UK operators talk in GP. If someone quotes a "150% margin", they almost certainly mean markup.

Your overall wet GP is a mix

No pub sells one drink. Your bar GP is a weighted mix of everything, so what you sell matters as much as how you price it. Here's a week in a village pub (all figures net of VAT):

If a warm month shifts sales towards draught lager, the overall GP drops even though no price changed. That's sales mix, not a problem behind the bar, and it's worth knowing the difference before you start counting spirits at 2am.

Common mistakes

1. Working out GP on the VAT-inclusive price. The most common error, and it flatters every number.
2. Using theoretical yield only. A keg never gives 88 saleable pints. Use a realistic yield, then check it against your stock-take.
3. Forgetting mixers, garnishes and ice.
4. Not updating costs. When the brewery puts prices up, your GP falls the same day. Re-run the numbers on every price change.
5. Ignoring cash GP. A lower-percentage drink that sells in volume can make more money than a high-percentage one nobody orders.
6. Price changes without a stock-take. If GP looks low, it might be price, mix, wastage or theft. Only a stock-take tells you which.

Where ShiftComplete fits

ShiftComplete doesn't calculate GP or connect to your till; use the calculators above or your stocktaker for that. It helps with the other half of the bar's numbers: the rota, with labour cost shown as you build, and the daily routine that protects your stock, such as cellar and line-cleaning checklists that change by weekday, with each tick named and timestamped. £1.49 per staff member per month, free for 60 days with no card.