Calculate gross profit on beer in your UK pub

Last updated: 12 April 2026

Most pub landlords can tell you their till total at the end of a shift, but ask them what gross profit they made on beer last month and they’ll either guess or change the subject. That disconnect between revenue and actual profit is where money leaks away silently. I’ve managed a busy pub in Washington, Tyne & Wear serving everything from wet sales to quiz nights and food service simultaneously—and the single most common mistake I see is confusing turnover with profit. You can be busy every night and still go backwards if you don’t understand the margins on every pint you pour.

Calculating gross profit on beer is not complicated, but it requires discipline and accurate data. This guide walks you through the exact formula, shows you how to apply it to your own business, and explains why tied pub tenants and free-of-tie operators need to approach this differently. By the end, you’ll know exactly what your beer margins really are—and more importantly, whether they’re good enough to keep your pub trading profitably.

The Basic Formula for Gross Profit on Beer

Gross profit on beer = Total beer revenue − Cost of goods sold (COGS).

Revenue is straightforward: add up every pound taken from beer sales over your chosen period (usually a week or month). COGS is everything you paid to buy that beer—the invoice cost from your supplier, nothing more.

Here’s a simple example. Say you sold £5,000 worth of beer in a week. Your invoice from the brewery and wholesaler came to £1,500. Your gross profit is £3,500.

That £3,500 is what remains after you’ve paid for the product itself. It has to cover your rent, staff wages, energy, insurance, and every other cost to run the pub. If your gross profit is too low, you won’t have enough left over to turn an actual net profit—and that’s when pubs get into trouble.

The formula sounds basic because it is. The complexity comes from knowing your COGS accurately. Most pub landlords think they know it—until they do a proper stocktake and realise they’ve been overpouring, or staff have been giving away free pints, or there’s been spillage they haven’t accounted for.

How to Collect Accurate Cost Data

Your COGS figure is only as good as your supplier invoices and your stock records. Here’s what you need:

1. Supplier invoices

Keep every invoice from every supplier—breweries, wholesalers, cash and carries. Record the date, the invoice total, and which beers and volumes you received. If you’re buying kegs, casks, bottles, or cans, each format has a different cost per unit.

2. Opening and closing stock

At the start and end of your calculation period (usually a week or month), count every single keg, cask, case, and bottle you have in the cellar and on the bar. Assign a cost to each based on what you paid for it. The stock value changes hands in your profit calculation: opening stock + purchases − closing stock = COGS.

This is the formula professional operators use:

COGS = Opening stock value + Purchases − Closing stock value

Let’s work through a real example. On Monday, you have £1,200 worth of beer in stock. During the week, you buy £1,500 worth. On Friday, you count stock again and it’s worth £800. Your COGS for that week is:

£1,200 + £1,500 − £800 = £1,900

If you sold £5,000 of beer, your gross profit is £3,100 (£5,000 − £1,900).

3. Stock control systems

Recording stock by hand once a month is better than nothing, but it won’t catch shrinkage, spillage, or give-aways in real time. Modern pub management software integrates with EPOS systems to track every pour automatically. If you’re managing a busy pub with staff handing out free pints or overpours going unaccounted for, this gap can easily cost you 3–5% of margin per month.

At Teal Farm Pub in Washington, managing stock across wet sales, food service, and quiz nights meant doing a physical stocktake weekly rather than monthly—because with multiple staff pouring and discounts being given, the variance grew quickly otherwise. That discipline made the difference between knowing your true margin and guessing.

Calculating Margin Percentage and Markup

Gross profit as a flat number (£3,100) tells you how much money is in the bank. But a margin percentage tells you how efficient you are. Two pubs might both make £3,000 gross profit on beer, but if one did it on £5,000 sales and the other on £10,000 sales, they’re very different businesses.

Gross margin percentage

Gross margin % = (Gross profit ÷ Revenue) × 100

Using the example above: (£3,100 ÷ £5,000) × 100 = 62%

This means for every £1 of beer you sell, you keep 62p after paying for the product. The other 38p goes back to your supplier.

Markup percentage

Markup is different from margin. Markup is the percentage increase on your cost. So if you buy beer for £1 and sell it for £2.70, your markup is 170%.

Markup % = (Selling price − Cost) ÷ Cost × 100

Or more usefully for a whole month:

Markup % = (Revenue − COGS) ÷ COGS × 100

Using the same numbers: (£5,000 − £1,900) ÷ £1,900 × 100 = 163%

Most UK pubs work with a markup of between 200% and 300% on beer, depending on the drink category. A standard draught lager might have a 250% markup, while a premium craft beer might be 280% or higher.

Here’s why markup matters: if you know your target margin (say 70%), you can work backwards to set your pricing. Use our pub drink pricing calculator to test different price points against your actual COGS and see the impact on margin.

Why Tied Pubs and Free-of-Tie Pubs Have Different Margins

This is where the pub trade gets real. If you run a tied pub—meaning you’re obliged to buy your beer from a specific pubco like Marston’s, Admiral Taverns, or another large operator—your COGS is fixed. You don’t negotiate prices. Your supplier sets the invoice cost, and that’s what you pay.

Most tied pub tenants see beer margins of between 60% and 68%. It’s lower than it should be because the pubco builds their profit into the wholesale price. When you sign a tie agreement, you’re accepting a lower margin in exchange for support, training, and (in theory) brand strength.

Free-of-tie operators and free pubs have much more control. You can buy from multiple suppliers, negotiate volume discounts, and chase cheaper product. The best free-of-tie pubs manage margins of 70–75% or higher, especially if they’ve built relationships with smaller local breweries or wholesalers willing to compete on price.

The practical difference: A tied pub selling £10,000 of beer monthly at a 65% margin keeps £6,500 for overheads. A free-of-tie pub selling the same volume at 72% keeps £7,200. That extra £700 a month—£8,400 a year—is the cost of the tie. Some landlords think it’s worth it for support and consistency. Others don’t.

If you’re a tied tenant considering your options, understanding free-of-tie pub models can help you evaluate what you’re really paying for the tie.

Benchmarking Your Margins Against Industry Standards

Knowing your gross profit is one thing. Knowing whether it’s good is another. Here are the benchmarks for 2026:

Standard wet-led pubs

If your pub is drinks-focused with minimal food, your beer margin should sit between 65% and 72%. A wet-led pub typically sources from tied or semi-tied arrangements and relies on high turnover to make the numbers work. If you’re below 60%, you’re either underpricing, overpaying, or losing too much to shrinkage.

Gastropubs and food-focused venues

If food is significant revenue (40% or more of total sales), you can often accept a lower beer margin—say 62–68%—because you’re making better margins on food (typically 60–70% on food cost, with higher selling prices). The combined effect keeps your overall gross profit healthy.

Premium and craft-focused pubs

Pubs serving high-end craft beers, limited editions, or expensive guest keg lines sometimes see lower beer margins (58–65%) on individual products. But they compensate with higher average spend per customer and lower customer volume needed to hit targets. If craft is your strategy, margin per pint matters less than margin per customer.

Community pubs with strong loyalty

Pubs with loyal regulars often work with slightly lower margins (60–68%) because volume is predictable and customer acquisition cost is very low. The regulars come anyway, so you don’t need to chase every penny of margin to stay profitable.

The point: there’s no single “right” margin. It depends on your model. But you should know what yours is, and whether it’s trending up or down. If margin is falling month on month, something is wrong—pricing, costs, or shrinkage. Track it monthly using a pub profit margin calculator to spot problems early.

Common Calculation Mistakes and How to Avoid Them

I’ve worked through countless pub accounts, and the same errors appear again and again. Here’s what to watch for:

Forgetting shrinkage

Spillage, overpours, samples for customers, staff training pours, and complimentary pints for quiz night regulars all reduce your actual COGS. If you assume perfect inventory between stocktakes, your calculated margin will look better than reality. Most pubs lose 2–4% of volume to legitimate shrinkage. Budget for it. Don’t pretend it doesn’t exist.

Mixing old and new invoices

If you buy beer on Monday and it doesn’t arrive until Friday, when do you count it as COGS? The invoice date or the delivery date? If your period runs Monday to Sunday, be consistent: either count all invoices issued in the week, or all deliveries received. Don’t mix them. The small error each week compounds to a big one by month-end.

Not including cash and carry purchases

Many landlords forget to add cash and carry runs to their formal COGS. You paid cash, there’s no invoice to file, and it’s easy to lose track. Write down every purchase at the point of sale. The best practice is to ask your accountant or bookkeeper to set up a petty cash log for these or to scan every receipt and record it immediately.

Including VAT in your calculations

Your supplier invoices include VAT. Your till includes VAT. For margin calculations, you need to work with VAT-exclusive figures. If your invoice says £1,500 including VAT, divide by 1.20 to get the VAT-exclusive amount (£1,500 ÷ 1.20 = £1,250). Do this consistently for revenue and costs, or your margin will be distorted.

Ignoring keg deposits and returns

When you buy a keg, you often pay a deposit that gets refunded when you return the empty. That deposit isn’t COGS—it’s a liability. Only count the product cost. When the keg is returned, credit it against future purchases or recover it as cash. Get your supplier to confirm the deposit value and track returns separately.

Forgetting promotions and discounts

If you run a Happy Hour at £2 per pint instead of £4, your revenue and margin both drop. Make sure your EPOS system records this correctly. Some tills lump discounts into a separate line, which can make it hard to see the true revenue figure. You need to know the actual selling price per pint, not the list price.

The core issue is data quality. If your EPOS system doesn’t talk to your stock management system, and neither talks to your accounting software, you’re doing the calculation with incomplete information. When I evaluated systems for Teal Farm Pub, the ability to integrate sales data directly with cellar management was a deal-breaker—because that’s where the real picture emerges.

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