Pricing for Profit

In the UK spirits market, you don’t get to keep most of the money from each bottle you sell. Between high duty, VAT, and distributor/retailer margins, your share can be far smaller than you imagine.

Price too low and you’ll be busy but broke. Price too high and you’ll struggle to get listings or keep them. Pricing is not just about matching competitors - it’s about building a model that supports your growth, funds your marketing, and keeps you in business long enough to succeed.

Start with Costs, Not the Market

Many new brands look at competitor prices first and then try to “fit in” - but this can be a trap. If you don’t understand your true costs, you might be selling at a loss from day one.

Work out your Cost of Goods Sold (COGS) in detail:

• Liquid – Base spirit, botanicals, flavourings.
• Packaging – Bottle, closure, label, outer case.
• Production – Labour, utilities, equipment depreciation.
• Compliance – Licences, lab testing, label approval.

Then layer on the unavoidable:

• Duty and VAT – Fixed by government and non-negotiable.
• Overheads – Marketing, insurance, salaries, admin.
• Distribution costs – Storage, freight, delivery fees, commissions.

If the maths doesn’t work here, no amount of “market positioning” will save you. You must fix the cost structure or rethink the offer.

Working Backwards from RRP

In spirits pricing, you rarely work “up” from your cost - instead, you work “back” from your intended shelf price.

1. Decide your recommended retail price (RRP) based on where you want to sit in the category.
2. Subtract retailer margin (typically 30–50%).
3. Subtract distributor margin (20–35%).
4. What’s left is your ex-works price - the amount you receive per bottle leaving your bonded warehouse.

Example:

• RRP: £30
• Retailer margin (40%): £12
• Distributor margin (25% of the £18 left): £4.50
• You receive: £13.50
• Duty (£8.42) + VAT (£5.00) take most of this - leaving very little for COGS and overheads.

When you see the numbers in black and white, it’s obvious why underpricing is fatal.

Price Positioning

Where you position your brand has a huge impact on margin, customer expectations, and required marketing spend.

• Budget – Low price, volume-driven, thin margins. Buyers expect frequent promotions. Any quality issue will sink you quickly.
• Mid-Market Premium – Competitive pricing with clear quality cues. This is the busiest battleground in spirits and demands sharp execution.
• Super-Premium – High margins per bottle but slower turnover. Requires sustained brand building and an exceptional story to justify the price.

Pick your lane early and commit. Drifting between tiers confuses customers and can make trade buyers lose confidence in your brand.

The “Launch Low” Trap

Dropping price to win early listings feels like a quick win - until you realise buyers will resist any later increases. Your price becomes anchored in their mind, and raising it can kill the account.

If you want to offer a deal at launch, make it clearly time-limited and tied to a specific promotion, not your “normal” price.

Promotions and Discounts

Retailers often expect promotional activity, whether you like it or not. That might mean funding a two-week discount, providing free stock, or paying for in-store features. If you haven’t factored these into your margin, you’ll end up paying for them out of already thin profits.

Overusing discounts risks devaluing your brand - if customers see your product on offer more often than at full price, they’ll stop buying at the regular RRP.

Case Notes

A gin brand launched at £25 RRP to undercut competitors and quickly picked up listings. Within a year they realised the margin couldn’t support marketing or expansion. They attempted a £5 price rise - listings collapsed. By starting too low, they had built their own glass ceiling.

Action Toolkit

• Calculate your ex-works price from a realistic RRP, using real distributor and retailer margin expectations.
• Model three scenarios - budget, premium, super-premium - and stress test each against your cost base.
• Build a promotional budget into your pricing from day one so you can support sales without eroding margin.
• Track actual margin per bottle sold (after promotions) so you know your true profitability.