Ask the Collective
The questions independent drinks founders ask most — answered. Distilled from years of community knowledge so the good stuff never disappears in the feed again.
Should alcohol duty be included in or excluded from margin calculations?
Whether to include duty depends on your purpose, but there are two distinct approaches: **For internal analysis and strategy:** Exclude duty from margin calculations. This approach is cleaner and more useful because: - It allows meaningful comparison across different channels (duty-free/export vs. UK domestic sales) - It keeps margins consistent when duty rates change—important because you typically can't pass duty rate increases directly to customers without them accepting the cost increase separately - It gives you a true picture of what's fundamentally changing in your business **For retail/wholesale customer discussions:** Include duty so your customer's margin calculations reflect their actual landed costs. **Key principle:** Members note that duty is not reclaimable like VAT, so it cannot be treated the same way. The standard approach among strategic-minded producers is to exclude duty when benchmarking gross margins, especially since duty rates vary hugely internationally. This avoids the problem where a duty rate change on 1 February (for example) would artificially depress your reported margin percentage despite nothing fundamentally changing in your operation. One member flagged that duty-suspended calculations are more complex and less commonly used.
Should margin percentages be calculated on ex-duty or including duty values?
Calculate margins **ex-duty and ex-VAT** for accurate performance tracking and meaningful peer comparison. Duty is a consumer tax controlled by government policy, not part of your operational margin; if duty rates change, customers expect price increases to reflect that exactly, so including duty in margin calculations masks true business performance and confuses stakeholders. This approach is especially critical if you have mixed duty-paid and duty-suspended sales, or if export represents a significant part of your business (export sales distort comparisons when duty is included). The trade-off is operational complexity—your systems need to track duty separately—but members with mixed sales models confirm it's manageable once set up. One member noted this is easier said than done depending on system complexity, so audit your data infrastructure before implementing.