In alcohol sales, what is meant by "markup"?

Markup refers to the difference between the purchase price of an alcoholic beverage and its selling price. This value is crucial in retail and hospitality industries because it helps determine how much a business will earn from selling a product after accounting for the initial cost. When a retailer marks up a product, they increase the price above the amount they paid to acquire it, which covers overhead costs and contributes to the profit margin.

Understanding markup is essential for businesses as it impacts pricing strategy and profitability. For example, if a restaurant buys a bottle of wine for $10 and sells it for $15, the markup is $5. This concept helps businesses decide on competitive selling prices while ensuring that costs are covered and profits are made.

While options like the tax applied to alcoholic beverages, the selling price itself, or the overall profit margin relate to the pricing structure, they do not define what markup is in the context of alcohol sales. Rather, markup is specifically the difference between what the business spends on acquiring the product and what they charge customers for it.