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eCommerce Tip! – Pricing Your Food Product for Profit

Picture of By <span style="font-weight:bold;color:#F63C47; font-style: italic;">Oscar Guerrero</span>

By Oscar Guerrero

Published January 3, 2019

eCommerce Tip! – Pricing Your Food Product for Profit

 

Estimate Production Costs

It is virtually impossible for small food businesses to compete in the lower price range of the commodity market. Because of this, it’s critical to know how to price your products for profit.

Research suggests that you should start by setting your production costs at 40% of the retail price. This means your ingredients, labor, package, and label must price out at 40% of what your product will sell for on the shelf.

The other 60% of the retail price will typically be used to get your product through the supply chain and onto the shelf.

Estimate Profit Margin for a Manufacturer

Once you determine your product production cost, you’ll need to determine what price you’ll then sell that product for to the supply chain to make a profit.

The usual percentage of a return, or profit margin for a manufacturer, is 30-35 percent.

Estimate Sale to the Supply Chain

Beyond your sale to the supply chain, your product will most likely go through other links in the supply chain that add mark-ups that lead to the shelf price. Although you may not use each of the links below, the industry standards for the mark-up ranges of the links in the supply chain are as follows:

> Broker: 5-15%
> Distributor: 25-30%
> Wholesaler: 10-20%
> Retailer: 30-50%

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This exclusive eBook is packed with real-world, data-driven concepts that can help maximize your store visits and double your sales.
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