Margins And Costs Where Is Your Profit?
When we are talking about margins and costs relating to the food manufacturing industry, you need to know some basic information. Perhaps the most important information is what portion of the money earned from your product you’ll actually be making!
Unfortunately, you do not get to take home your retail price. Before you see a profit, the grocer’s margin is deducted, the distributor’s margin is deducted and your costs are deducted. The amount that is remaining is your profit.
Grocer’s margins are a percentage of the retail price, which can be up to 40%.
Distributor’s margins are a percentage of the grocer’s cost, sometimes up to 35%
Here’s a Simple Example:
Retail Price $10.00
Grocer Margin $4.00 40% of Retail Price
Grocer Cost $6.00
Distributor Margin $2.10 35% of Grocer Cost
Cost to Distributor $3.90 Proceeds to Entrepreneur
Proceeds to Entrepreneur includes cost of manufacture, ingredients, bottles, caps, labels, transportation, marketing, etc. and PROFIT hopefully.
Your profit is the difference between ALL of your costs and selling price.
Your costs can include ingredients, packaging, and labor. These are the cost of goods sold. In addition, your costs can also include marketing, insurance, social media promotion, setting up/maintaining your website, product transportation, utilities, and more. Before launching your product, consider all of the factors that will affect your profit and your margins.
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