Wholesale baked goods pricing
Posted 13 January 2007 - 08:56 AM
Posted 13 January 2007 - 09:01 AM
Posted 13 January 2007 - 10:30 AM
Your wholesale customers know where they need their products to be priced in order to maximize their sales. So pricing is often a ritual involving a discussion with your customers and scrutinizing your own costs and pricing needs.
Find the best prices for your supplies. This sounds silly, but many people will get everything from one supplier because it seems most convenient, but they are paying a premium for this. Often you can find much lower prices on different items from various suppliers, and it can end up bringing your costs down significantly.
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[size="3"]As for butter versus margarine, I trust cows more than chemists. ~Joan Gussow[/size]
Posted 13 January 2007 - 10:36 AM
Since my intern starts today, let me offer option #2...have your intern do these calculations as a project.
Posted 13 January 2007 - 01:46 PM
When you look at all of your costs of doing business, the two areas that take the biggest percentage of your sales are your Food (& Beverage) Cost and your Labor (& Benefits) Cost. They also happen to be the two areas that you have the most control over. Rents, utilities, etc. are fairly fixed costs. So it is your Food Cost and your Labor Cost together that you should track most closely. Taken together they are called your Prime Cost.
To be successful, you're Prime Cost should be less than 65% of sales. However, the lower you can get that number, the more profit you'll have in the end. So let's say you estimate your Labor Cost to 35% of sales and you want a target Food Cost of 25%. Your Prime Cost would be 60% of sales. Now that you know your target Food Cost, you have a guideline for pricing your product. First, you need to cost out your recipe. This is accomplished by knowing how much each ingredient costs you and multiplying that cost (per ounce/gram) by the quantity. For example, let's just assume the following --
AP Flour costs $2.99 for a 5 pound bag
16 ounces in a pound
5 pounds x 16 ounces = 80 ounces
$2.99 / 80 = $0.037
AP Flour costs $0.037 per ounce
The recipe calls for 40 ounces of flour
40 x $0.037 = $1.48
You would do this for all of the other ingredients in the recipe. Let's say the total cost of the recipe is $3.50 and you're able to get 35 portions out of the recipe. That means your unit cost is $3.50 / 35 or $0.10 each. If you're target Food Cost is 25% then you take $0.10 / 25% which equals $0.40. So, you're selling price would be 40 cents in order for you to have a 25% Food Cost.
Of course, you then should take into account what you can actually charge for the item. Maybe everyone else who is selling this is getting around 75 cents for it. Then you have to decide if you want to also sell it for 75 cents or if you want to undercut the competition and sell it for less. But then you get into the psychology of pricing - what would a potential customer think if they saw you selling this for 40 cents when everyone else has it for 75? They might think that it must be an inferior product because it's so inexpensive. If you do sell this item for 75 cents then it could possibly make up for some other product that you make that has a higher than target food cost but isn't marketable at a higher price. That's what is called "menu mix."
There's a lot that should go in to your pricing strategy. You need to have a grip on your costs but you also need to have an eye to the marketplace and what it can bear. You need to have a balance of higher cost and lower cost items that ensure you hit your target food cost percentage.
I hope this helps guide you in the right direction!
Edited by naes, 13 January 2007 - 01:48 PM.
Posted 13 January 2007 - 08:28 PM
Posted 14 January 2007 - 07:15 AM
I price desserts around the same as some of the bigger guys, but in my explanation I let them know that I use top shelf ingredients but they still see it as 50% food cost.....its not easy as everyone makes it seem and even more difficult to collect your money
Chocolate is food for the soul, The soul has no weight, therefore no calories" so said a customer, a lovely southern woman, after consuming chocolate indulgence
SWEET KARMA DESSERTS
550 East Meadow Ave. East meadow, NY 11554
Posted 15 January 2007 - 08:24 AM
Posted 16 January 2007 - 12:32 AM
10 to 30% off retail pays the bills usually
after that partner with the best bank around because bripastryguy is right, you become a bank...
Posted 19 February 2008 - 08:05 AM
It looks like I'll be doing both retail and some wholesale. Anyone who has some pricing guidance on both would be SO appreciated.
In simple terms, for an item that costs you $1 to make (food cost only), what do you RETAIL that item for? What do you WHOLESALE that item for?
"If you don't want to use butter, add cream."
Posted 19 February 2008 - 09:09 AM
You cannot redeem your overhead if you don't charge for it.
If you lowball it now you will be setting up your business on sand.
General rule of thumb is three times your cost including overhead for retail so I guess twice for wholesale. But you gotta cipher/determine your break even point and all that other annoying math.
All that to say Multiplied Congratulations!!!
But I tell yah, we have a lovely lovely bakery here in Memphis, LaBaguette's and they are charging $1.25 each for nice sized tall poofy cookies. Like a chocolate cookie and a snickerdoodle. They have to be making much more than 33% on the snickerdoodles which probably offsets the cost of the chocolate ones, 'cause they are really good fudgey inside mmmm. So there's that too.
They have huge date squares that must be at least 3x3 and those are probably only $1.50 each. They are loaded with nuts too. Glory, you look at it from both sides, from consumer, "Eeghads that costs too much." And from retailer, "Eeghads how can I afford the best ingredients and be able to attract customers at these prices?" And it just boggles the brain. They of course have a thriving lunch counter to prop up the bakery.
I'm very very happy for you. However if you don't factor the hourly wage of employees and the cost of the plastic wrap you will use and the dish detergent to wash the dishes not to mention the fuel for heating hot water and et cetera save yourself the trauma and kiss it good bye now.
Dude, if you are wholesaling you HAVE to cost for transportation. Where's the I want to strangle you smilie face? Now tell me I'm all wrong and you really have all those annoying percentages already figured out. (Lie to me.)
Sounds like a sugar free fat free flavor free business plan?
Posted 19 February 2008 - 10:26 AM
Thanks for the input. I hope others will chime in.
"If you don't want to use butter, add cream."
Posted 19 February 2008 - 01:14 PM
As for retail pricing, it's what the market will bear. If a cake costs you $5 to make but comparable cakes sell for $30, by all means sell yours for the same price.
Broadly speaking, you can compete based on quality, convenience or price. Personally, that would be my preferred order. Competing solely on price is never fun and can eat into profits quickly.
Go around to your competitors and see what they charge. Understand that even if you're making high-end cakes, you're still competing with the local grocery store or whoever sells baked goods in your vicinity. They're still your competitors, but with a lower case 'c.'
As for wholesaling, determine what is and isn't worth your while. If it's great exposure and it'll be a consistent source of income, great. If they're just going to be a pain in the ass don't do it. And be sure to draw up a contract. How long can your items sit in their display case? Will they agree to a fixed amount each week? How much notice will you get for orders? Most importantly, are you gonna get paid? How often? Cash or check? All those are important to consider.
Posted 20 February 2008 - 08:57 AM
Fixed costs are VERY important. That determines how busy you have to be to make a profit. Whether you pay $500 rent per month or $1000 rent determines how many cakes you have to make in order to break even. Every time I looked at a potential place to rent I considered how many cakes I'd have to make to pay that (considering about 30% food costs.) Someone (I think Sugarseattle) mentioned targeting 30% food costs, 30% labor costs, 30% fixed costs and 10% profit. At first, I thought that was unreasonable, but now, I think it's right on, for me at least.
You also have to factor in miscellaneous items (or else categorize them). Plastic wrap, cake circles, parchment paper, tape, dish detergent, garbage bags, smallwares, etc. Gasoline and insurance. Website design, yellow page listings, so many things. I'm glad I started small and rented this first year because I'm just now starting to get the hang of what I'm doing. Which is good, because it's going hand in hand with growth.
As far as costs, I agree with above. It's a combination of food costs (and packaging costs included in that), percentage markup the customer is aiming for, what they've been paying and are willing to pay and quality of the product. I bake from scratch and use good quality ingredients and have no direct competition. But, my customers' alternative is foodservice (Sysco or Sams) which are both much cheaper than my products. I've found enough customers to support my business, however, it's not for everyone. I lost one great customer when the owner died and a new owner took over. They weren't willing to pay my prices. Figure out what you need to make to be profitable and find out if there are enough customers willing to support you before you begin. I'm rambling now, but you get the idea.