Pricing Handmade Chocolates

[Jim D.]

Host's note: this topic was split from Pâte de Fruits (Fruit Paste/Fruit Jellies) (Part 2)

 

On 2/26/2017 at 2:51 AM, Bentley said:

 

If you really want to bust your R&D budget, try Stick With Me Sweets.  Around $3.60 each.  But they do look amazing. 

 

 

I took a look. Rather manipulative site: you have no idea what your selection will cost until you have finished choosing chocolates. And the descriptions are a masterpiece of marketing:  dulce de leche is "succulent homemade milk jam"--a rather grand description of cooked sweetened condensed milk. Really! But you are so right, they look amazing.

[keychris]

4 hours ago, Jim D. said:

If you think the price is high, someone just sent me an ad for chocolates from Madison, Wisconsin, that are $2.60 each.

 

I charge $2.50 for mine when I'm selling at markets and whatnot. So, nope I don't think that's expensive

[Jim D.]

8 hours ago, keychris said:

 

I charge $2.50 for mine when I'm selling at markets and whatnot. So, nope I don't think that's expensive

 

If you are speaking of Australian dollars and if the conversion rate I found online is correct, that amounts to $1.92 US. But I'm sure yours are worth it!

[Tri2Cook]

11 minutes ago, Jim D. said:

 

If you are speaking of Australian dollars and if the conversion rate I found online is correct, that amounts to $1.92 US. But I'm sure yours are worth it!

What would you consider an average per-piece price? I'm not at a point where I'm advertising or considering it a home business yet, I still want to get better at a lot of things before I take that step, but I get occasional requests and I've been charging $10 (Canadian) for a 6 piece box. That works out to about $1.67 Canadian - $1.27 US - per piece. I always cringe just a little when telling people the price because I'm afraid they'll think it's too much but I'm not sure I'd consider it worth doing for much less. And I'm certainly not at the level of most of the people here or those doing it as a full time business.

[Jim D.]

6 hours ago, Tri2Cook said:

What would you consider an average per-piece price? I'm not at a point where I'm advertising or considering it a home business yet, I still want to get better at a lot of things before I take that step, but I get occasional requests and I've been charging $10 (Canadian) for a 6 piece box. That works out to about $1.67 Canadian - $1.27 US - per piece. I always cringe just a little when telling people the price because I'm afraid they'll think it's too much but I'm not sure I'd consider it worth doing for much less. And I'm certainly not at the level of most of the people here or those doing it as a full time business.

 

I think the discussion of pricing is a very interesting topic.  I live in a small city in an area where people are quite frugal (a nice word for what I am actually thinking); to add to the perspective, there is a Hershey factory in the area. A pastry chef in town charges (the last I knew) around $1.60 per piece but less for larger size boxes. As I am retired and too old to start an actual business enterprise, I began making chocolates as a hobby and I charge considerably less. Some people who have previously lived in metropolitan areas comment on my low prices, but most people here would not pay a lot more. I am an actual licensed business technically speaking (paying all the taxes and fees--including a "litter tax," of all things), but the U.S. Internal Revenue Service considers what I do a hobby. I have tried several times to calculate the cost per chocolate, but it is quite complicated (if I buy several pounds of hazelnuts and use one to top each piece, how much is each nut costing?--far too much work to figure that out, especially since it is not relevant to my situation, though I am sure others on the forum have gone through this). I don't know what sort of area economically you live in, but $1.27 per piece sounds quite reasonable, probably low if you have invested in equipment, which can be quite expensive. It seems to me that potential customers fall into two categories: either they know what good chocolate tastes like and therefore believe $1.27 is a bargain or they think Hershey's chocolate is just fine and so assume you must be crazy to charge so much. The usual advice given to businesses is not to set prices too low in the beginning because customers resist a noticeable increase later on.

Edited February 26, 2017 by Jim D.
Per request of moderator, I removed a sentence so as to separate this topic from an unrelated one. (log)

[pastrygirl]

Oh, pricing!  Remember when we all though tempering was the tricky part? 

 

Definitely depends on location/demographic.  Here in Seattle, around $2 per piece is about average, so that is what I usually charge.  But I did a Valentine's pop-up with one vendor who charged $5-7 per piece for her "apothecary" truffles infused with all sorts of organic herbs.  I was a little stunned, but people did buy them and in talking with her, that is what she needs to charge to make it worth doing.  Another maker does hand-dipped vegan confections and the price on their website is $7 for a box of two. 

 

The mistake I make is that I look at the big producers who I want to compete with.  Around here, Fran's is well known for high quality chocolate  https://www.franschocolates.com/   They are good and elegantly packed, but they also have a factory with an enrobing line and four retail stores, so they are operating on a far different scale.  Still, when a chef of a hotel restaurant contacted me about Valentine's chocolates, he was hoping I could beat Fran on pricing, and I did (there is actually a Fran's shop in their hotel).  So for that order, two piece boxes were $4, not a great margin because the little boxes are 50 cents each but I consider them sort of wholesale and it was 100 boxes so volume discount.  I sold more of the same at pop-ups for $5.  Should they actually be $6 or $7 if I want to make money?  Yes!  And when I sell on consignment I do bump the prices up a little so my half is not too small.

 

But live and in person I still get stuck on wanting things to be an affordable luxury and not gouging the customer.  I raised prices on my standard items (bars and cocoa-dusted truffles) last fall and I don't think it hurt sales at all.  I think I need to get over worrying about seniors on social security and go after all the tech and weed money here!

 

 

[Jim D.]

I neglected to mention that I also sell chocolates on consignment at a local florist shop. The store did quite well at Valentine's, linking chocolates and flowers (there's no customer like a panicked husband/boyfriend on the afternoon of February 14 who's forgotten the roses and the chocolate!). I get 60% of the sale price (the owner offered 70%, but that seemed a little greedy). I like the consignment arrangement because it removes the merchant's understandable tendency to hold the product until every last box is sold, regardless of what the chocolates may be like. This way I take the hit if they don't sell, but better that, in my opinion, than a disappointing product. I once bought a box of chocolates from the best-known chocolatier in this part of the state, and several pieces definitely tasted stale. There is no bigger reputation-killer than a product sold well beyond its "best by" date.

[gfron1]

I sell mine at $2.50 per pc and $20 for a box of 10, which is what I push. Pricing is a matter of two things in my opinion: 1. perceived value to the customer and 2. what the market will bear. Obvious statement, but it very much applies to chocolates. If you're selling enrobed ganaches they have lower perceived value than airbrushed artistic bonbons. In some ways it doesn't matter how good (taste and texture) the chocolate is because the general public is often not savvy enough to discern what we care about. And size is irrelevant. I've seen people who make these massive (3 oz maybe) truffles and try to sell them for $1.50 and they don't move. Put an exquisite airbrushed bonbon next to it and sell it for $3 a pc. Why? Because most people buy them to give as gifts or treat themselves to something special. In regards to what the market will bear, I sold mine at the prices I mentioned in my shop. But, when I went to a regional chocolate show, where mine stood out as the best of show, I was able to charge $3.25 per pc and not hear a single complaint. 

[ChocoMom]

Pricing had been a difficult subject for me to tackle.  I had a friend who worked in manufacturing for years. The rule of thumb was "cost times 3". So, early on, I went through the painstaking process of figuring out what the cost was to make hand dipped truffles, multiplied by 3, added in the packaging. But then, when you start figuring in molds, use of airbrushes, making caramel, etc....its more difficult.  Things have evolved a bit for me in 20+ years. 

 

In 2013, I started selling to a shop in town, and I wasn't sure what to charge because up until then, I had done all the packaging as well- and that was rolled into the price.    So, the owner told me her thoughts on what she'd charge per piece, and I priced based on that. One of my sea salt caramels would sell at her shop for $2.25. I sold them to her at $1.10 each. (Airbrushed pieces were more.)  Why? I had no store front to pay rent on and maintain, and I supplied no packaging. I would deliver to the shop on my way into town, or the owner would come here to pick them up.   In return for my wholesale pricing, she would refer customers to me who were looking for custom work, give them my card, and I'd end up working with a lot of those folks.  (My shop was then, and is now again, in my house.)   

 

Currently, I sell the 12 piece assortment at $25, but if I have someone who wants to purchase 5-10 boxes....then, I'll do a volume discount.  I try to work with each individual, and give them the best customer service possible, so they return and/or spread the word. Given that I know how much people were willing to pay at the shop downtown for my Tipsy Tortoise, or whatever, I've adjusted pricing here the house/shop. 

[Tri2Cook]

This is all great information. I plan to start putting together a list of the points being made here to store in my "chocolate" folder on my laptop. There are a lot of things to take into consideration that I hadn't thought of. I'm not at the point where most of it is an issue right now but I hope to get there eventually. The chocolates I mentioned that I've sold were all plain shells or, at most, maybe a little splatter or swipe of a contrasting color (still just chocolate, not colored cocoa butter) so no decoration time or special materials were involved. The packaging I'm using now isn't particularly cheap at the quantity I purchased but I could cut the per package price almost in half by buying in bigger quantities. I just didn't want to commit to too much until I see how this goes and I'm not particularly in love with it. But it's good enough for where I'm at right now. One advantage I have where I live is I have zero competition at this time for handmade chocolates (though it comes with the disadvantage that it's a fairly remote area with a small population). I'm starting to get my flavors out there and I'm working on getting to a point where I'm happy with my results with decorating techniques so hopefully this information will come in handy at some point.

[gfron1]

I would also encourage anyone thinking about such things as pricing to do some of the things we've already mentioned, but then approach it from a different angle. Ask yourself - how much money do you want to make from chocolates this year? Maybe too big of a question...so, how much this month? This week? Today? One of those time spans will resonate and have meaning for you. So let's say this is an on-the-side gig, not a full living wage. And let's say you hope to make an additional $1,000 per month on chocolates. Is that gross or net? Let's assume gross. If you think the market will bear $2 per piece, and your food costs support that (which they should) then that is 500 pcs per month. That's roughly 17 pcs per day. That's a couple of boxes. But you won't really sell every day I'm guessing so in my mind I then say 500 pcs per month x 12 months = 6,000 per year....divide that by 52 weeks for easier math = 115 per week. Can you sell 10 boxes of 10 plus a few singles each week? Don't forget the paydays of Christmas, Valentines, Easter, Mother's Day...and if you talk to the right folks, wedding season, corporate gifts, B&B amenities....

 

Alos, dig deep into your true food costs (electric, saran wrap, time, a portion of your kitchen use) and get a really solid cost. That math isn't hard, but it's necessary to move from hobby to business. I can spend 3 hours making one tray of chocolates or I an spend the same time making 500 chocolates, buying wholesale ingredients. 

 

My point is, come at this from a number of angles.

 

Maybe you can tell that I love crunching hypothetic numbers. I've helped a few people in this forum do just that and I always offer that for free to anyone.

[Jim D.]

1 hour ago, gfron1 said:

Also, dig deep into your true food costs (electric, saran wrap, time, a portion of your kitchen use) and get a really solid cost. That math isn't hard, but it's necessary to move from hobby to business.

 

Previously I mentioned calculating the cost of a hazelnut (meant to be an extreme example, but calculating the true cost of ingredients is difficult). How closely do you think this needs to be done? For those of us who work in our own kitchens, we buy a quart of cream, use most of it in making ganache, but a little here and here for our own morning coffee (buying separate quantities would seem to me ridiculous and ultimately wasteful). Would you make a guess as to how much went toward the business or keep track of it rigorously? Let's say I have tracked it rather closely, so I divide that by the amount of ganache made from it, then the number of pieces made, but there is leftover ganache to think about.

 

At least in the U.S. turning a hobby into a business requires proving that you have made a profit for several years. Only then can one take business deductions, which are a big part of making a business succeed financially (hobby deductions are allowed, but only up to the amount earned from the hobby, which sounds much better than it actually is). And it is quite possible (assuming enough IRS manpower) that one will be audited at some point. So what is your view on record-keeping--wild guesstimates or OCD detail? 

[Bentley]

Kate Weiser once talked about how she costed out her chocolates.  She would figure out how much of every ingredient went into a recipe and then calculate how much that ingredient cost.  She said she would weigh an empty mold then weigh it again once she applied the colored cocoa butter.  Then she would mold the shell and weigh it again to see how much chocolate was used.  She would get the cost of a bon bon down to a pretty precise number.  She did this for every recipe she sold.  She also accounted for waste.  It's a tedious process but one that is essential to pricing your product.  No matter what the business, if you don't know your cost of goods, then pricing is guesswork.  

[pastrygirl]

7 hours ago, Jim D. said:

 

Previously I mentioned calculating the cost of a hazelnut (meant to be an extreme example, but calculating the true cost of ingredients is difficult). How closely do you think this needs to be done? For those of us who work in our own kitchens, we buy a quart of cream, use most of it in making ganache, but a little here and here for our own morning coffee (buying separate quantities would seem to me ridiculous and ultimately wasteful). Would you make a guess as to how much went toward the business or keep track of it rigorously? Let's say I have tracked it rather closely, so I divide that by the amount of ganache made from it, then the number of pieces made, but there is leftover ganache to think about.

 

 

If I wanted to cost out single hazelnuts, I'd weigh out a few different ounces then count the nuts and get an average - if there are 20 nuts in an ounce and they were $8/#, then each nut cost 2 1/2 cents.  If they are big nuts and only 15 per ounce then it's 3 1/3 cents per nut.  When considering a whole recipe, I might do a super precise cost but then round it up by 5-10% to allow for waste.  So maybe I'd go ahead and cost that nut at 4 cents each, because sometimes you get halves in the bag and sometimes I need chef snacks.

 

But I'm not that precise   Labor is the bigger factor, and more unpredictable.  What's your most expensive ingredient?  You could do solid Valrhona and your max food cost for a 14g bonbon is 38 cents (at $12/#)  I guess some liqueurs are expensive, but sugar, cream, and butter are relatively cheap.  The years of practice however ... priceless! 

 

As for getting audited, I've heard the main thing is that your numbers look realistic.  They're looking for people who are claiming huge gains or losses that aren't supported by evidence.  I think they start to wonder if you claim losses too many years in a row.

 

And back to pricing, I had forgotten about a custom order I have this week.  They want 40 monogrammed salty caramels, 20 "A" and 20 "C".  I figured that'll be kind of a pain, so I quoted them $3 each, not packaged.

[gfron1]

9 hours ago, Jim D. said:

So what is your view on record-keeping--wild guesstimates or OCD detail? 

This should come as no surprise - OCD...but just at the beginning. I can tell you that I don't re-cost yearly. I know how much my cream costs and even as it fluctuates throughout the year the fluctuation in my final product is pennies so my markup can absorb that. I do not worry about OCD number crunching after I've done it the first time. I just think it's good to force yourself to think through the whole process so you don't ignore things like your time and utilities, which are harder to calculate than chocolate and cream.

[keychris]

11 hours ago, Bentley said:

Kate Weiser once talked about how she costed out her chocolates.  She would figure out how much of every ingredient went into a recipe and then calculate how much that ingredient cost.  She said she would weigh an empty mold then weigh it again once she applied the colored cocoa butter.  Then she would mold the shell and weigh it again to see how much chocolate was used.  She would get the cost of a bon bon down to a pretty precise number.  She did this for every recipe she sold.  She also accounted for waste.  It's a tedious process but one that is essential to pricing your product.  No matter what the business, if you don't know your cost of goods, then pricing is guesswork.  

 

...  I do that too

 

But it's more because I prefer to keep track of all those minor details and I'm interested to know exactly how much I spend (read: how much I'm losing with this hobby)

[curls]

@Jim D. I have linked to two posts from Wendy DeBord (a former eGullet member) with methods for determining the cost of your ingredients and the cost of your recipes. I have used her strategies for calculating the costs on some of my recipes (planning to figure them all out at some point!). Her site is geared to baking (not chocolates) but much of it is still applicable.

http://www.fearlessbakers.com/how-to-cost-out-your-ingredients/

http://www.fearlessbakers.com/how-to-cost-out-your-recipes/

[Kata]

Hi friends, this website has aided me greatly in figuring out ingredient costs.

 

It has a section where you list all of your ingredients along with their prices, and another where you input your recipes using your ingredient library. It then breaks down the cost per recipe and/or portion. It has truly been indispensable to my baking business.

 

https://www.cookkeepbook.com/

[Kerry Beal]

Thanks Kata - that looks useful - and welcome to eG!

[pastryani]

Thought I'd add onto this thread as it's related (but please move if needed).  

 

Is there a bare minimum number of chocolate pieces you require per flavor for each order?  I recently made 4 different flavors with a minimum of 25 pieces per flavor but found that that should have been higher.   (Or maybe I'm just lazy haha). 

[JohnT]

I am not a chocolatier but do enjoy a good munch of the results every now and then. I am a baker and a couple of years ago I found an app for the iPad called "Fillet", which is a brilliant costing app for basically any ingredient based application. I am sure it would work just as well in chocolate manufacturing as it does for baking or general cooking. I am not sure if it is also available for the other tablet platforms.

[pastrygirl]

@pastryani

 

My official minimum for any one thing is two dozen but I'm not always strict about it. Small orders are inefficient, for sure. I usually either suck it up or make more to freeze or try to sell to a different customer. 

[InfinityCandies]

On 3/1/2017 at 9:13 AM, gfron1 said:

Question about pricing for a local international market.  If I sell multiple boxes of different assortments of chocolates to them, which they markup by 10%, what do I use to base the profit I would like to make in a month?  With varying boxes and prices, should I just look to make 25% profit from any of those, and have minimum net profit figure in mind?  Calculating per piece seems ludicrous. I understand holidays will produce a bigger number.  Need help in this area. Like you previously mentioned, it’s the difference between a business and an [expensive] hobby. 😆

 

 

I would also encourage anyone thinking about such things as pricing to do some of the things we've already mentioned, but then approach it from a different angle. Ask yourself - how much money do you want to make from chocolates this year? Maybe too big of a question...so, how much this month? This week? Today? One of those time spans will resonate and have meaning for you. So let's say this is an on-the-side gig, not a full living wage. And let's say you hope to make an additional $1,000 per month on chocolates. Is that gross or net? Let's assume gross. If you think the market will bear $2 per piece, and your food costs support that (which they should) then that is 500 pcs per month. That's roughly 17 pcs per day. That's a couple of boxes. But you won't really sell every day I'm guessing so in my mind I then say 500 pcs per month x 12 months = 6,000 per year....divide that by 52 weeks for easier math = 115 per week. Can you sell 10 boxes of 10 plus a few singles each week? Don't forget the paydays of Christmas, Valentines, Easter, Mother's Day...and if you talk to the right folks, wedding season, corporate gifts, B&B amenities....

 

Alos, dig deep into your true food costs (electric, saran wrap, time, a portion of your kitchen use) and get a really solid cost. That math isn't hard, but it's necessary to move from hobby to business. I can spend 3 hours making one tray of chocolates or I an spend the same time making 500 chocolates, buying wholesale ingredients. 

 

My point is, come at this from a number of angles.

 

Maybe you can tell that I love crunching hypothetic numbers. I've helped a few people in this forum do just that and I always offer that for free to anyone.

 

 

 

[InfinityCandies]

On 3/1/2017 at 9:13 AM, gfron1 said:

I would also encourage anyone thinking about such things as pricing to do some of the things we've already mentioned, but then approach it from a different angle. Ask yourself - how much money do you want to make from chocolates this year? Maybe too big of a question...so, how much this month? This week? Today? One of those time spans will resonate and have meaning for you. So let's say this is an on-the-side gig, not a full living wage. And let's say you hope to make an additional $1,000 per month on chocolates. Is that gross or net? Let's assume gross. If you think the market will bear $2 per piece, and your food costs support that (which they should) then that is 500 pcs per month. That's roughly 17 pcs per day. That's a couple of boxes. But you won't really sell every day I'm guessing so in my mind I then say 500 pcs per month x 12 months = 6,000 per year....divide that by 52 weeks for easier math = 115 per week. Can you sell 10 boxes of 10 plus a few singles each week? Don't forget the paydays of Christmas, Valentines, Easter, Mother's Day...and if you talk to the right folks, wedding season, corporate gifts, B&B amenities....

 

Alos, dig deep into your true food costs (electric, saran wrap, time, a portion of your kitchen use) and get a really solid cost. That math isn't hard, but it's necessary to move from hobby to business. I can spend 3 hours making one tray of chocolates or I an spend the same time making 500 chocolates, buying wholesale ingredients. 

 

My point is, come at this from a number of angles.

 

Maybe you can tell that I love crunching hypothetic numbers. I've helped a few people in this forum do just that and I always offer that for free to anyone.

Question for someone selling in a local international market. I’ve sold boxes of bonbons to them, and they mark up my price by 10%. What do I use to base the profit I want to make monthly? It seems ludicrous to calculate selling per piece. Should I just base my profit off a standard 25% that I want to make off each box? I know the holidays will produce a bigger number? But if I have a minimum amount that I want to net monthly, what is the most efficient way to go about ensuring that??

[pastrygirl]

3 hours ago, InfinityCandies said:

I’ve sold boxes of bonbons to them, and they mark up my price by 10%.

Wow, that's a really low margin on their part.  Most shops I sell to double my prices.

 

25% net at the end of the year isn't terrible but 30 or 40% sounds better.  Especially if you can work from home without added rent expense.