Food Manufacturing Margins

[Pthelionheart]

Hi there,

New to the forum,

I'm a start-up food manufacturer making posh fudge. We have a meeting with a distributor in a few weeks and I'm just trying to get my dynamic pricing right.

Does anyone have any rough figures for the food sector regarding gross margins? Both producer and distributor margins.

I think it would help me prepare my costings and help with negotiating position if I knew what sort of margin they would be after. Obv this would depend on volume of sales but some rough parameters would be great. Or if anyone has any experience with this sort of negotiation feel free to jump in.

Thanks in advance

Paul

 

[The Byre]

We are back to lengths of string here! But I shall ballpark the figures as far as possible -

• Producers - Gross margins for food producers (manufacturers, farmers and agricultural businesses) typically range from 10% to 30%. Some farmers are selling with no mark-up and may even make a loss and rely on subsidies to keep afloat!
• Distributors/Wholesalers - Gross margins range from 10% to 25%.
• Retailers - Gross margins range from 20% to 50% or more, but non-perishable or specialty items usually have higher margins. It is a classic mixed calculation, i.e. must-haves can be sold at cost with the profit in the impulse purchases.

The discounters aim for a 5% overall gross profit after all costs inc. overheads and usually do not buy from distributors - with notable exceptions for certain classes of goods.

The slower the goods move, the higher the margin has to be. A shop calculates profit-per-shelf-meter. A 10% mark-up that flies off the shelf within a day is far better than 30% for something that sits there all week. Each shelf-meter will carry a fixed cost per day, so every product must cover that cost and generate a profit over and above that fixed rate.

 

[fisicx]

Spoke to a lady near us who does posh chocolate that sells in the local garden centre. They buy at £5 per item and sell at £8. Costs her around £2 to make. She makes more selling online.

 

[Greg PW Shearman]

There is no one answer to this

I appreciate you are trying to get free advice but you really need to sit opposite someone who knows what they are talking about.

What are you offering just the product wrapped up ? or everything marketing POS

Maybe you can get distributors to pay for all the marketing all the point of sale as well as paying a premium for your product.

Its easy to sell lots cheap with low margin

do not be a busy fool be a profitable planned business.