Understanding Exchange Rate - Paying a days wage for 1kg.

[smithster1]

I was in Morocco recently, looking to find a supplier for a new food business.
The trip was not as successful as I had planned, but then I realised I was scoring it on the wrong metric.
I did indeed understand more about Morocco, it's people and a little but how they go about business.
I did not succeed in finding a 'farmer' and probably a good thing and would definiteky not work with some random dude off a tourist market. I even went deep in the atlas mountians to one of the most spectacular markets, but it was pretty raw, bare feet on produce, guys sitting on mountains of chillies, was wild.
I did meet an American woman though, who has lived in Morocco for quite some time, speaks Arabic and was married to a Moroccan man.

She was the only person who got back to me with prices and who shown some promise. She had good products, samples of which I have at home and they are great.

But here is the thing, for a kilo of this product, a moroccan spice, she is asking what equates to £12.
Whilst I was there I met a Moroccan lad, maybe aged 20, works 12 hours a dayin hospitality for 120 mad, which is about £10 a day (crazy).
But here's my thinking - she is essentially asking for a days wage for 1kg of spice, is it right to think that is like paying £100 for 100g of spice ar wholesale in the UK? (a good days wage being £100). Please correct me if I am wrong.
Does this make sense? I assumed that in Morocco I would be able to get this spice for far less... I have emailed some european companies with the same query and got mixed results, but overall it seems that the woman in Morocco is really upping it.
I wanted to work with a legit export company, but it seemed there was none! Even on an extensive Google search I can find very few that seem right for me. And the companies that I did find and makde appointments with it seemed they were definiteoy not up for the level needed.

Sorry for the mass of words but my question is - am I looking at this wrong or would that price be justified, a days wage for 1kg of spices.

 

[Newchodge]

£12 for a kilo. How much will you sell it for? It sounds as if you are affronted by the idea of someone in Morocco trying to make a decent living.

 

[smithster1]

£12 for a kilo. How much will you sell it for? It sounds as if you are affronted by the idea of someone in Morocco trying to make a decent living.

125g of produce, for £5.50 approx retail. It's organic, made with traditional practice and has origin. (no nasty chemicals).
At retail, this turns over £44 for the kilo.. if I sell in 125g. Add in packaging, marketing, distribution, that may come down to £38...... Minus the £15 (I forgot to add shipping and import costs to me) that's just £23 gross profit. minus corp tax and other expenses well it seems it is not worth it.
I am willing to be humbled and corrected here, but am I missing something? I would either have to sell 1000 units daily / weekly or it would be impossioble to make a living.

 

[Newchodge]

125g of produce, for £5.50 approx retail. It's organic, made with traditional practice and has origin. (no nasty chemicals).
At retail, this turns over £44 for the kilo.. if I sell in 125g. Add in packaging, marketing, distribution, that may come down to £38...... Minus the £15 (I forgot to add shipping and import costs to me) that's just £23 gross profit. minus corp tax and other expenses well it seems it is not worth it.
I am willing to be humbled and corrected here, but am I missing something? I would either have to sell 1000 units daily / weekly or it would be impossioble to make a living.

You're upset about £23 gross profit and complaining about paying £12 for the product which has been grown, nutured, harvested, processed and packed?

If you vannot make a profit don't do it

 

[japancool]

Depends on the spice. £12 is cheap compared to 1kg of saffron.

 

[smithster1]

You're upset about £23 gross profit and complaining about paying £12 for the product which has been grown, nutured, harvested, processed and packed?

If you vannot make a profit don't do it

Would you say this is ideal?
The whole point of my post was that essentially i am paing the equivalent of a local days wage for 1kg.. Which is like someone coming to the UK and paying £100 for 1kg of produce, I want to know if my thinking is wrong.
I appreciate and understand that this produce has been nurtured, but but still, is that worth a days wage - or is this woman taking a USA wage in a foreign country with local produce, I don't 100% understand the origins, she may be using arbitrage and just buying it from a local at £2..?

 

[smithster1]

Depends on the spice. £12 is cheap compared to 1kg of saffron.

It's not Saffron, it's spices like Turmeric and Paprika.

 

[japancool]

It's not Saffron, it's spices like Turmeric and Paprika.

And how many man-hours does it take to pick a kilo of it?

 

[JEREMY HAWKE]

And how many man-hours does it take to pick a kilo of it?

Ages feckin ages I picked some blackberries at the top of the garden yesterday . I would not know where to begin to price up that job

 

[fisicx]

@smithster1 - you are working on too small a scale. The big importers are buying spices by the tonne which makes it far more viable as a business.

Watch the TV show ‘inside the factory’ to see the huge quantities of raw materials being consumed.

 

[Mark T Jones]

Good deals never come from worrying about what someone else is making - particularly if you don't understand their cost base.

Good deals come from understanding the variables and finding the right market price for your business.

Can you get goods of similar quality for less?

Are the suppliers equally reliable?

Will quality be consistent?

Can you make the margins work?

Those are the business questions you need to focus on

 

[WaveJumper]

As many are finding who post on here the days of going abroad and I count the likes of China in this and getting something on the "cheap" are pretty much gone especially if you want quality and as mentioned above you are competing with business's purchasing by the tonne

Personally i think you need to re-visit your whole business plan

 

[NickGrogan]

The price of spices, all food commodities is dictated by the global markets, it has nothing to do with the cost for a days labour in whatever country and to think that it does is a bit strange.

What value are you adding? If all you're doing is repackaging, how much is that worth?

 

[WaveJumper]

Ages feckin ages I picked some blackberries at the top of the garden yesterday . I would not know where to begin to price up that job

I dread to think of the delivery costs from garden to kitchen

 

[smithster1]

As many are finding who post on here the days of going abroad and I count the likes of China in this and getting something on the "cheap" are pretty much gone especially if you want quality and as mentioned above you are competing with business's purchasing by the tonne

Personally i think you need to re-visit your whole business plan

I am not just buying a kilo..
I just mean that is the kilo price.
I was looking at orders of 25kg and 50kg, but yes that's far from a tonne I know.
I suppose it's worth asking are they even capable of providing a tonne should I need it. That's a concern.

 

[smithster1]

The price of spices, all food commodities is dictated by the global markets, it has nothing to do with the cost for a days labour in whatever country and to think that it does is a bit strange.

What value are you adding? If all you're doing is repackaging, how much is that worth?

I wouldn much prefer to have more control on the productio but this is not possible, I have to get it from somewhere, and I think I am pretty close to the source. I would much prefer to be working with a bigger company but then there are issues there, minimums by the tonne, more layers of management and added costs, lack of origin and transparency.

 

[WaveJumper]

Always a good read:

https://www.food.gov.uk/print/pdf/node/587

 

[NickGrogan]

I wouldn much prefer to have more control on the productio but this is not possible, I have to get it from somewhere, and I think I am pretty close to the source. I would much prefer to be working with a bigger company but then there are issues there, minimums by the tonne, more layers of management and added costs, lack of origin and transparency.

I can buy 25kg of Tumeric in the UK for £75 - £3 per kilo - that's on my first google search, no shopping around.

You're talking about buying for £12 per kilo, + delivery, duties and taxes. Thats £300 for 25kg, probably over £500 to get it to your door.

I'd guess that you are nowhere near the source and just found someone who'll buy at the local market.

If not Tumeric (which you mentioned above), happy to look for figures for any other spice.

 

[JEREMY HAWKE]

I dread to think of the delivery costs from garden to kitchen

4 pints up the market house

 

[peterrepair]

she is essentially asking for a days wage for 1kg of spice

That's entirely wrong way to look at it. You should be interested how much profit you can make.
I would be more worried if I had to pay too little for materials, because that means maybe workers are being exploited or that supplier will be spending time on ways to cut corners to make that little I pay stretch just a bit further. It also means supply could become inconsistent (no motivation, other priorities) etc.
The last thing you want is a bad batch of the product getting to your customers.

 

[smithster1]

That's entirely wrong way to look at it. You should be interested how much profit you can make.
I would be more worried if I had to pay too little for materials, because that means maybe workers are being exploited or that supplier will be spending time on ways to cut corners to make that little I pay stretch just a bit further. It also means supply could become inconsistent (no motivation, other priorities) etc.
The last thing you want is a bad batch of the product getting to your customers.

Yes i want to understand how others see it so I can adopt a better mindset, but still I feel I have to question where the costs comes form, for what I believe is high.

 

[NickGrogan]

Yes i want to understand how others see it so I can adopt a better mindset, but still I feel I have to question where the costs comes form, for what I believe is high.

What spice is it?

 

[smithster1]

What spice is it?

Turmeric (but will be others)

 

[fisicx]

It’s not a days wage. It’s the cost of growing, harvesting, drying, processing, packing, transporting. The farmer will be just one person in the chain.

It’s taken months to get the spices from seed to the package.

Your whole mindset is wrong. The product cost breakdown is irrelevant. You pay whatever the distributor charges. If you feel it’s too much find another distributor.

 

[NickGrogan]

Turmeric (but will be others)

So I can buy turmeric in the UK, all taxes and delivered for £3 per kg, this ties in with the wholesale rates you can find quoted online.

You've come back from Morroco with a price for £12 in Morroco, this is easily £20 per kilo in the UK.

You could go to Tescos and buy better for less.

The best turmeric in the world is from a small province in India, which costs less than £15 per kg, even in small quantities.

I wouldn't worry to much about how many hours labour you think is a fair exchange rate, and worry more about your sourcing strategies.

Did you check the UK and international wholesale prices before you went?

 

[BusterBloodvessel]

Sorry, but your whole thinking is wrong. Since you have zero knowledge of the material costs and man-hours required to grow and pack the product, in what way shape or form is the daily wage rate in Morocco relevant? You're just picking an arbitrary metric that bears no relevance.

I've just been looking at buying a new small electronic device which is £400. I don't turn round and say "bloody hell, that's a full weeks wages at NMW, that's expensive!". How are the two things even remotely relevant?

Bizarre.

 

[smithster1]

Sorry, but your whole thinking is wrong. Since you have zero knowledge of the material costs and man-hours required to grow and pack the product, in what way shape or form is the daily wage rate in Morocco relevant? You're just picking an arbitrary metric that bears no relevance.

I've just been looking at buying a new small electronic device which is £400. I don't turn round and say "bloody hell, that's a full weeks wages at NMW, that's expensive!". How are the two things even remotely relevant?

Bizarre.

Thanks, why so aggressive? Have I touched a nerve?
I've come here asking for advice, mindset, as I know I was probably looking at it wrong.
I am humble and willing to be humbled. No need to come at me all guns blazing, it's not the place for it.
So what market are you buying this product from?
I am looking at competitors, who are very good, they are selling for the top price in this area, I need and want to be placed where they are and feel the product I have is matched with theirs, if I work out the landed costs, and my mark up, if i am 90% more expensive than the leading brand then I have a problem.

 

[BusterBloodvessel]

Thanks, why so aggressive? Have I touched a nerve?

Not particularly aggressive I wouldn't say, just to the point.

I am looking at competitors, who are very good, they are selling for the top price in this area, I need and want to be placed where they are and feel the product I have is matched with theirs, if I work out the landed costs, and my mark up, if i am 90% more expensive than the leading brand then I have a problem.

Correct you do, and so you need to challenge the costs with the supplier, or find another supplier. My point merely was that the problem you have is completely irrelevant to the labour rate in Morocco.

 

[smithster1]

Not particularly aggressive I wouldn't say, just to the point.



Correct you do, and so you need to challenge the costs with the supplier, or find another supplier. My point merely was that the problem you have is completely irrelevant to the labour rate in Morocco.

I agree.

 

[smithster1]

I contacted a supplier in Sri-Lanka, asking for prices per kilo, 25kg and 100kg, they only come back with a kilo price so probably meaning even a 100kg price is the same.
They want $12 USD for 1 kilo of organic turmeric. If I multiply that by 25 kilos thats $300 FOB, minus shipping and charges. Or £225. Add on freight and imports maybe looking at £400+.
I can find a UK supplier online selling 25kg of organic turmeric for £150 with free delivery.
How is that possible? The UK supplier buying by 10 tonnes? Or have I just not found the right supplier.

 

[Newchodge]

I contacted a supplier in Sri-Lanka, asking for prices per kilo, 25kg and 100kg, they only come back with a kilo price so probably meaning even a 100kg price is the same.
They want $12 USD for 1 kilo of organic turmeric. If I multiply that by 25 kilos thats $300 FOB, minus shipping and charges. Or £225. Add on freight and imports maybe looking at £400+.
I can find a UK supplier online selling 25kg of organic turmeric for £150 with free delivery.
How is that possible? The UK supplier buying by 10 tonnes? Or have I just not found the right supplier.

Why not buy from the UK supplier?

 

[NickGrogan]

I contacted a supplier in Sri-Lanka, asking for prices per kilo, 25kg and 100kg, they only come back with a kilo price so probably meaning even a 100kg price is the same.
They want $12 USD for 1 kilo of organic turmeric. If I multiply that by 25 kilos thats $300 FOB, minus shipping and charges. Or £225. Add on freight and imports maybe looking at £400+.
I can find a UK supplier online selling 25kg of organic turmeric for £150 with free delivery.
How is that possible? The UK supplier buying by 10 tonnes? Or have I just not found the right supplier.

Simple, you have no idea what you are asking for, so like the Moroccans, they're trying to rip you off.

Where does 80% of the world's turmeric come from? If you want to import, why not import from there?

But there is absolutely no reason to import, and it is certainly not a good idea for you to import; just buy from your local wholesaler; at least, you know it will probably be organic. Your Sri Lankan supplier will stick any old turmeric in an "organic" bag.

Do you have any customers who want to buy Turmeric?

Why would I buy turmeric from you and not someone else?

 

[peterrepair]

If you want to sell it as organic, you probably want it to be certified as well and do independent lab tests to ensure it doesn't have any nasty chemicals in it.

 

[BusterBloodvessel]

Can you give us a clue what you're trying to achieve here? Why are you looking to import turmeric? Or not specifically just turmeric, but what else and why? Are you looking to retail it? Based on what USP? Or cook with it, or make health supplements, or a.n.other.

We may be able to offer better advise if there was a bit of context around what you're trying to do as I am really not sure.