Setting Wholesale Prices

[Breifne]

This one is for all my fellow professional roasters:

How you you set your prices for your wholesale accounts? How do you gauge what your local competition is doing on wholesale prices, and what sort of pricing structure do you use for your wholesale customers?

~ Ryan

 

[Jaycamp]

Solid question. I would like to see some formulas on that...

 

[expat]

Don't think about what the other people are doing because they may be selling crap coffee or coffee that costs a lot more than you. So consider your own situation. Figure out how much money you want/need to make. You can't work for free.

After that it is simple math -- your price + distributor margin = wholesale price even if you're doing the distribution right now, because chances are you won't be doing that in the future.

Now look at your competitor prices. If you've got room to go up, do so. Don't go down, remember you set the price you need to make. Don't undercut yourself. If the wholesaler wants a better price move on.

Also the wholesaler will press you for $1 off specials, rebates, etc. It all comes out of your pocket. Remember that you're an artisan roaster, not a factory roaster, so don't go down that road. When they press you on it just say that really, you need to raise your prices based on your coffee quality, and are doing the best you can to hold prices the way they are.

One caveat here: think ahead. For instance what about packaging? When we serviced stores ourselves we delivered per bag. Then we got accounts that wanted us to ship them boxes. So one example is that we have a box made that holds 8 coffee bags. Then that box goes into a larger box that holds 12 of the 8-bag boxes (96 bags of coffee). This is sized this way because the courier service here has a max weight of 30kg (another thing to think about). So all those boxes cost a fair amount. Divide that by 96 bags of coffee and add that to your cost too. Not saying that is the packaging configuration you'll have but if you get to any size you'll be shipping coffee so think ahead.

When you get to this point think about bar codes, or really think about it now. Your package needs a bar code. Your box needs a bar code. Your outer box needs a bar code. It gets crazy.

When you start growing will you be able to keep up with all the paperwork? Will you need to hire a bookkeeper? Accountant? That's another expense to think about.

Hope this helps a bit.

 

[Breifne]

Helpful thoughts, Expat. Cheers!

 

[HillofBeans]

I get that Expat But it is nice to know your local market. And You do want to decide your retail price as part of marketing. (Will it be comparable or higher or lower than the others.) If you have a client you can speak to ask them. I did my clients and i have this relationship of "we're in it together" make sure your comparing the same thing too ie organic, fair trade You should be reading the competitions labels for lots of reasons as well.

 

[JohnD18]

There may be ballpark price ranges, but it all comes down to three variables: Your monthly costs, what your market is willing to pay, and what type of coffee you're offering. You have to find your base costs on the coffee, including weight shrink, packing,etc and then figure out what the gross margin is you need to make so that you can set reasonable profit goals. In the beginning, you may need to provide incentives to early adopters to get the cash flow rolling and your coffee/brand out there on the market. Set a profit margin that is your lowest, and try to stay well above it, but negotiate with it in mind. It's all dependent on your market, and what they want/are willing to pay for.