Wholesale discounting strategy

javayankee

New member
Aug 25, 2005
27
0
Seacoast of New Hampshire
I'm a small roaster and am in talks with my first potential commercial account. Up to this point I've been selling directly to the public and via local independent grocers.

Here's the question: is there an industry standard for wholesale price breaks/incentives? E.g., after buying X amount of coffee X, we'll give you X amount discount. Is there a common "tier" system that is used? I have my wholesale price set for my coffees, but was caught off guard with the "price break" and discounting question. It has also been understood that I won't be able to offer equipment, but they are still interested.

That's my other question: how do roasters offer all this equipment to their accounts? Are they reselling/leasing it through other companies? Like who? How would I be able offer this?

Sorry for the noob questions! I know my coffee…but am a little slow with the business-part uptake!
Anyone have any insights?
 

wmark

New member
Nov 12, 2008
475
0
Canada
I have been told by a machine supplier to resist getting sucked into supplying equipment as you now have finance costs and maintenance costs.....never mind who gets to service the equipment.

That said, we have supplied some equipment but very little.

Discounts ? We have walked away from any customers wanting discounts.
If you are a small roaster, what happens when your volume increases ? You will have added costs of equipment upgrades. We have decided to build a business built on margins and not volume. Hope some of this was helpful
 

wmark

New member
Nov 12, 2008
475
0
Canada
To drive the point home, I had a nice discussion with a major food importer/broker today who is a friend of a friend.

The basic question was, "Are you in the commodity business or specialty coffe (roasting) business ?"
 

JCBSMLK

New member
Feb 4, 2011
3
0
If you are basing your business on margins, I wouldn't even offer the discount. There are a lot of industries who have been revoking these types of courtesy refunds. This is American, and we have gotten used to discounts. However, we need to remember that everything costs money. For example, consider the banking industry who has been offering free checking. Due to the recent regulation changes, free checking will be going away forever soon and it's because companies are in business to make money...not offer free or discounted services!
 

Ellie

New member
Dec 27, 2004
86
0
GA
I'll have to disagree with the previous posts. My philosophy is that with greater volume comes greater discounts. From the roaster's perspective, you can afford to earn a little lower profit margin per pound if you are making up for it in volume. And if you ship, the shipping cost per pound decreases with increasing weight. So you can price your coffee to include shipping, then offer a volume discount to your customers.

From the coffee shop perspective, I think that most roasters selling to coffee shops offer a volume discount. Depending on where you're located, if you want to be competitive, you might want to consider it.

Good luck with your growing business!
Ellen
 
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