We recently started roasting coffee for our two shops, but have been getting a lot of interest in potential wholesale accounts. I was wondering what you roasters out there use to determine how much you will charge for roasted coffee both wholesale and retail. Any help or direction is appreciated.
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Your own Cost to Produce/Overhead will factor into this greatly, along with what your local market will bear. Try to figure out what it costs you (aside from green coffee price) to produce 1 lb or 1 kg of roasted coffee (labor, utilities, rent, etc). Add this cost to your green coffee cost (landed, in your warehouse), then multiply by 2 (100% markup). This should put you in the ballpark of the minimum wholesale price. The wholesale prices I’ve seen tend to be 30-50% off retail price for roasted and packaged coffee (usually a tiered system based on volume purchased weekly).
Example: $3.50/lb green coffee cost. $2.50/lb cost to produce/overhead = $6 x2 (markup to wholesale) = $12/lb.
x140% = $16.80/lb. retail.
Of course, different locales will produce different costs, and your markup may need to go higher than 100% to remain profitable. Also note that your cost to produce will go down as your average volume produced increases.
Finally, there are more than a couple of ways to do this and is by no means definitive. I’m stoked to see what others contribute here.
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I say this without any sarcasm:
Price as high as you can possibly get away with (without losing too many sales)
Remember: if you’re making $1 profit on every kilo of coffee, changing prices so you make $2 profit allows you to lose HALF of your customers without any ill effect. Or, from a sales perspective: a salesman that brings in half as many accounts with twice the profit margin is just as valuable, if not more.
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Matt,
I disagree.
I would agree if wholesale clients are only useful for revenue. But there’s so much more to them. Wholelsale clients are excellent network for branding, collaborating, recruiting, career pathing, feedbacking, stress testing, employment creating, bringing purchasing volumes to full lots, creating cash flow for green purchasing, testing out new markets, and building a larger audience.
Price as low as you can afford to(within limits of positive cash flow) and watch your business and influence grow.
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Calculate your landed price, then multiply that by 1.25 to allow for weight loss of the roasted product, that’s your actual cost of goods (COGS).
Do not try to figure out what it costs you to produce 1 lb or 1 kg of roasted coffee because different volumes equate to different figures for your labour and overheads so this is totally pointless (sorry Will).
Multiply your COGS by 3, then adjust according to supply and demand.
If you have high demand for your product, adopt Matt’s philosophy.
If you do not have high demand, use James’ philosophy until you have high demand, then adopt Matt’s philosophy.
*this advice is coming directly from a ops manager for a roasting company, we hope you find it useful
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Of course they are! But without healthy revenue you can’t support them. Price as highly as your customers will pay, and that’s the sweet spot.
Hey man! You are probably well into this by now, but I just got into this online community. I’ve been a barista all my life but we just started our roasting company so I was going through the exact same situation. As of right now, I am calculating my true green cost per lb, and then marking it up to make a 66% margin on my coffee. This makes my prices vary much depending on what I pay, so it directly reflects what I pay. It’s working really well right now! We will see what we decide to do moving forward, but I’m pleased!
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Hey Will… Is that 66% the wholesale or retail markup? I’m working on adjusting our margins, so I’m looking for that sweet spot for both! Thanks!