Hey everyone, we’re a young roastery and have started growing our wholesale business. We feel good about our wholesale pricing in general, but when it comes to selling retail bags to other shops and markets for resale, we are a little uncertain where to land. What’s a fair profit margin for 12oz retail bags when selling them at wholesale pricing?
What I’ve come up with for retail is this:
I take my landed cost of the green and triple it, then add $4 per pound for roasting.
This accounts for shrinkage, my capital invstment in the whole bag of green, mu skill and judgement in deciding to bring in THAT one instead of somehting else, by opportuunity cost for the funds tied up, space here, time to break bulk and handle. The markup figure for roasting covers value, opportunity cost of the capital investment in the roasting equipment, operator skill in developoing and repeating the roast profil,e packaging’handling costs and time… and distribution costs at all levels along the chain.
For wholesale, I typically multiply by 2 to 2.5, depending on the volume and packaging (some want a two or five pound bag, others are fine in the 4 gallon food grade bucket, which I get back) then add $3 for roasting.
Thus, a four dollar coffee at retail ends up going out for sixteen in a twelve ounce bag, the same coffee at wholesale in the bucket is eleven the pound, and in weighed bags at about thirteen the pound.
Let experience dictate changes. If a buyer is able to commit to a certain quantity on a specific day of the week every week, I’d be able to slide things a bit lower, but if it is variable and on demand short notice, the “hassle factor”" dictates being a bit more pushy on price. The best I’ve had are those that let ME track their usage and just make certain they never run out. Then I can schedule my production and dleivery to keep them happy, easing the “stress level” on my end.
Best tactic is to put on your thinking cap and figure something that is close, then try it for three months and “readjust”. I also find the most fruitful relationships are those were the wholesale buyar and I form a sort of mutual pertnership, each looking after the needs of the other. That way when one of us wins, we both do.
Hope this makes some sense, and helps at least a little.