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redmatch
03-26-2008, 03:18 PM
Hi everyone, :D

I'm new to this, I have an idea I'm ready to pursue, and am planning on starting a beverage company to produce and market it.

I understand the costs of product formulation, as well as bottling.

I need to understand the pricing decision before I begin to approach my first potential customers. Can someone tell me a ballpark per-unit cost and pricing range? The drink is 12 ounces, nonalcoholic, and would be sold in retail stores like GNC, nightclubs, bars, and hotel minibars.

Any advice would be greatly appreciated!

Thanks!

greg
03-26-2008, 05:05 PM
There are a lot of variables to consider, however, given your potential distribution points it seems you will have a "specialty" type product.
My suggestion is take your cost and add 40-50% margin for you. Of course when you sell it to distributors you can eat some of your margin by offsetting with volume. Try and make the Dist 30-40% margin when give your regular wholesale price( price he sells it to retailer) from there the retailer will want 40-50% margin and maybe even 60%.

These may seem high but you must consider what your initial cost is and the volume discounts you will give to dist's. In the end it will usually be OK, again, you must have your cost as low as possible and be spot on. Always allow your self room to increase price in nthe future without killing the pricing structure.

redmatch
03-26-2008, 05:22 PM
There are a lot of variables to consider, however, given your potential distribution points it seems you will have a "specialty" type product.
My suggestion is take your cost and add 40-50% margin for you. Of course when you sell it to distributors you can eat some of your margin by offsetting with volume. Try and make the Dist 30-40% margin when give your regular wholesale price( price he sells it to retailer) from there the retailer will want 40-50% margin and maybe even 60%.

These may seem high but you must consider what your initial cost is and the volume discounts you will give to dist's. In the end it will usually be OK, again, you must have your cost as low as possible and be spot on. Always allow your self room to increase price in nthe future without killing the pricing structure.
Thanks Greg! I am sort of at a loss in trying to understand the basics. So let me be sure I understand. You're saying that if my cost was $1 per bottle, then i sell to distributors for $1.40, and distributors sell to retailers for $1.96, who then sell to consumers for $3.15?

What if I am able to sell directly to the hotels or nightclubs, without benefit of a distributor? If my per unit cost was $1, what do you think would be a reasonable price to sell to them for? (I assume they would sell to consumers for at least $3 apiece).

Thanks again.

greg
03-26-2008, 06:52 PM
Margin is not simply calculated as a percent of $1.00 on your cost. You just "marked up" the product 40% of the actual cost.

Your 40% profit margin on a $1.00 cost good will be a price of $1.66 to your dist. He in turn will want, for sake of defining this scenario, 40% as well. He will then sell it at $2.76. The retailer will then want 50% margin making it $5.52.


The one thing you don't want to do is set a lower price than any other potential dist will price it at once he takes it to market. This is tricky. Of course you want to make sales as quickly as popssible, however, if you are selling to Bars direct at $1.50 and your "other" retailers find out they have been paying over $2 you will have some serious explaining to do.

Go to Staples or Office Depot and buy a simple business calculator that has a "MGN" button on it. that stands for margin. It will save you a great deal of headaches and actually make your job easier.