Understanding your food business costs is crucial

By June 10, 2022June 21st, 2022No Comments

Anyone who has worked with me will know that I’m recommend getting to know your food business costs right at the start of developing your product. If not, it could be that you carry on developing your product, investing in branding and more with a product that might not be making you any money!

So right from the beginning even if there are gaps in your costing model – I always recommend completing one in as much detail as you can. Checking the commercial viability of your product at the start is an essential part of building a successful food or drink business and will save you money in the long term.

Food business costs – do you understand your model?

There are lots of things to include when doing your costing model – ingredients, distribution costs, manufacturing costs, marketing costs etc – and I always suggest you include everything you can possibly think of as soon as you can. Whilst I often say in food marketing less is more – this time too much information is better than too little. Surprises in product costings are not nice!

Retailers, margins and profit

So once you’ve got your product cost, you are then able to look at what margins retailers require, work out what price you think consumers will pay for it (RRP or recommended retail price)  and work out if you are making any profit! This is why it’s so important to look at the costings at the beginning – because if it turns out that you are not making any money here, or that you have to sell your product at such a high retail price so that hardly any consumers will buy it – you need to revisit the model.

Maybe you need to look at using different ingredients, pack it differently, find a cheaper manufacturer?   There are lots of ways you can look at improving your costings.

If you need help with your costing model and advice on what margins retailers expect and how they work them out, pop over to the Free Webinar section on my website and watch All About Costs and Margins. Or get in touch to arrange a call.