what is the mark up for grocery store products

[IceBergSLiM]

for example I make xyz crackers and I sell them to a distributor for what % mark up? What does the distributor sell to the supermarket? What is the final mark up the super market applies.

I just want averages.

 

[aloser]

Depends on what you're selling.

 

[SilverTrine]

Grocery store margins are very thin. Say 5-8%. Thats why when you go into a new grocery store these days, half of the store are specialty breads and cakes, and lots of in house prepared foods. The margins on these sort of things is much higher.

 

[AnyMal]

Originally posted by: SilverTrine
Grocery store margins are very thin. Say 5-8%. Thats why when you go into a new grocery store these days, half of the store are specialty breads and cakes, and lots of in house prepared foods. The margins on these sort of things is much higher.

When I worled for Kroger it was more like 3-5% if not less.

 

[jadinolf]

Also the margin on non-foods is quite a bit higher.

 

[Shawn]

It's pretty much nothing. 1-5%

 

[Sukhoi]

Grocery stores are all about volume.

 

[Whoozyerdaddy]

Originally posted by: Shawn
It's pretty much nothing. 1-5%

Yup. The idea is to break even on the food to get you in the store. Then you are supposed to buy some electronics or clothes or hardware... That's where they make their money.

 

[IceBergSLiM]

ok but is the typical mark up for the manufacturer to the distributor and the distributor to the retailer.

I would imagine a manufacturer needs to make more than 5% to make it worth their while.

 

[RagingBITCH]

Originally posted by: Whoozyerdaddy

Originally posted by: Shawn
It's pretty much nothing. 1-5%

Yup. The idea is to break even on the food to get you in the store. Then you are supposed to buy some electronics or clothes or hardware... That's where they make their money.

What in the hell are you talking about? Since when does Kroger/Tom Thumb/Albertsons sell electronics/clothes/hardware? They sell minimal amounts of it, sure, but they have it there (as high margin items) for convenience, not to be their bread and butter.

 

[JeffreyLebowski]

The food and products are usually sold for only a few % more than their costs. Grocery stores make money on selling shelf space. When I worked in a grocery store and did plan-o-grams, they product is put on the shelf in order based on how much the vendor is willing to pay. Why do you think Coke products are 99% of the time on the front of the soda isle, while Pepsi is next and everything else is after that?

 

[RagingBITCH]

Originally posted by: IcebergSlim
ok but is the typical mark up for the manufacturer to the distributor and the distributor to the retailer.

I would imagine a manufacturer needs to make more than 5% to make it worth their while.

I don't think those figures are publicly available. You could google it to maybe get industry averages...but it depends on the manufacturer, type of product, the distributor, and the retailer. Some retailers cut out the middlemen to make larger profit margins (Walmart working directly with companies, as do many grocery chains). There's no magic answer.

 

[dullard]

Costco, with one of the smallest markups of all stores: maximum of 14% compared to a typical 25%-50% at other stores. I searched specifically for that article to post here because it was a very interesting article.

 

[IceBergSLiM]

ok basically im asking becuz im thinking of getting into the business and im just starting to play with some numbers and I'm curious to know if I produced something and it cost me 2.00/unit to produce what would be an approriate mark up? I was thinking .40-.60 /unit

 

[GagHalfrunt]

Originally posted by: AnyMal

Originally posted by: SilverTrine
Grocery store margins are very thin. Say 5-8%. Thats why when you go into a new grocery store these days, half of the store are specialty breads and cakes, and lots of in house prepared foods. The margins on these sort of things is much higher.

When I worled for Kroger it was more like 3-5% if not less.

Did you guys just pulls those numbers out of thin air? You're both completely clueless and should shut the hell up if you don't know what you're talking about. I'm in the business, Margins are MUCH higher. Net profits are small because overhead is a killer, but gross profit margins are generally pretty large across the board. On gourmet and specialty items it's commonly 50-60%. Non-foods like cosmetics and medications easily 50% and higher. Everyday prices for line items are generally in the 35-40% range and sale items 10-20%. Every store will have a few loss leaders, supersales or everyday superlow prices that are actually below costs. People will drive halfway across town and burn $5 worth of gas to save .17 cents on bread, so if your competitors are willing to sell below cost you have to do it too. Luckily that's only on the Top 100 items or so, so you can lose 8 cents on a loaf of bread if necesary and cover it by making $1.15 on that bag of cookies they're buying with it.

That being said, NET profits are UNDER ONE PERCENT. Repeat that again. UNDER ONE PERCENT. When you factor in rent (as much as $30/sq foot for 100,000 feet in some places), payroll, utilities and shrink the store makes less than a penny for every dollar that goes through the register. If you can make a full one percent you're a genius.

To answer the OP, if you're selling a specialty item like gourmet crackers that are retailing for $2.99 the supermarket is probably paying $1.25 to $1.50. The distributor is probably buying them from you at 75 cent to a dollar.

 

[IceBergSLiM]

Originally posted by: GagHalfrunt

Originally posted by: AnyMal

Originally posted by: SilverTrine
Grocery store margins are very thin. Say 5-8%. Thats why when you go into a new grocery store these days, half of the store are specialty breads and cakes, and lots of in house prepared foods. The margins on these sort of things is much higher.

When I worled for Kroger it was more like 3-5% if not less.

Did you guys just pulls those numbers out of thin air? You're both completely clueless and should shut the hell up if you don't know what you're talking about. I'm in the business, Margins are MUCH higher. Net profits are small because overhead is a killer, but gross profit margins are generally pretty large across the board. On gourmet and specialty items it's commonly 40-50%. Non-foods like cosmetics and medications easily 50% and higher. Everyday prices for line items are generally in the 35% range and sale items 10-20%. Every store will have a few loss leaders, supersales or everyday superlow prices that are actually below costs. People will drive halfway across town and burn $5 worth of gas to save .17 cents on bread, so if your competitors are willing to sell below cost you have to do it too. Luckily that's only on the Top 100 items or so, so you can lose 8 cents on a loaf of bread if necesary and cover it by making $1.15 on that bag of cookies they're buying with it.

That being said, NET profits are UNDER ONE PERCENT. Repeat that again. UNDER ONE PERCENT. When you factor in rent (as much as $30/sq foot for 100,000 feet in some places), payroll, utilities and shrink the store makes less than a penny for every dollar that goes through the register. If you can make a full one percent you're a genius.

thats the retailers side what about that cookie manufacturer.

 

[GagHalfrunt]

Originally posted by: IcebergSlim
ok basically im asking becuz im thinking of getting into the business and im just starting to play with some numbers and I'm curious to know if I produced something and it cost me 2.00/unit to produce what would be an approriate mark up? I was thinking .40-.60 /unit

If it cost you $2.00 to produce final retail would be in the $6.00 to $7.00 range after the distributor and retailer both took their profits. You think you're going to move enough units at $6 retail to make it worthwhile to go into business? You can get by on small markups if you're selling tons of units. You can manufacture ketchup for 12 cents a bottle, mark it up to 20 cents, distribute for 50 cents and retail for a buck if you're moving millions of units. On low volume like gourmet crackers you need much higher margins.

 

[IceBergSLiM]

Originally posted by: GagHalfrunt

Originally posted by: IcebergSlim
ok basically im asking becuz im thinking of getting into the business and im just starting to play with some numbers and I'm curious to know if I produced something and it cost me 2.00/unit to produce what would be an approriate mark up? I was thinking .40-.60 /unit

If it cost you $2.00 to produce final retail would be in the $6.00 to $7.00 range after the distributor and retailer both took their profits.

ok so to find a production cost target I need to work backwards from what I would like it to sell for retail.

i would like to see it sell in the grocery store for 3.99/unit

how do I work backwards to come to an acceptable production cost I need to shoot for?

 

[GagHalfrunt]

Originally posted by: IcebergSlim

Originally posted by: GagHalfrunt

Originally posted by: IcebergSlim
ok basically im asking becuz im thinking of getting into the business and im just starting to play with some numbers and I'm curious to know if I produced something and it cost me 2.00/unit to produce what would be an approriate mark up? I was thinking .40-.60 /unit

If it cost you $2.00 to produce final retail would be in the $6.00 to $7.00 range after the distributor and retailer both took their profits.

ok so to find a production cost target I need to work backwards from what I would like it to sell for retail.

i would like to see it sell in the grocery store for 3.99/unit

how do I work backwards to come to an acceptable production cost I need to shoot for?

You need to do some studies to see what sort of sales you're going to generate. First year it's going to be next to nothing. You think you're going to walk into a supermarket and ask them to devote shelf space to you? Nope. You think you're going to walk into a distributor and ask them to start peddling your stuff at their accounts? Nope again. You're going to be paying just to get in the door and paying more to be shelved. At the beginning you're going to be dealing with a lot of expenses and almost no sales. You better have a business plan that keeps you afloat for 2 years of very little income. You need to get off ATOT and do some serious homework by talking to people who are actually in the business. You're approaching this without even a shred of understanding about the realities of the business. These days supermarkets don't only sell merchandise, they sell shelf space. If you're not paying to be in the store they dont want to know your name.

 

[MikeyIs4Dcats]

this is funny....

 

[IceBergSLiM]

Originally posted by: GagHalfrunt

Originally posted by: IcebergSlim

Originally posted by: GagHalfrunt

Originally posted by: IcebergSlim
ok basically im asking becuz im thinking of getting into the business and im just starting to play with some numbers and I'm curious to know if I produced something and it cost me 2.00/unit to produce what would be an approriate mark up? I was thinking .40-.60 /unit

If it cost you $2.00 to produce final retail would be in the $6.00 to $7.00 range after the distributor and retailer both took their profits.

ok so to find a production cost target I need to work backwards from what I would like it to sell for retail.

i would like to see it sell in the grocery store for 3.99/unit

how do I work backwards to come to an acceptable production cost I need to shoot for?

You need to do some studies to see what sort of sales you're going to generate. First year it's going to be next to nothing. You think you're going to walk into a supermarket and ask them to devote shelf space to you? Nope. You think you're going to walk into a distributor and ask them to start peddling your stuff at their accounts? Nope again. You're going to be paying just to get in the door and paying more to be shelved. At the beginning you're going to be dealing with a lot of expenses and almost no sales. You better have a business plan that keeps you afloat for 2 years of very little income. You need to get off ATOT and do some serious homework by talking to people who are actually in the business. You're approaching this without even a shred of understanding about the realities of the business. These days supermarkets don't only sell merchandise, they sell shelf space. If you're not paying to be in the store they dont want to know your name.

i am fully aware about stocking fees(cooler and freezer is more than dry shelf and prominent display is even more) and I have connections with large and medium sized distributors.

I am just talking about calculating a reasonable mark up because that is certainly a huge part of a business plan. I have to sell them with a % mark up that will allow me to aleast break even with the stocking fees.