Pricing right For the marketplace Deb Foote & Gunta Vitins SunOpta Inc. February 21, 2009
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MARKET CHANNELS
Farm GateFarmers MarketDirect to StoreDirect to RestaurantDirect to ProcessorThrough DistributorsExport
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Margins
Distributors• Produce: 20 – 25%• Grocery: 25 – 30%
Retailers• Produce: 35 – 40%• Grocery: 35 – 40%• Meat: 25 – 28%• Dairy: 25 – 28%• Deli: 50 – 60%• Bulk: 40 – 50%• Frozen: 40 – 45%
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Margin does not equal Mark Up
Example:
20% distributor’s margin on 1 case of apples
Farmer’s selling price = $40 per case
Distributor takes a 20% margin = $40 divided by 0.80 (note: 100% - 20% = 80% or 0.80)
Distributor’s selling price = $50 per case
******************20% Mark Up = $40 x 1.20 = $48 (don’t compare apples to oranges)
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Farm Gate (*Mark Ups perspective)
Selling Direct to Consumers: • Farmer’s Price: 95 – 105%* of retail• Consider costs:
- Product & packaging- Labour- Structure & signage: road side stand or enclosed
retail outlet
Selling Direct to Retailer/Restaurateur/Processor • Farmer’s Price: 50 – 80%* of retail • Consider costs:
- Product & packaging- Labour
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Farmers Markets
• Farmer’s Price: 95 –100% of retail
• Consider costs: - Product & packaging- Labour- Market fees- Transportation- Structure: tents, tables etc- Presentation & Signage - Scales
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Direct to Store
• Farmer’s Price: 60 - 70% of retail price• Consider costs:
- Product & packaging- Labour- Transportation
Include distributor’s margin Establish minimum order requirements Standard packaging/caselots Labelling – UPCs, PLUs, bilingual, organic
stickers, twist-ties etc
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Direct to Restaurant
• Farmer’s Price: 70%+ of retail price
• Consider costs: - Product & packaging- Labour- Transportation
Include distributor’s margin Split cases; non-standard quantities
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Selling to Distributors
• Farmer’s Price: 45 – 55% of retail price• Consider costs:
- Product & packaging- Labour- Transportation
Standard packaging/caselots Labelling – UPCs, PLUs, bilingual,
certification, organic stickers, twist-ties etc Volume Service costs per unit for farmer are lowest
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Organic Produce Pricing
Highly volatile -- changes daily Based on market supply & demand Standard premium for organic produce
does not exist Follow market fluctuations when
determining selling price Volume deals for promotions Local versus Imports
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Key Purchase Factors: Produce
Wholesaler – Retailer – Consumer
Quality: appearance, cleanliness, ripeness, taste
Price: competitive (supply & demand)
Supply: consistent, timely
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Recommendations to Growers
Use sales history and market trends to plan for production
Discuss plans with distributors & retailers
Base volumes on sound projectionsSet prices according to supply and
demandFollow market fluctuations Communicate with your customer
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Organic Grocery Products
Must have: Appropriate & appealing Packaging,
labelling (bilingual, nutritional, etc), UPCs
Marketing Funds for: Listing Fees Advertising: Co-ops, In Store Specials,
Flyer Costs Product Demos Guaranteed Sales First Case Intro Offer (free fills etc) Store Samples (after listing)
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Questions?
Contact: Deb Foote
Deb Foote Organic Consulting
604-803-6476
Gunta Vitins
VP Marketing, Pro Organics
(604) 253-6549
1-800-461-1122