misc Pricing Dilema?????

OK.. This one is for all the pros out there, where can I find some information on how to price for distributors? Im looking for standard margins... mostly for the food industry, all I have encountered was info based on HUGE companies (which really isnt helping)..

thanks
Lisa
 
Well, it's not the easiest thing to find out. Now, the first question would be, are you looking for a distributor to take complete control of the production, marketing, distribution and risk? Or are you just looking for someone to produce your product for you? If it is the first question, do not expect to make a lot of cash unless the product seriously takes off. If you are looking for a complete distributor, since they are taking the risk with the product, they will take the lions share of the profit as well. In this case, your personal profit (royalty) from this will not be huge unless, like previously stated, the product finds itself in many large markets. On the good side of this, you really don't have to do anything, as the distributor will completely take over the entire product, and you sit back and take care of the books. You will also most likely lose ownership, or at least your majority ownership of your product. If you are just looking for let's say a contract packer (co-packer), this is much more lucrative, however you will put in a lot more work this way. With us, it's a labor of love, and we have a co-packer who we are very satisfied with. If this is the angle you wish to approach, the Fiery Foods website has quite a few names of co-packers, perhaps even in your area you may want to at least talk to. By only using a co-packer, you maintain full ownership of your product, and you will sign a non-disclosure form when you sign on with the co-packer, so they cannot use your formula for anything but your bottles. Insist on this form. Either way you go, I wish you the best of luck with it. I would suggest at least starting with a co-packer and work your way up to a full distributor, as you may not want to give up ownership of something you yourself created. It's more work not using a full distributor, but you can call it your own (legally). I hope this helps you.
 
Thanks for all that but maybe I didnt execute the question correctly. I do have a copacker, and am selling wholesale and retail already, I had a distributer ask me for pricing and I dont know what the "standard" margin is from my wholesale price to my distributor price... :0 see.. told you it was confusing ..

should of listened to my parents and been a doctor 8)
 
As far as I know, there is no "standard" margin for pricing. I'd go back to the distributor with a number -you- feel comfortable with, maybe even shoot a little high, and allow the lovely art of haggling come into play.
 
I'd worry less about what the distributor is going to ask and figure what your profit point actually is. The Disty knows what his distribution and marketing costs are for a product so, they will add their marketing costs and work your payment from there. They will negotiate your profit from you if you let them. Ask them what they're willing to pay you; they approached you.

The next thing you want to be sure of is whether or not you can afford to carry the distributor. We looked at WalMart and they want 6 months lead time before payment one gets back to us. That's a lot of stock and a long time for a large amount of money to not be in cash flow (Don't look for Peppermaster in WalMart any time soon.). I don't know what kind of product your distributor wants, but if he's paying you later, you need to ask yourself, if you can afford to put in the cost to get the project set up?

As John said, they take care of marketing and distribution. You just sit back and count the cash, so to speak.

T
 
This is true. Various lead times (how long until you get your payment) is quite common, and the overall market lead time has been increasing for quite some years. Wal-Mart is notorious for stupidly long lead times, not to mention not wanting to pay an extra penny for anything. Personally, I would stick to smaller markets to begin with, instead of completely overwhelming yourself with a huge contract immediately. The distributors all work with each other for the most part, hence the reasoning behind the ability to haggle a little. Tina is right, you should ask them what they are offering since they approached you, as you may come out with a number that is less than they were originally going to pay you.
 
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