Volume and Pricing

AJ Drew

AJ Drew

On another topic, Sirex commented on how horrible my winter pricing on fresh pods is.  I agree.  I am scared to death of the electric bill to heat the high tunnel this winter but i really want to grow year round.  In that conversation was a bigger topic, one better suited here.  I want to share what i learned this season with folk.

Going to use my own pricing because i am most familiar with them, but i imagine the same is true for everyone.  The thing I found out this season is that labor is almost everything.  Sure, seed and other needs cost money, but labor is the biggest volume.  Here goes:

Many will remember I had several variety and mixed boxes for $10.00 including shipping.  These were SFRB with 30is peppers.  At the same time, i offered boxes of five peppers for $7.50.  Lets turn that into per pod prices.

SFRB - 30 peppers for $10.00 is about 33 cents a pod.
Small Box - 5 Peppers for $7.50 is about $1.50 a pod.

Damn, that is about 450% difference per pod to the consumer.  Ah, but lets run the numbers from the other direction.

SFRB - Box is free from USPS, shipping is about $6.00, so net (not counting labor) is about $4.00

Box of 5 - Box costs under 50 cents, shipping is a bit more than $3.00, so lets call it $3.50.  So net (not counting shipping) is about $4.00.
 
It takes the same labor to print labels, print packing slips, fold boxes, and get the boxes shipped.  The labor in picking and packing is about the same as well.  Walking to the right row and planting my ass takes the same amount of time.  Picking and packing 5 or 30 is only maybe a few minutes difference in time.

So if you have labor to pay, the cost of shipping both size boxes is about the same.  Sure it takes a little bit more to plant, tend and harvest.. but for the most part the difference is small on such small volumes.  Now it does change dramatically when you are shipping pounds, but a 5 pod box or a 30 pod box not so much.
 
Thoughts?

Kind of curious because i do not see many offering boxes smaller than SFRB, much less boxes of only five peppers.  I do see a couple places but after shipping, same thing.  Smaller quantities cost a ton more money per pod.
 
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Hope this isn't hijacking your topic AJ, but was wondering what you think is good pricing for selling supers at a farmers market. I want to try doing some of that next year. Would something like pick your own 4 or 5/$1.00 be good? Then little baskets of pods at another price tier?
 
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AJ it's all supply and demand.  In winter hardly no one has fresh pods so demand is high while supply is low.  The only thing I'd suggest is to take a look at how much time you're spending doing all the work and then divide that but your net income.  Seems to me at $4 a box you're making considerably less than minimum wage already, and I say if people will pay $10 for 5 peppers then take it - more than 90% of the population have not ever had a superhot - and it's not like many of them are going to become repeat customers.  
 
I struggle with this when pricing sauces as well.  25 years in food service; and the 'golden rule' has always been your food costs cannot exceed 30% of your revenue.  But each recipe costs different amounts to make, so finding the sweet spot is tough.  People say that handmade artisan products are worth more, but when mass market sauces are $3 a less and you're pulling $6-10 sauces it isn't easy.  
 
Idea:  What if you set it up for volume pricing like printers do?  5 pods = $10, 10 pods = $15, 20 pods = $20 and so on?  I'm just bandying about numbers here, but I would think most everyone would understand/appreciate volume discounts.  Just a thought.  )
 
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ajdrew said:
 
Thoughts?
 
Click to expand...
 
People paid $130 for Air Jordans that cost $7 to make.
 
People paid at least 200 percent what an iPhone cost to make.
 
Do what you want. Figure out your own prices.
 
Funny that if you dont charge enough guess what, still people bitching.
 
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Peter S - On super hots at farmers market, what hogleg said is absolutely true.  Most people have never had one.  Thing is, most people dont like them either.  So what you get is a surge, then it falls off cause most of your customers are repeats.  That said, i have trays all priced at $2.00.  For commons, i fill them based on what Walmart and Krogers sets their prices.  Red Sav, Scotch Bonnet, and so on all priced like common habanero because they dont sell for much more.  People just see habanero.  Ghost pepper and above, around eight pods per tray.  Think of the small sales as advertising for larger volumes.  Lots of cooks, chefs, and sauce makers shop the farmers markets.  You will make much more money selling the commons.

One huge warning: Tell people no frigging pepper X challenges at the market.  When they start hopping around and screaming, it is good for your sales cause other people come to hop around and scream.  But it really pisses off your competition.

Smokefire, winter pricing is still up in the air till i figure out what it will cost.  But some people do not understand volume pricing.  One of the first responses compared a five pepper sale to pound prices.  I pointed out my pound prices are a lot better than the ones he mentioned.  Yep, in the summer a box of 10 peppers goes for 12.50, but a MFRB (bout 3 1/2 pounds) goes for 42.00 which works out to be about 12.00 a pound.  So 10 peppers costs more than a whole pound, go figure but that is how it has worked out.  Surprised the hell out of me, which is why i wanted to share.  Although we generally think of what we are selling as a product, we are really selling labor / our time.  If we have employees, we are reselling their labor / time.  I imagine you source some of your ingredients, then you are reselling both labor / time and ingredients.  Divide the labor of putting out a MFRB at 42.00 and a box of 10 at 12.50 and it is about the same margin per hour.  Again, shocked the hell out of me.

Hogleg, am figuring out prices as i go.  Only last season that i started selling produce on line.  Still kind of shaking my head but looking for more ideas for online sales.  Thinking garlic.  Started topic to share what i learned.  Seriously, had no clue.  Formerly it was just put it on the table.  Once you introduce taking orders, printing labels, printing packing slips, picking, packing, and shipping things really shift to being labor based pricing.

Think about being at the super market.  In the produce section, everything is self serve and a set pound price.  Online / prepackaged stuff is so much different.
 

 
 
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You have to remember also that during the off season you are going to be paying much more per pepper to grow them as the heating of the green house is not cheap and the electricity to make up for the lack of hours of light is also expensive - not to mention the longer time it takes to ripen the pods. so charging more during the winter would be normal as costs are higher - inventory available is smaller - and production time is longer.
 
Also reason that most people will not sell smaller amounts than the SFRB for shipped is that the ost is going to be about the same to ship it and as you mentioned paying $3.50 to ship 5 peppers really makes the price per pepper for the buyer much higher -- due to the fixed costs that barely change between growing and piking a single pepper and a SFRB of peppers and then you have to send them a fast way so sending regular postage will not work as they may be delayed a few days longer than the SFRB would be so there is a bigger chance of the customer not being happy as well.
 
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AJ I didn't read all of this as I am at work.

Just want you to understand this. I didn't say your pricing is ridiculous intentionally. That would be malicious and I'm not here for that. At the time I didn't know who sold that person what.

That being said. I understand why your pricing was that way. I know people.who can and will sell bhuts 10 bucks an oz all day long at farmers markets.

At the butcher here its around 12 for 1.5 oz of dried Scorpions.

As everyone else said. Its supply and demand. I figured that dude bought some pods from someone down south and put my opinionated statement out there on that assumption.

Stay true to.you bro .
 
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JDfan, very much agree but want to add most people have no use for 30 super hots.  Many do, but the vast majority of people who buy a five pepper box just want do one of those X pepper challenges.

Sirex, wasn't really addressing what you said.  I forget the wording but i agree that my winter prices blow flaming chunks.  So you could have said my winter prices blow flaming chunks and i would have agreed.

In this thread, just getting a feel for if folk think the expensive small boxes make sense.  In the summer, a 5 pepper box goes for $7.50.  The price seemed nuts to me until I tried to sell them for less and found out I was making a dollar an hour.  In fact, had to be told that cause i have no head for business.  i just like growing things.
 
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ajdrew said:
JDfan, very much agree but want to add most people have no use for 30 super hots.  Many do, but the vast majority of people who buy a five pepper box just want do one of those X pepper challenges.
Click to expand...
 
And those that are just doing that challenge are not going to worry about paying $2 - $3 per pepper because it is a novelty thing that they want to do the one time and you shouldn't worry about charging them that much for it because they are getting what they want at a price they think is fine for a one time competition with their friends ( In fact if the price gets too low they'll think the peppers must not be that hot and look for another place to buy it that is charging them more -- Most of these type people figure the higher the cost per pepper the hotter they must be and know nothing about the grower or their products.
 
So figure offer both options and take the sale where ever you can get it (besides those buying the SFRB for the better per pepper price are more likely to be your return customers so you'll make more of your profit from them in the long run even though they are paying less per pepper.
 
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ajdrew said:
 Yep, in the summer a box of 10 peppers goes for 12.50, but a MFRB (bout 3 1/2 pounds) goes for 42.00 which works out to be about 12.00 a pound. 
 
Click to expand...
 
AJ where in the world are you seeing prices this high? Especially in the summer? MFRB for $42??? Good Lord I've bought a bunch of pods and I don't think I've ever seen prices like that. I got sticker shock just from reading that. People are catching on finally to the newer smaller SFRB as well. Not getting as many pods per box like it was previous years.
 
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Chewi, please help me adjust my prices. 

Tiny Orders - i think we have already covered the cost of five and ten peppers.  But if you can point me to a site that offers such small quantities for less, please do help me to adjust my prices by doing so.  The only places i find offering such small quantities tack on shipping and wind up being much more expensive.  I ordered from many to see how I could improve shipping and prices.
 
Small Flat Rate - I see the standard for a mixed box at about $16.00 shipped.  People asked for labels on each pepper in a mixed box, so i kept it at $16.00 and added labels.  Later I offered $10.00 boxes without the individual labels.  Basically what I do is peg the SFRB at $25.00 in the spring when things are trickling in.  Then i use sale prices to adjust things as they come in faster.  So depending on what is what and when, i am at between $10.00 / SFRB and $25.00 / SFRB. Patrons seemed very pleased.  Do you think that is too high?

Medium Flat Rate Boxes - Figure it is about 3 1/2 pounds by working with a value added person here.  Also started a conversation here about setting a pound price.  Someone said Pepper Lover was at $10.00 / pound last year.  Someone else said Mr. Butch Taylor was at $12.00 a pound this year.  But it was unclear if these folk charged shipping.  i found that the folk at Buckeye Peppers (also members here) sold mixed MFRB for $45 shipping included.  That works out to about $13.00 a pound.

So i set my price at $12.00 a pound / $42.00 MFRB because it seemed to be a reasonable average of well respected people here at THP.  When the one guy was bragging about $22.50 a pound shipped, i thought i did well in my pricing since i was at $12.00 a pound shipped.  It is important to note that the people who led me to my current price structure are consumers / patrons.  I essentially asked consumers what price they were comfortable with.  After i set it at $12.00 per pound shipped, they seemed very pleased with it. 
 
But now I see you feel $12.00 a pound is sticker shock.  Please help me improve my prices by providing links to people selling things ghost or above for less than $12.00 a pound shipped.

Thank you in advance for helping me to establish better prices next season.

 

After thought; i do not see that Pepper Lover or Mr. Taylor post their prices for larger orders.  Buckeye Peppers does, here is the url you asked for.
 
https://www.buckeyepepper.com/products/fresh-peppers/mixed-peppers-medium-flat-rate
 
Again, if you think his prices, Pepper Lovers prices, and Mr. Taylors prices are over the top, please do let me have some examples.  Set my prices by trying to emulate very well known and respected people, but if you think they are over priced please do help me be more reasonably priced.
 
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http://thehotpepper.com/topic/57276-4-mfrb32-100-pods-or-more-closed/?hl=mfrb
http://thehotpepper.com/topic/57064-1-mfrb-13-varietys-101-total-pods22-closed/?hl=mfrb
http://thehotpepper.com/topic/57245-mfrb-yellow-fatalii-closed/?hl=mfrb
http://thehotpepper.com/topic/57129-whoops-i-overpickedclosed/?hl=mfrb
http://thehotpepper.com/topic/56841-mixed-mfrb-23/?hl=mfrb
http://thehotpepper.com/topic/56699-mixed-mfrb-sold/?hl=mfrb
http://thehotpepper.com/topic/56679-lfrb-sampler-of-60-varieties-sold/?hl=mfrb#entry1211069
http://thehotpepper.com/topic/56529-mfrb-5-mix-of-everything-18/?hl=mfrb
http://thehotpepper.com/topic/56527-mfrb-3-superhots-32/?hl=mfrb
http://thehotpepper.com/topic/56520-mfrb-43-varieties-of-superhots-sold/?hl=mfrb
 
These are just from the first two pages of the forum ads and just for MFRB. You know, it is only one guy's opinion. If folks buy at a price, whatever it is...then that is a fair price. Here is an example though..... just the other Wednesday I posted a want add for a MFRB of specific varieties  and it only took 20 minutes for my inbox to fill up with offers. By the weekend I had 2 MFRB at my door and I paid less than $50 combined.
 
I wouldn't buy peppers from Buckeye because of the prices, but I do buy seeds from them.
I have purchased many boxes from Judy and didn't pay that much.
 
I tell you what though, when I go to the grocery store next time I'll look and see how much the ghost peppers are per pound since you mentioned them specifically.
 
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Chewi, no sir it is not just your opinion.  Prices are facts, not opinion.  If I am doing my math right, you are paying $3.61 a pound plus shipping for super hots.  Maybe i am doing the math wrong.  $50.00 for two MFRB, so $25.00 per box.  Shipping on the MFRB is $12.35, so you paid $12.65 for the peppers.  There's about 3 1/2 pounds in a MFRB, so divide by 3 1/2 and I come up with $3.61 a pound.  Yep, I am doing the math right. 

$3.61 per pound for super hots is AMAZING!  I dont think i can buy jalapeno at the grocery store for that price. 
 
On the links to folk selling in the forums, yes when people have extra they sell at a very good price.  I do the same thing.  Thing is, now that i know you are paying $3.61 a pound gotta say even those forum adds seems wildly over priced.  Not joking, please share.  Where can i get super hots at $3.61 a pound?

Not joking, dead serious. Please turn me on to your hook up.  I do pride myself on producing everything I sell, but at that price I might reconsider.

Did i mention WOW!

Chewi, followed those links.  Have to thank you because I have spotted the confusion.  You are describing the container size:  MFRB and i am describing the size of the contents: about 3 1/2 pounds. 

First link - MFRB - $32.00 - It is described as 100 pods or more.  I have never not counted how many pods go into a 3 1/2 pound box but it is a shit ton more than 100.  This link says Ghost Peppers average about 50 per pound.  That sounds fair, so lets use that number and you will see why i was confused. 

I ship 3 1/2 pounds (about 175 peppers) for $42.00, that works out to about 24 cents a pod.
Your first example is offering pods at about 32 cents a pod.

Because MFRB seems to be a standard, you think 32 cents a pod is better than 24 cents a pod.  You are absolutely right, without including how many pods are in a box I could be creating sticker shock even when I offer lower prices.  Thank you very much for your help.  I will be counting pods as i pack the MFRBs next year and posting the count so folk do not have the same shock.

And no, i am not being a smart ass.  I am sincerely thanking you.  The farm has to feed my family in more ways than one and you helped it to improve.
 
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