Retailers marking up over 50%... help!

[revnatscider]

I'm selling hard cider, not beer.

Before I launched my cider, I spent some time visiting prospective accounts and discussing markups, price points, bottle packaging, labeling, marketing, etc. General product research. One thing everyone told me is that the standard markup is 25-30% from me to a distributor and then 25-30% markup to the retailer. I'm self distributing in Oregon now so able to eliminate the distributor but I'm noticing a nearly universal markup of over 50% from my wholesale price in my ~20 accounts. Off-site grocery stores or on-site bottle shops, it doesn't matter.

I sell for $8 per 750ml and I'm seeing it on the shelf for $12 and up. This makes me grumpy because I wanted to target the $10 price point, hence my $8 wholesale price. One retailer started out at $10.50, but just bumped up to $12.50, probably based on prices he saw everywhere else.

It is a pretty awesome-looking (swing top) big bottle of yummy, local cider in a very cider-friendly market (Portland). But I feel like they're making too much money on it. Should I raise my prices to "force" them to take a smaller markup? Can I politely ask them to lower the price? Is this amount of markup normal for specialty/micro/local brews? Was I completely mistaken about the supposed average 25-30% markup?

Despite the high price, I am selling enough cases (actually too many, but that's my problem) so I don't think the shelf price is hurting my business. But I just feel kinda betrayed. Your opinions please.

[gungadin]

markup v. margin

Your retailers are working on 33% profit margin rather than 30% cost markup. They probably did the math for 30% margin and then rounded up to an even price point of $12. Either that or your package is so nice that they believe your cider can command a premium price.

Congratulations on selling more than you expected!

[WitsEnd]

Your retailers are working on 33% profit margin rather than 30% cost markup. They probably did the math for 30% margin and then rounded up to an even price point of $12.

gungadin has is spot on.

They're selling a bottle for $12, they purchased it for $8, so they're making $4 a bottle
$4 / $12 = 0.33, which is a 33% margin.
A 50% markup will always yield a 33% margin.

I'm sure you went around asking what everyone's markup was, but what they told you was their margin. Margins are easier to work with at retail because it is a function of total retail sales, which is a number readily available.

[william.heinric]

You should also remember that the relationship between supplier and retailer is symbiotic. You both are bringing things to the deal that you can't readily get otherwise. And the retailer is often the face of your product, like it or not. So don't begrudge them their margin for selling for you.

The only way you're going to shrink the nominal amount of money that the retailer makes on a bottle is to lower your price. Raise your price and they will not only raise their price, but they will keep that 25-30% and make more money if they can sell it.

I guess there is one other option for lowering the price...give it the AB treatment. Make it like Bud Lt; every bar, restaurant, bottle shop, grocery, everywhere, and have a really high level of demand. Then your retailers will be forced to compete with each other and drop their price.

Good luck,
Bill

[kai]

What do comparable big bottles of yummy sell for in your market?

[revnatscider]

What do comparable big bottles of yummy sell for in your market?

That's a good question, I am right in there with other retail prices.

I'm glad I asked this question, I totally misunderstood margin vs markup. Thanks to all.

[Brewtopian]

As a retailer I'd like to chime in. Yes, the standard mark up in the retail world on beer and now cider is about 25% but that is including the large chain stores and super markets who tend to focus on large mass market brands and not specialty products like yours. Getting a mainstream supermarket to buy an $8 750 ml bottle of cider would be near impossible currently.

Specialty shops on the other hand tend to have a higher than average mark up for a number of different reasons. Labor is considerably higher than for the supermarket since specialty shops usually have trained and educated staff on hand to answer questions and assist with selections. Overhead is higher within the category because unlike a typical supermarket which may have a selection of 35 or 40 beers and maybe a cider a or two, a specialty shop's selection could extend beyond 1,000 individual labels. Our small shop stocks more than 800 beers and close to 60 ciders.

Your retailer will find out very quickly if your product will sell in the time they believe it should at the price they've established. If it doesn't then inevitably the price will come down.

[revnatscider]

Thanks for the info brewtopia, I understand what you're saying about big grocery vs specialty. As I mentioned, my cider is selling well, better than I hoped, and I know at least one retailer is increasing his price. I don't begrudge them. It just underscores one desire I have to produce a smaller bottle (12/16oz) less-premium product in addition to my big bottle yummy.

[Brewtopian]

I don't agree with the retailer raising his price just because he can. We maintain a standard margin across the board and if a price on something goes down we lower the retail price. The only time I might consider raising a price is if we were selling the product at a reduced margin and it sold better than anticipated.