Distribution Pricing Question

[RNJ]

If the suggested retail price for a 6-pack is $9.99 and for 22oz bottle is $4.29,
What is a reasonable price to sell to the wholesaler in a three tier system?
Thanks
RNJ

[einhorn]

Ballpark $27/case of 6-packs and $37/case of 22s. It does depend on where your distributor is, too - don't forget his freight costs.

Re-think your $9.99 price strategy IMO. Not a lot of stuff moving at that price nowadays, too many other good beers on sale.

[ParishBrewingCo]

I can tell you from experience with 12oz cases (4 x 6 packs). From brewer to wholesaler at about $22 to $28 per case down here in the deep dirty south - where 3 tier isn't just a PITA, its a way of life. You need to know what margin the distributor will put on the beer. That will determine your whoesale price in order to hit the retail price points you quoted.

Most distributors talk in case quanities, so best to keep your pricing units consistent instead of per 6 pack or bomber.

Andrew
Owner/Brewer
Parish Brewing Co.

[RNJ]

Einhorn, how did you reach those numbers? and what price do you suggest for the 6-packs?
Thanks

[admin]

Also keep in mind that distributors add their margin (anywhere from 25-30%) on their laid-in cost. That includes freight, taxes and any other costs.
Admin

[einhorn]

My apologies for the mis-read. The prices I quotes were from wholesale to retailer rather than brewery to wholesaler.

Which brings up an interesting discussion. Normally a wholesaler should say "a case is a case is a case", as most costs involved are the same and have a general dollar mark-up per case. Not all think like that, though, and some want to earn more with the higher-ticket beers (for the most part 22s & 750s). It's a tedious discussion, and we would need a few beers to philosophise this in it's entirety.

Back to the question at hand. I think that $15-18/case 6-packs and $24-27 with bombers are appropriate for the final prices you are trying to achieve. Here I am assuming a ballpark wholesale markup of $10-12/case.

[RNJ]

My apologies for the mis-read. The prices I quotes were from wholesale to retailer rather than brewery to wholesaler.

Which brings up an interesting discussion. Normally a wholesaler should say "a case is a case is a case", as most costs involved are the same and have a general dollar mark-up per case. Not all think like that, though, and some want to earn more with the higher-ticket beers (for the most part 22s & 750s). It's a tedious discussion, and we would need a few beers to philosophise this in it's entirety.

Back to the question at hand. I think that $15-18/case 6-packs and $24-27 with bombers are appropriate for the final prices you are trying to achieve. Here I am assuming a ballpark wholesale markup of $10-12/case.

This is the part that does not make sense to me. If the retail price per 6-pack is 9.99, and assuming 25% mark up by retailer and 28% mark up by wholesaler, then price from brewer to wholesaler should be:
(4 * 9.99)/1.25/1.28=$24.97, which falls in the range mentioned above. Am I doing something wrong?

[einhorn]

Most calculate like this

FOB brewery 18.00/.70=$25.71 or $8.71 markup/case

Retailer 25.71/.7 (30% mark-up)=$36.73

$36.73/4 = $9.18/6-pack and you try to convince him to do $8.99 and not $9.49.

[frigatebay]

Einhorn has is right. Look to sell to wholesaler for a price you can make money then figure out where your products will retail for. Don't go in reverse. YOU HAVE TO MAKE MONEY, not just the retailer and wholesaler.

[RNJ]

Most calculate like this

FOB brewery 18.00/.70=$25.71 or $8.71 markup/case

Retailer 25.71/.7 (30% mark-up)=$36.73

$36.73/4 = $9.18/6-pack and you try to convince him to do $8.99 and not $9.49.

Thanks Einhorn,

That makes more sense. I have two questions, in the scenario you have above, are you assuming the 30% margin of the wholesaler will cover the shipping cost, or how do you work that in? Also, do you find that the requested margin by retailers is lower around 25% for 12 oz bottles, if they are in loose format and intended for bars/restaurants. I have found that many bars/restaurants would not carry 22 oz bottles and prefer the 12 oz size. Is that your experience as well?

Thanks

[frigatebay]

most dist add shipping cost to unit cost then markup 25-40%. retailers request that you take a lower margin?

[RNJ]

most dist add shipping cost to unit cost then markup 25-40%. retailers request that you take a lower margin?

No I meant to say is, are the retailers margin lower for 6-packs than 22 oz bottles? I have heard they have a margin of 20-25% on 6-packs and around 30% on bombers. Anyone knows?

Also mark up is very different than margin. A 28% margin is equal to 39% mark up. So I think this is were the confusion is. Do wholesalers and retailers take the purchase price and calculate a 28% margins (purchase price/0.72 to get their price) or simply multiply the purchase price by 1.28 which would be a lot lower. From what Einhorn is stating, they do the former, which is the true definition of margin. I think the confusion is mark up vs. margin which most people interchange erroneously. So which one is correct?

[einhorn]

Once again, "my bad", Frigate is right. Should be FOB wholesaler warehouse.

Seems as if retailers are generally OK with lower margins with 6-packs (25-30) and want more for 22s (30-40). Could be a regional thing.

If you have the warehouse space to do all 12 ounce in loose format, and you are turning over enough product (demand), give it a try and save on 6-packs.