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For those of you who do not self-distribute: What is the typical mark up rate from the price at which a producer sells his product to the distributor and the final average shelf price. I understand tiered pricing models, I'm looking for an average rate of increase.

The reason I'm asking is that I have a friend in Germany who wants to export to the States. He has not been able to figure out the typical rate at which each tier increases their pricing. I've tried reaching out to several Chambers of Commerce, etc. but to no avail.

Slàinte mhath*,

Matthew Street

"Mandalf"

"The proper drinking of Scotch whisky is more than an indulgence: it is a toast to civilization, a tribute

to the continuity of culture, and a manifesto of man's determination to use the resources of nature to

refresh mind and body and to enjoy to the fullest of senses that with which he has been endowed."

- David Daiches, c 1969

*(Basic Gaelic meaning: to your "Good health")

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Your cost to the distributor, he marks it up 30 to 100%, the the retailer marks it up 30 to 100%. It makes it tough on the craft distiller. The margins very greatly.

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Tell your friend to use 33% for the wholesale markup and then another 33% for the retail markup as a place holder. I think the average generally lands around there. Of course, they will take as much as they can, and larger markups are possible. But, I know of at least a few with markups in the mid to low 20% range.

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Tell your friend to use 33% for the wholesale markup and then another 33% for the retail markup as a place holder. I think the average generally lands around there. Of course, they will take as much as they can, and larger markups are possible. But, I know of at least a few with markups in the mid to low 20% range.

I agree with these numbers for most 3 tier states.

Whatever amount you sell to the distributor at, they will mark it up about 30% to 35% to the retail store.

Then the retail store will price it at whatever they think will move. If they are looking to clear out a bunch of bottles, they will sell it at their cost.

For large national brands, they have much thinner margins because they have to carry Absolute, Jim Beam, etc. They just don't have any negotiating leverage with their distributors on those brands. It is take it or leave it.

For craft brands fighting for limited shelf space, the retail stores can be selective in what they carry and make sure that they have over 30% gross margins in their markup.

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A reasonable ballpark estimate is 100%.

The distributor will add their margin (margin not mark up; the two are different) after adding in all costs, including state and county alcohol taxes, transportation, etc.

The retailer will also add margin (again, not mark up).

Obviously different distributors and retailers have different margins (Costco = 14%!), but ballpark it at 100% increase to get average shelf price.

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As Flintstone emphasizes, margin or "gross profit" is the concept you want to use, as this is what distributors and retailers use.

An example. You sell the bottle for $10. The distributor's desired GP is 30%. This makes their price $14.29 ($10/0.7 - divide your price by 1, minus the gp percentage).

Now the distributor might reduce their actual price to $14, or they might jack it up to $15 (or more, if there are high excise taxes in their state). So let's say the retailer pays $14.50 and now they want 25 points of GP. Their price is $19.33, but that's the kind of number that might get rounded up to $19.99.

Of course in most states, the consumer will now pay sales taxes, which will make their cost even more than the 100% Flintstone Ballpark Number.

Now to get back to the original question from Vintage Cocktailing, importing adds several additional wrinkles. Is the distributor going to purchase directly and only distribute in one state? Or is an importer going to bring in the product, then sell to distributors? The difference determines whether there will 2 or 3 tiers of cost increases. There may also be customs fees, shipping, and other costs which will send the total increase well above 100%.

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