Retail Markup

[Max Action]

Looking at one of the sample spreadsheets from Bill Owens, he's figuring a wholesale price for a case to be 1/2 that of retail. That's a 100% retail mark-up. How does that compare to the real world wholesale/retail pricing you guys are seeing?

[will]

depends upon the state. control states are more expensive than that.

the break-down is: 30% margin to wholesaler, and 30% margin to retailer.

so, a $10 product on the shelf costs the retailer $7, and the wholesaler $4.90

$10 * (1.00 - .30) = $7

$7 * (1.00 - .30) = $4.90

so Bill Owens is about 1% light...it's 51% to the channel

these are generalizations.

some retailers here will take as little as 15% margin.

their_cost / (1.00 - .15) or cost/.85

25% is typical for grocers, while 50% (2x) is not uncommon for high-end wine & spirit stores.

some wholesalers will take less also, but 50% overall is a good rule of thumb.

sorry for all the bad news,

will

[Charles@AEppelTreow]

Most states (I believe) are also going to have a rule that you have to offer the same price to all comers - or some rule like it. The WI version is that all orders of similiar size on the same day have to be the same price.

The upshot is that it's generally not allowed to adjust your wholesale price to different retailers in order to soak up some of that margin (for those running on the low side) yourself. That's if you're even allowed to sell directly to retailers.

The 30% gross margin through two-tiers is the rule of thumb for the wine industry. I've seen 25% used for both beer and spirits. You may want to plan on more than 30% - as a new entry to the market and a small volume product, a greater margin helps compensate the retailer and wholesaler for slower than average turnover on the inventory they get from you. Or allows them more wiggle room for sampling/specials/etc.

[JohninWV]

Charles,

You aren't setting a MSRP then?

We are getting ready (relative term) to sell In WV and VA.

VA's markup is 100%.

WV is 28% markup, and a $2.30/case delivery fee. The liquor store is then allowed to put any markup they choose onto the product. So the state will buy a case from me for $100, and provide it to their retailers for $130.30 ($128.00 + $2.30/case). Then they can mark it up to their liking. If they only want 25% at retail, that's only $173.75/case...a lot cheaper in WV than VA. How are you guys combating this difference if you can't change prices from state to state? All retailers in WV would need to mark it up 35% to have the same price in VA as WV.

[Charles@AEppelTreow]

Charles,

You aren't setting a MSRP then?

I'm mostly working in-state. And while I have more than one distributor, they carry different product lines. I have dabbled in nearby states, and even a national distributor (4 tiers - hurray!). Working with one, or few, distibutors, I don't worry about zone pricing. It's one price, less any volume breaks, plus shipping.

It was when I was trying to figure out relationships with in-state retailers (back when I could self-distribute) that the variation in retailer markups gave me fidgets. My MSRP is the price in my tasting room. But that _S_ is the biggest letter.

My lingering question is that if the distributor gets 30% gross margin, and the retailer gets 30% gross margin - how much do I get? If I aim for 30% too, I get the least dollars of any tier. But the same ROI - I think. On the other hand, the first distributor I approached told me that it was both unreasonable, and immoral, to expect to make any money on product run through distribution. I should sell it to them at cost. Honestly - they said it was immoral of me to want to make money off their hard work to sell my product. I didn't go with them.

[JohninWV]

Wow, those distributors sound like nice folks. You aren't doing this for good will and generosity? LOL.