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Average margins from cost/ production/ distribution / r

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Hi All,

I'm fairly new here so please forgive my levels of education when it comes to the spirits business!

My question is in regards to margins (mark-ups, gross profits) when it comes to a craft distillery product going to market in a 3-tier state. We are prodicing a few products, and thinking of partnering with someone for local distribution who can concentrate on our products mostly.

 

I'd like to know if anyone could help explain the margins in a 3 tier dtste, what they normally are and what to anticipate on each tier for an artisan spirit locally produced..

 

Example; how much is the cost to produce the spirit -> how much the distillery marks up (or makes % wise on margins, standard practice..50%? 100%) when selling to the distributor -> how much the margins are usually, standard for the distributor to make on each product -> what the margins are from the wholesale cost that the retailer pays the distributor to end retail price.

 

I greatly appreciate any and all help that you can give..I love the industry and am looking forward to diving in, of course homework always comes first. 

 

Thank you all in advance,

 

Cheers!

-Jon

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We have not had to deal with a distibutor yet, but I would expect that they want 20-30% margin.  Retailers want 20-30% as well.  So if you are selling in a 3 tier state, you will sell to the wholesaler for about 50% of the retail price.   Margin is a % of selling price, different than markup which is a % increase from cost or purchase price.  A 30% margin is 43% markup.  

 

Imho this is an industry where retail prices are set more by the market, than by what it costs to make.   This is not your normal 4 or 5 times cost business.  The only way to break out of that seems to be to make a premium whisky and have good name recognition to command a premium price. 

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Normally, 30% margin is the top. We have noticed more distributors that set 30% margin as the large case order margin, and increase the margin for single case and bottle orders.

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On 6/25/2018 at 12:47 PM, bluestar said:

Normally, 30% margin is the top.

The thread lives!  Here in Indiana it's 30% margin (as opposed to markup) to the distro and 30% to the retailer. If you really want to make money in booze become a distributor. Although good luck with that! 

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