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Mark Up (Three Tier States)


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Does anyone have any advice on how to best estimate mark-up from a wholesaler to a retailer? You can eyeball where the product should be at retail, and get a good sense of the mark up the retailer gives a product fairly easily. Are there any generally accepted rules of thumb about how much the wholesaler marks it up?

Sharing some info around this could serve two purposes, help new folks in their earliest negotiations (wink-wink) and also help people feel as if there is an accepted ball park, and know whether or not they are in it!

Best Rgds,

Jon Cook

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The rule of thumb for wine is 30% gross margin per tier. Or about a 40% markup. Both downstream tiers appreciate a little extra margin when working with a low turn over product. It gives them more room to sample, run specials, etc. Say 35% gross margin. A new/little producer usually falls into that camp.

So in working the numbers through, producer price * (1/(1-grossmargin))^2 = consumer price. For 30% gross margin, you figure to get half of what the shelf price is. Good reason not to use an importer/broker and thus end up with a 4 tier system.

Now, I checked with my distributor here in WI last night, and he says that he (in the middle tier) uses the same markup for spirits as for wine, but that most off-premise retailers mark up spirits about half of what they mark up wine. Say 20% mark up or 17% gross margin.

Retailer markups vary, of course. I work with a big grocery store chain that uses about a 20% gross margin for starters and a little touristy place that argues it's worth 40+% gross margin.

I'm not sure how much of that is regional. I recently had an inquiriy from a New York distributor - they seem to plan around a 42% gross margin.

Finding a distributor can be hard. The first one I spoke with told me that it not only was an unreasonable expectation for me to make any money using a distributor (I should sell to them at cost) but that it was actually immoral. I've had worse and better luck since.

I don't know how many folks are in states that allow self-distribution. It's not an easy job - there are lots of trade-offs. Handing off established accounts to a distributor can also be painful. Anecdotal evidence from WI suggests a 60-70% loss rate as the distributor learns to sell the new product. If they learn how to sell it.

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