A barbecue sauce maker sells most of its bottles to grocers at a thin margin and earns more on the few it sells direct, because the glass bottle, cap and label cost more than the sauce. Margin = (price − cost) ÷ price. In the example below, a 16-ounce bottle costs $3.17 to make and sell to a grocer and goes for $5.50, a 42.4% margin. A month of four ways of selling brings $20,400 of sales and about $9,630 of gross profit.
The short version
- Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
- Count your time as a cost, even if you don't pay yourself yet.
- A 16-ounce bottle to a grocer: $3.17, $5.50, 42.4%.
- The bottle, cap and label cost more than the sauce.
- Online sales carry the shipping box and fees.
- Gift packs earn the most per sale.
- TaroStack costs each bottle from what each batch used. More below.
A bottle, costed
Congaree Smokehouse Sauce Co., the made-up sauce maker in Columbia, South Carolina, I use in these examples, makes 600 bottles on a kitchen day:
| A 16-ounce bottle, to a grocer | Cost |
|---|---|
| Tomato, vinegar, molasses, spices | $0.95 |
| Bottle, cap and label | $1.05 |
| Labor and kitchen time | $1.17 |
| Cost | $3.17 |
The business year is in BBQ sauce business plan, and when a co-packer pays in sauce co-packer.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| BBQ sauce, 16 oz | Grocers, by the case | $5.50 | $3.17 | $2.33 | 42.4% |
| BBQ sauce, 16 oz | Online, shipped | $10.00 | $4.77 | $5.23 | 52.3% |
| BBQ sauce, 16 oz | Markets | $9.00 | $3.44 | $5.56 | 61.8% |
| Three-pack gift box | Online and holiday markets | $25.00 | $11.60 | $13.40 | 53.6% |
The grocer bottle earns 42.4%; the market bottle 61.8%.
A month's numbers
A month at Congaree Smokehouse Sauce Co.:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| BBQ sauce, 16 oz, grocers | 2,400 | $13,200 | $5,592 |
| BBQ sauce, 16 oz, online | 300 | $3,000 | $1,569 |
| BBQ sauce, 16 oz, markets | 300 | $2,700 | $1,668 |
| Three-pack gift box, online and holiday markets | 60 | $1,500 | $804 |
| Month | $20,400 | $9,633 |
Grocers take four of every five bottles and bring about half the gross profit. At a co-packer's $2.96 a bottle the grocer margin would grow by about 20 cents a bottle. How a price becomes a margin is in what is a good profit margin for a food product.
Get the calculator
Download the BBQ sauce margin calculator. One sheet: one line for each product and channel, with its price, materials, packaging, labor and fee rate; the cost, gross profit, margin, markup and the price your target margin needs fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The calculator holds one cost a bottle. Glass bought at a new price, a grocer promotion and a batch that's too thin and gets reworked change every channel's margin.
How TaroStack does it
TaroStack costs each bottle from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes tomatoes, vinegar and bottles at the price of the deliveries they came from, so a price rise shows in the next batch's cost.
Labor on the batch. The minutes a batch took are recorded on it, so the hours behind each product are on record.
Margins by product. Margins are reported per product on that actual cost, and a price-creep report per supplier shows whose prices moved.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| What a bottle cost | One price from last season | Cost from the batch's deliveries |
| The hours behind a batch | Remembered | Labor minutes on the batch |
| An ingredient creeping up | Noticed late | A price-creep report |
| Margins by product | Re-worked by hand | Margins on real cost |
Recipes, batches, costing and margin reports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.