Butter is mostly cream: a pound takes about two pounds of heavy cream, so the cream price decides the margin. A small creamery sells cultured butter in rolls at a good margin at its farm shop and a thinner one by the pound to a co-op, and the buttermilk left in the churn is a second product that costs almost nothing. Margin = (price − cost) ÷ price. In the example below, an 8-ounce roll of cultured butter costs $3.72 to make and sell and goes for $9.00, a 58.7% margin. A month of four ways of selling brings $10,450 of sales and about $5,830 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.
- An 8-ounce roll at the farm shop: $3.72, $9.00, 58.7%.
- Cream is most of the cost: about two pounds for a pound of butter.
- Co-op pounds keep less.
- Buttermilk from the churn is a second product.
- TaroStack costs each roll from what each batch used. More below.
A roll, costed
North Fork Creamery, the made-up creamery on Long Island, New York, I use in these examples, churns cultured butter from its own cream in its licensed dairy plant:
| An 8-ounce roll of cultured butter at the farm shop | Cost |
|---|---|
| Cream, culture and salt | $2.10 |
| Foil-lined wrap and label | $0.15 |
| Churning, washing and rolling | $1.20 |
| Card fees, 3% of $9.00 | $0.27 |
| Cost | $3.72 |
The wraps and cartons are in how to package butter for sale, and why butter is made in a licensed dairy plant in can you sell butter from home.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| Cultured butter, 8 oz roll | Farm shop | $9.00 | $3.72 | $5.28 | 58.7% |
| Cultured butter, 1 lb carton | Co-op, wholesale | $11.50 | $6.09 | $5.41 | 47% |
| Herb butter, 8 oz tub | Farm shop | $10.00 | $4.54 | $5.46 | 54.6% |
| Cultured buttermilk, quart | Farm shop | $5.00 | $1.25 | $3.75 | 75% |
The co-op pound keeps 47%; the buttermilk keeps 75%, since the cream is already paid for by the butter.
A month's numbers
A month for North Fork Creamery:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| Cultured butter, 8 oz roll, farm shop | 500 | $4,500 | $2,640 |
| Cultured butter, 1 lb carton, co-op | 300 | $3,450 | $1,623 |
| Herb butter, 8 oz tub, farm shop | 150 | $1,500 | $819 |
| Cultured buttermilk, quart, farm shop | 200 | $1,000 | $750 |
| Month | $10,450 | $5,832 |
Farm shop rolls bring most of the gross profit; the co-op takes the pounds in weeks when the shop is slow. The buttermilk, poured off every churn, used to go to the pigs; sold by the quart it brings about $750 of gross profit a month. The creamery's cheese is costed in how to price cheese, and butter turned into ghee in ghee business profit margin.
Get the calculator
Download the butter 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 cream cost. Cream richer in spring than in August makes more butter a churn, and a cream price that rises in the holidays changes every roll.
How TaroStack does it
TaroStack costs each roll from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes cream and culture 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 roll 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.