Ghee Business Profit Margin, per Jar and per Month

A ghee business's margin starts with the butter, and with what the butter loses on the way to becoming ghee. In the example below, a pound of butter makes about 0.8 pounds of ghee, so an 8-ounce jar needs $3.13 of grass-fed butter. With the jar, the time and the card fees it costs $5.35 and sells for $14 online and at markets: a 62% margin. The same jar sold to a co-op for $8.50 earns 39%, and a gallon tub for a restaurant 33%. Over a month, five products bring $16,780 of sales and $8,945 of gross profit, and about $7,640 is left after the fixed costs. Below is a jar costed, why the butter price is the number to watch, the margins by channel, a month's numbers, and where the margin leaks.

The short version

• Cost the ghee from the butter, after the loss: about 20% of the butter's weight boils off or is strained out.
• An 8-ounce jar needs about 0.63 pounds of butter.
• Butter is most of the cost; a dollar a pound on butter is 63 cents a jar.
• Direct jars earn about 60%, co-ops 39%, restaurant tubs 33% in the example.
• Spiced ghee sells for more on a few cents of spices.
• Weigh the yield every batch; a batch that loses 25% costs more than one that loses 20%.
• TaroStack costs every batch from the butter you paid for and records what each batch made. More below.

A jar, costed

Fox River Ghee Co., a made-up ghee maker in Appleton, Wisconsin, I use in these examples, clarifies grass-fed butter at $5 a pound in batches and jars it.

The butter is the number to watch

Butter is 59% of the jar's cost. If butter goes from $5 to $6 a pound, every 8-ounce jar costs 63 cents more, and the gallon tub $8.75 more. The loss matters as much: a batch cooked longer, or strained harder, that loses 25% instead of 20% uses 0.67 pounds of butter for a jar instead of 0.63. How to measure a batch's yield is in batch yield formula.

Margins by channel

The spiced jar uses 40 cents of dried turmeric, cumin and pepper and sells for $2 more. The gallon tub is mostly butter, $43.75 of its $53.75, which is why it earns the thinnest margin. Dried spices keep ghee dry; anything fresh and watery, like raw garlic, changes how it keeps and needs a process review first.

A month's numbers

Fixed costs are $1,305 a month: a shared commercial kitchen ($700), market fees ($150), the website ($50), insurance ($70), ads ($300) and software ($35). That leaves about $7,640 a month, a 46% net margin, with the making paid at $20 an hour. The month uses about 960 pounds of butter.

What a good ghee margin is

With labor counted, 55% or more direct and 35% or more to grocers leaves room for butter prices to move. Because butter is most of the cost, a margin that looks fine in spring can be thin by autumn; check it against every butter invoice. Margins in food in general are in good profit margin for a food product, and the wholesale side in distributor margin.

Where the margin leaks

Yield. Five points more loss on a batch is about 21 cents more butter in every 8-ounce jar.

Burnt batches. Ghee taken too far tastes scorched and can't be sold; a lost batch of 40 pounds of butter is $200.

The milk solids. The browned solids strained out are a loss unless they're sold or used, in baking or as a topping.

Butter bought at the wrong time. Buying a month's butter when the price is low, and storing it frozen, smooths the cost.

Get the calculator

Download the ghee profit margin calculator. One line for each product and where it's sold: the price, the butter, packaging, labor and fees as a share of the price; the cost, gross profit, margin, markup and the price a 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 sheet uses one butter price and one loss. In practice the butter comes from two dairies at different prices, each batch loses a little more or less, and the jars made last week cost something different from this week's.

How TaroStack does it

TaroStack costs every batch from the butter you paid for and records what each batch made.

Batches from real butter. A batch takes the butter off stock, its lot recorded, and is costed from what that butter cost, so a batch from the dearer dairy shows its own cost.

Yield on every batch. Each batch records how much ghee came out, good and rejected, so a batch that lost more shows up, and actual cost is set against the recipe's standard cost.

Butter prices watched. The price-creep report shows each dairy's prices over time, and margins are reported by product and by customer.

Recipes, batches, costing and margins 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.

Questions people also ask

What is the profit margin on ghee?

In the example, 62% on an 8-ounce jar sold direct for $14, 39% to a co-op at $8.50, and 33% on a gallon tub for a restaurant, with labor counted.

How much butter does it take to make ghee?

About 1.25 pounds of butter for a pound of ghee, in the example's 20% loss. An 8-ounce jar needs about 0.63 pounds.

Is a ghee business profitable?

It can be. In the example, $16,780 of sales a month leave about $7,640 after fixed costs, with the making paid, as long as the price keeps up with butter.

What affects ghee profit the most?

The butter price and the yield. A dollar a pound more for butter costs 63 cents a jar, and five points more loss costs about 21 cents a jar.