An ice cream maker's profit margin depends on where the ice cream goes. In the example below, a pint costs $3.24 to make and sell direct, with $1.49 of base mix and flavors in it, and sells for $10: a 68% margin. The same pint sold to a grocer for $6 earns 44%, a scoop at the weekend window 55%, and a 3-gallon tub for a restaurant 37%. Over a full month, the four bring $16,650 of sales and $8,678 of gross profit, and $6,482 is left after the freezers' power, the production space and the van. Below is a pint costed, why air matters, the margins by channel, a month's numbers, and where the margin melts away.
The short version
- Cost a pint from the base mix, with the overrun in it: air is part of the yield.
- Add the flavors, the pint and label, your minutes and the fees.
- Direct pints earn the most; grocer pints sell the most.
- Scoops carry the window staff; tubs carry the mix.
- A good gross margin with labor counted is 50% or more on direct sales.
- The margin melts away through refrozen pints, freezer burn and slow flavors.
- TaroStack costs every batch from the base mix and dates every pint. More below.
A pint, costed
Ironwood Pint Co., a made-up small-batch ice cream maker in Birmingham, Alabama, I use in these examples, buys a pasteurized base mix at $10 a gallon and freezes it at 40% overrun, so a gallon of mix makes about 11 pints.
| A pint, direct | Cost |
|---|---|
| Base mix, at 40% overrun | $0.89 |
| Flavors and mix-ins | $0.60 |
| Pint, lid and label | $0.55 |
| Freezing and packing, 3 minutes at $18 an hour | $0.90 |
| Card fees, 3% of $10 | $0.30 |
| Cost | $3.24 |
Why the air matters
Overrun is the air whipped in as the mix freezes. At 40%, a gallon of mix makes 1.4 gallons of ice cream; at 80%, it makes 1.8. More air makes a cheaper, lighter pint: the base in a pint drops from 89 to 69 cents. A dense pint costs more and is what small-batch makers sell on; whatever you choose, measure it, because a batch that comes out at 30% instead of 40% uses more mix for every pint and nobody notices unless it's weighed. How yield is measured batch by batch is in batch yield formula.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin | Markup |
|---|---|---|---|---|---|---|
| Pint | Grocers, wholesale | $6.00 | $3.37 | $2.63 | 43.8% | 78% |
| Pint | Window and markets | $10.00 | $3.24 | $6.76 | 67.6% | 209% |
| Scoop, 4 oz | Weekend window | $5.00 | $2.27 | $2.73 | 54.6% | 120% |
| 3-gallon tub | Restaurants | $55.00 | $34.55 | $20.45 | 37.2% | 59% |
The grocer pint carries 25 cents of dry ice and cold box for delivery. The scoop is mostly the window staff, $1.50 of its $2.27, paid whether the line is long or short. The tub is mostly mix, $26.40 of $34.55, which is why restaurants get the thinnest margin and the lowest effort.
A month's numbers
| Product | A month | Sales | Gross profit |
|---|---|---|---|
| Pints to grocers | 1,000 | $6,000 | $2,630 |
| Pints direct | 400 | $4,000 | $2,704 |
| Scoops | 1,000 | $5,000 | $2,730 |
| Tubs | 30 | $1,650 | $614 |
| Total | $16,650 | $8,678 |
Fixed costs are $2,195 a month: licensed production space, the frozen dessert license, the freezers' power, insurance, the van and store demos. That leaves $6,482 a month at full speed, a 39% net margin, with every hour of making and every window shift already paid. The grocers bring a little less gross profit than the direct pints from two and a half times the pints. The whole year, month by month, is in ice cream business plan.
What a good ice cream margin is
With labor counted as a cost, 50% or more on direct sales and 40% or more wholesale leaves room for the freezers, the waste and the business. A scoop shop's margin depends on the line: the staff are paid by the hour, so a slow afternoon makes every scoop cost more. Margins in food in general are in good profit margin for a food product.
Where the margin melts away
Refrozen pints. A pint that softens in a delivery or a power cut can't be sold as it was; every lost pint is $3 of cost with nothing against it.
Freezer burn and slow flavors. A flavor that sells two pints a week ages in the freezer; date every batch and sell the oldest first.
Overrun drift. Ten points less air in a batch uses about 8% more mix for every pint.
Samples. Store demos and tasting spoons are marketing; count them, or they hide in the margin.
Get the calculator
Download the ice cream profit margin calculator. One line for each product and where it's sold: the price, the mix and flavors, 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 the costs you type in. Base mix prices change with dairy prices, overrun varies batch to batch, and a freezer full of pints made on different days is a stock you can't see from a spreadsheet.
How TaroStack does it
TaroStack costs every batch from the base mix and dates every pint.
Batches from the mix. Each flavor is a recipe of base mix and mix-ins, so a batch takes them off stock and is costed from what they cost, and the pints made, good and rejected, are recorded, so the yield shows.
Every pint dated. Each batch gets a lot and a date, recorded automatically, the picking list puts the earliest dates first, and lots close to their date raise an alert.
Margins by customer. Margins are reported by product and by customer, so the grocer pints and the window pints show what each earns.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| What a batch cost | Prices you type | Costed from the mix you paid for |
| Pints a batch made | A tally | Good and rejected on each batch |
| Oldest pints first | Dig through the freezer | Earliest dates first |
| What grocers earn | Worked out by hand | Margins by customer |
Recipes, batches, lots 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.