Gourmet marshmallows are cheap to make and slow to finish: a bag of 12 costs $5.73 at the market, but most of that is time, whipping, setting, cutting and dusting by hand, not sugar and gelatin. At $11.50 a bag keeps 50.2%. Cafés pay $7.50, which keeps 28.3%; cocoa gift tins keep 60.3%, and gift boxes keep 46.6%. Margin = (price − cost) ÷ price. In the example below, a month of four lines brings $7,095 of sales and about $3,330 of gross profit, before kitchen rent and the owner's pay.
The short version
- Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
- A market bag: $5.73, sold for $11.50, 50.2%.
- Time, not sugar, is most of the cost.
- Cafés keep 28.3%.
- Cocoa tins sell in December.
- TaroStack costs each bag from what each batch used. More below.
A bag, costed
Litchfield Hills Marshmallow Co., the made-up marshmallow maker in Torrington, Connecticut, I use in these examples, counts its time at $20 an hour:
| A bag of 12 at the market | Cost |
|---|---|
| Gelatin, sugar, syrup and dusting | $1.35 |
| Bag and header card | $0.28 |
| Whipping, cutting and dusting | $3.75 |
| Card fees, 3% of $11.50 | $0.35 |
| Cost | $5.73 |
The bag's price is in how to price marshmallows, and the business's year in marshmallow business plan.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| Bag of 12 | Markets | $11.50 | $5.73 | $5.78 | 50.2% |
| Bag of 12 | Cafés | $7.50 | $5.38 | $2.12 | 28.3% |
| Cocoa gift tin | Markets and online | $24.00 | $9.52 | $14.48 | 60.3% |
| Gift box of 16 | Gift shops and online | $16.00 | $8.54 | $7.46 | 46.6% |
The cocoa tin keeps 60.3%, with a cocoa mix and a tin; the gift box keeps 46.6%.
A month's numbers
A month for Litchfield Hills Marshmallow Co.:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| Bag of 12, markets | 250 | $2,875 | $1,444 |
| Bag of 12, cafés | 200 | $1,500 | $424 |
| Cocoa gift tin, markets and online | 60 | $1,440 | $869 |
| Gift box of 16, gift shops and online | 80 | $1,280 | $597 |
| Month | $7,095 | $3,333 |
The market bags bring the most gross profit; the cafés keep 28.3% and sell a marshmallow with every hot chocolate. Cutting faster, with a guitar cutter instead of a knife, would lift every line. Bags and tins are in how to package marshmallows for sale.
Get the calculator
Download the marshmallow 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 per bag. Flavors with fruit or chocolate cost more, a humid day slows the cutting, and December changes every number.
How TaroStack does it
TaroStack costs each bag from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes gelatin, sugar and syrup 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 bag 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.