A small nut butter maker grinds peanuts into jars at a healthy margin sold direct and a thin one wholesale. Peanuts are cheap; almonds aren't, so an almond butter jar costs twice as much to make. Margin = (price − cost) ÷ price. In the example below, a 12-ounce jar of peanut butter costs $4.15 to make and sell direct and goes for $9.00, a 53.9% margin. A month of four ways of selling brings $19,400 of sales and about $8,220 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 12-ounce jar direct: $4.15, $9.00, 53.9%.
- Almond butter costs about twice as much to make.
- Wholesale earns less; check it against full cost.
- Snack packs sell at a higher price per ounce.
- TaroStack costs each jar from what each batch used. More below.
A jar, costed
Red Oak Nut Butters, the made-up nut butter maker in Little Rock, Arkansas, I use in these examples, grinds about 2,500 jars a month:
| A 12-ounce jar of peanut butter, direct | Cost |
|---|---|
| Peanuts, salt, honey | $1.97 |
| Jar, lid and label | $0.70 |
| Labor and kitchen time | $1.21 |
| Card fees, 3% of $9.00 | $0.27 |
| Cost | $4.15 |
The business year is in nut butter business plan, and the safety plan in peanut butter HACCP plan.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| Peanut butter, 12 oz | Direct, markets and online | $9.00 | $4.15 | $4.85 | 53.9% |
| Peanut butter, 12 oz | Grocers, wholesale | $5.50 | $3.88 | $1.62 | 29.5% |
| Almond butter, 12 oz | Direct | $14.00 | $7.59 | $6.41 | 45.8% |
| Snack packs, box of 10 | Gyms and online | $15.00 | $6.45 | $8.55 | 57% |
The grocer jar leaves $1.62; the direct jar $4.85.
A month's numbers
A month at Red Oak Nut Butters:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| Peanut butter, 12 oz, direct | 600 | $5,400 | $2,910 |
| Peanut butter, 12 oz, grocers | 1,500 | $8,250 | $2,430 |
| Almond butter, 12 oz, direct | 250 | $3,500 | $1,602 |
| Snack packs, box of 10, gyms and online | 150 | $2,250 | $1,282 |
| Month | $19,400 | $8,225 |
Grocers take most of the jars and a thin share of the gross profit; direct jars and almond butter bring the rest. When a co-packer starts to pay is in nut butter co-packer.
Get the calculator
Download the peanut 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 cost a jar. Almonds bought at a new price, and roasting loss that changes with each lot of peanuts, change every jar's margin.
How TaroStack does it
TaroStack costs each jar from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes peanuts and almonds 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 jar 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.