A jar of salsa costs $3.37 at the market, in tomatoes, peppers and vinegar, the jar, lid and label, labor and the card fee, and sells for $9.00, a 62.6% margin. The jar, lid and label cost two-thirds as much as the salsa in them. Grocers pay $5.50 for the same jar, which keeps 43.6%, but a grocer takes cases every two weeks, and the market only sells on Saturdays. Margin = (price − cost) ÷ price. In the example below, a month of five lines brings $16,250 of sales and about $8,780 of gross profit, before kitchen rent and insurance.
The short version
- Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
- A 16-ounce jar at the market: $3.37, sold for $9.00, 62.6%.
- The jar, lid and label are a big share of the cost.
- Grocer jars keep 43.6%, in volume.
- Hot sauce keeps the most at the market.
- TaroStack costs each jar from what each batch used. More below.
A jar, costed
Saguaro Salsa Co., the made-up salsa maker in Tucson, Arizona, I use in these examples, counts its kitchen time in each jar:
| A 16-ounce jar at the market | Cost |
|---|---|
| Tomatoes, peppers and vinegar | $1.40 |
| Jar, lid and label | $0.95 |
| Labor at $20 an hour | $0.75 |
| Card fees, 3% of $9.00 | $0.27 |
| Cost | $3.37 |
The jar's price is in how to price salsa, and making it by the hundred jars, which lowers the cost, in how to make salsa in bulk.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| 16 oz jarred salsa | Farmers market | $9.00 | $3.37 | $5.63 | 62.6% |
| 16 oz jarred salsa | Grocers | $5.50 | $3.10 | $2.40 | 43.6% |
| Fresh salsa, 16 oz tub | Farmers market | $8.00 | $2.79 | $5.21 | 65.1% |
| Hot sauce, 5 oz | Farmers market | $10.00 | $2.50 | $7.50 | 75% |
| Hot sauce, 5 oz | Shops | $5.50 | $2.20 | $3.30 | 60% |
Hot sauce at the market keeps 75%, in a 5-ounce bottle; at shops it keeps 60%.
A month's numbers
A month for Saguaro Salsa Co.:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| 16 oz jarred salsa, farmers market | 300 | $2,700 | $1,689 |
| 16 oz jarred salsa, grocers | 1,500 | $8,250 | $3,600 |
| Fresh salsa, 16 oz tub, farmers market | 200 | $1,600 | $1,042 |
| Hot sauce, 5 oz, farmers market | 150 | $1,500 | $1,125 |
| Hot sauce, 5 oz, shops | 400 | $2,200 | $1,320 |
| Month | $16,250 | $8,776 |
The grocers buy five jars for every one sold at the market and bring the most gross profit, even at 43.6%. Every 10 cents off the jar, lid and label adds $180 a month across these jars. Kitchen rent, insurance and the owner's pay come out of the month's gross profit. When a co-packer makes the numbers better is in salsa co-packers.
Get the calculator
Download the salsa 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 jar. Tomatoes cost twice as much in March as in August, the jar supplier raises prices, and a batch cooks down further than the last, changing every 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 tomatoes, peppers and jars 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.