Jonathan Milo Leal, a 20-year food maker, understands how costs and pricing are essential to a specialty food business’s success. During the SFA Maker Prep webinar, “Understanding Margins and Pricing for Specialty Food," he will share his wisdom to help budding businesses learn how pricing works, the generally accepted standards for margins, and how to create effective price sheets. The webinar will take place this Thursday, Oct. 20.
SFA News Daily recently spoke with Leal about the topic.
Are there any mistakes you often see specialty food businesses make when pricing their items?
The biggest mistake I see is when people make products in-house to get started and don’t properly cost their labor/overhead. Meaning that when they get to needing a co-packer, they don’t have the margin built in, and their suggested retail prices go up considerably as a result.
What is the most important consideration when creating a price sheet?
The most important thing is to be accurate, and include all the needed info. Also make sure you are not creating different price sheets for the same class (wholesale, distributor, etc). Everyone in a class should have the same pricing.
Do you recommend any materials, programs, or resources to serve as a companion when working out a specialty food business’ margins and pricing strategies?
For resources, there are many–SFA, attending shows, networking, researching competitors, buying SPINS data, and hiring experienced consultants. But bottom line, do your own research and know your category really, really well.
How important is pricing an item similar to that of a competitor?
Pricing versus competition is tricky. You have to be careful what you’re comparing yourself too. If you think you should be able to compete with Walmart BBQ, for instance, that’s very likely unrealistic. If you do compare, make sure you’re finding brands in the industry similar to yours. And at the end of the day, don’t be afraid of costing more–95 percent of the work in this business is selling, and if your product is good and unique, it will likely sell.
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