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Learn about different pricing strategies for organic produce in the marketplace and how to determine the right prices for various market channels. Understand the importance of margins, mark-ups, and factors influencing pricing decisions. Get valuable recommendations for growers and discover key purchase factors for wholesalers, retailers, and consumers.
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Pricing right For the marketplace Deb Foote & Gunta Vitins SunOpta Inc. February 21, 2009
MARKET CHANNELS • Farm Gate • Farmers Market • Direct to Store • Direct to Restaurant • Direct to Processor • Through Distributors • Export
Margins • Distributors • Produce: 20 – 25% • Grocery: 25 – 30% • Retailers • Produce: 35 – 40% • Grocery: 35 – 40% • Meat: 25 – 28% • Dairy: 25 – 28% • Deli: 50 – 60% • Bulk: 40 – 50% • Frozen: 40 – 45%
Margin does not equal Mark Up Example: 20% distributor’s margin on 1 case of apples • Farmer’s selling price = $40 per case • Distributor takes a 20% margin = $40 divided by 0.80 (note: 100% - 20% = 80% or 0.80) • Distributor’s selling price = $50 per case ****************** 20% Mark Up = $40 x 1.20 = $48 (don’t compare apples to oranges)
Farm Gate(*Mark Ups perspective) • Selling Direct to Consumers: • Farmer’s Price: 95 – 105%* of retail • Consider costs: • Product & packaging • Labour • Structure & signage: road side stand or enclosed retail outlet • Selling Direct to Retailer/Restaurateur/Processor • Farmer’s Price: 50 – 80%* of retail • Consider costs: • Product & packaging • Labour
Farmers Markets • Farmer’s Price: 95 –100% of retail • Consider costs: • Product & packaging • Labour • Market fees • Transportation • Structure: tents, tables etc • Presentation & Signage • Scales
Direct to Store • Farmer’s Price: 60 - 70% of retail price • Consider costs: • Product & packaging • Labour • Transportation • Include distributor’s margin • Establish minimum order requirements • Standard packaging/caselots • Labelling – UPCs, PLUs, bilingual, organic stickers, twist-ties etc
Direct to Restaurant • Farmer’s Price: 70%+ of retail price • Consider costs: • Product & packaging • Labour • Transportation • Include distributor’s margin • Split cases; non-standard quantities
Selling to Distributors • Farmer’s Price: 45 – 55% of retail price • Consider costs: • Product & packaging • Labour • Transportation • Standard packaging/caselots • Labelling – UPCs, PLUs, bilingual, certification, organic stickers, twist-ties etc • Volume • Service costs per unit for farmer are lowest
Organic Produce Pricing • Highly volatile -- changes daily • Based on market supply & demand • Standard premium for organic produce does not exist • Follow market fluctuations when determining selling price • Volume deals for promotions • Local versus Imports
Key Purchase Factors: Produce Wholesaler – Retailer – Consumer • Quality: appearance, cleanliness, ripeness, taste • Price: competitive (supply & demand) • Supply: consistent, timely
Recommendations to Growers • Use sales history and market trends to plan for production • Discuss plans with distributors & retailers • Base volumes on sound projections • Set prices according to supply and demand • Follow market fluctuations • Communicate with your customer
Organic Grocery Products Must have: • Appropriate & appealing Packaging, labelling (bilingual, nutritional, etc), UPCs • Marketing Funds for: • Listing Fees • Advertising: Co-ops, In Store Specials, Flyer Costs • Product Demos • Guaranteed Sales • First Case Intro Offer (free fills etc) • Store Samples (after listing)
Questions? Contact: Deb Foote Deb Foote Organic Consulting 604-803-6476 organicdeb@shaw.ca Gunta Vitins VP Marketing, Pro Organics (604) 253-6549 1-800-461-1122 gunta.vitins@sunopta.com
