Feedback on retailer box request

[Tamyra_Paunchy]

Hi all! I'd love it if you'd take a moment to share feedback with me. I'm working on a custom order for a potential retail customer. Normally my small business sells bottled teas and lemonades as singles only. This customer has asked if we can create an 8-pack for their store. I'm working on it but having some trouble with the design. Can you tell me which you like best and why? Are both boxes clear on what's inside - which is 8 12 ounce bottles of lemonade, 4 of which are classic lemon lemonade and 4 of which are red raspberry? The second box image is the box, flattened. Additional feedback welcome also. I'm pretty new to retail still (in under 30 stores) so this is a big step for me. Thanks in advance! 

[gmcgirr]

Hi Tamyra, the designs look great. I like the flat option design a bit better as it is more clear to the consumer what is inside the package, especially if this is sitting on a shelf and only shows the customer one side of the package.

I would suggest a few tweaks. First, I don't think you need the Paunchy Lemonade name listed twice. Assuming that is the brand, you can give it higher visible priority at the top in a bigger font and then name the two different flavors next to the fruit images. If I understand right, they are both lemonade, so for the variety pack wording it could be confusing to have one listed as lemonade and one as red raspberry. I might go with Lemon and Red Raspberry. I love the colorful 8 but that could be confusing too. Maybe put a 4 in each color on each side and add a starburst (or similar) with "8-Pack". Great work and best of luck!

[Tamyra_Paunchy]

Thanks so much, Graham! Yes, you've got it right. The brand name is Paunchy Elephant and both items in the box are lemonades. I'll continue to work on it and definitely try out a few of the suggestions you made here. Thanks again!!!! Much appreciated. 

[GourmetOnWheels]

@Tamyra_Paunchy That looks pretty nice. Keep in mind selling to retail is called wholesale make sure you know your food cost. 

That includes all your costs for ingredients, the bottle, the cap, the product labels, and the box. Your total food cost determines your selling cost. Like if it the total food cost is 3.50, you sell it at retail for 14.00 and wholesale for 7.00

René

[Tamyra_Paunchy]

Ok, thank you so much! I'm struggling with this a bit. The customer wants to pay as LITTLE as they can so they can resell it wholesale. They are uncomfortably close to my cost, especially since they asked for this custom box. 😞 Sigh - on the one hand I don't want to lose out on the deal. On the other hand I'm so worried that with any small change to my costs with the market as crazy as it is right now this could go from barely profitable to a lose-lose deal for me. I'll have to keep a really careful eye on my costs. that's the only thing I can think of. Still. A bit scary! 

[PartyManiaMD]

Yea definitely stick to your guns if you're making the product, it sounds like they want to distribute it if they're not selling it at retail price? 

The real question is what the market will bear, it's a pipe dream to sell a product $7.00 wholesale if other companies are selling the same product at retail for $7.00.

Unfortunately retail is a crowded market when it comes to a lot of products (yet seriously uncrowded when it comes to certain lines I'm looking for), and what you consider a reasonable markup might not work when it hits the shelves, especially if discounting is involved.

If I have to mark stuff down 50% off to move it I can't pay 50% of the retail price to the wholesaler.

A realistic cost of 3.50, assuming you have to make $3.50, would be $7.00 cost and a retail price closer to $17.50 before discounting (using a 2.5 x multiplier).

The only thing you can do is determine the total cost to bring it in and figure out what you're comfortable selling it to the retailer for, if they can make money off of it they can make money off of it, if not they won't buy it. 

I hate to say there are companies I've bought from that turn out to be duds and those are 1 off orders that I heavily discount to get rid of their products, others I order 1-10 times a month and their stuff isn't discounted.

[Tamyra_Paunchy]

They're not selling it at retail price, no. I wish I was able to sell an 8-pack of organic anything for $7. Right now, my 12 ounce bottled lemonades (esp something with an additional flavor like raspberry) costs me almost $2 to make. $.45 for the bottle, $.05 for the lid and shrink wrap, then another $0.3 for the labels, another $0.10/bottle for the box, and about $0.95 for ingredients (water, sugar, lemons, raspberries). Add another 10% (?) for labor and that's nearly $2. This customer wants to buy from me, then sell (wholesale) to their customers for less than $20 for an 8-pack. Think Costco/Sam's club type setup. They also need a 15% margin. Even if I sell to them at $2.10, allowing them to resell at $19.79 for an 8-pack of lemonade (which I think the market will bear?) that's barely a 13% margin for me. My saving grace may only be that in the box, they want to do a variety pack. So half of the box would be the pricer raspberry lemonade, while half would be plain/classic which has a cost that's closer to $1.6-1.70 for me, which gets me closer to a 20% margin if my math is right. That's still really low. All the store would need to ask me for was a promo or in-store demo where I gave away 10-20 cases and I'd be losing $. 😞 Uff - some days this is so hard. 

[PartyManiaMD]

The only way that would make sense is if they agreed to large minimums and if you can fulfill. If you can do 100,000 units at 13% margin's not bad if you're not already at capacity.

Sometimes the order is too good to be true and you're better off finding retailers that will pay you a better margin. 

Costco/sams club and even walmart create unrealistic price points that diminish the ability of retailers to survive and the worst part is they eventually jack up their prices once they run competition out of business.

One of my pinatas we sell for $19.99 walmart was selling for $44.99 on their website and I have one location. They're gouging because they've conditioned the buyer that they're the cheapest game in town.

[Tamyra_Paunchy]

Ooh. I hadn't thought of that - asking them to commit to an order min. We could do 100,000 but yes, that's absolutely at our max, since lemonade is typically a Summer item. They'd have to order the 100,000 units between June and late September/October, which would compress the production down to 4 months roughly. We'd have to be able to crank out almost 8 pallets a week to do that, which would be tough (but not impossible). Eeek! 

Thank you! I just emailed the buyer asking to set up another call. I will definitely ask this and report back. Appreciate you!

[GourmetOnWheels]

@Tamyra_Paunchy Your actual food cost is $2.04 if you sell it to them at $2.10 per bottle you are making 2.94% IE you are losing money

If you sell it to consumers  (Retail) you need to take your food cost per bottle off $2.04 divide that by 0.25 and you sell it at $8.20 That gives you enough money for labor, taxes, suppliers, and income. You make $6.16per bottle

If you sell it to a distributor, who will sell it to retail (wholesale) you sell it for $3.40/bottle. Take the 2.04 divided by 0.60 is $3.40 You make $1.36/Bottle and that only works if they buy hundreds of bottles, and re-order.

I would take a good look at your food cost as the pricing of your cost seems low.

René

[Tamyra_Paunchy]

Ok. Thank you! It's a 12 ounce bottle of lemonade though so I can't sell it for $8.20/bottle. Right now, in one of the small, independent retail stores that buys from me, it retails for almost $7. I am having the same problem there, though. I'm selling to a distributor for $2.80. The distributor has a 40% margin! 😮 They resell to the retailer, who then resells to their end-customer. But even at a $2.80 distributor cost, for me that's so close to margin when I add in things like labor, taxes, and the constant request for 'promos'. I'm like promos!? How am I supposed to offer promos when I'm barely able to pay rent without a second job? I'll take another look at costs and then see, to your point, if this really is one of those 'too good to be true' deals that in the end will NOT turn out to be in my favor. Thanks again. 

[PartyManiaMD]

Yea it definitely seems like you're between a rock and a hard place unless you can:

A) Cut out the middleman, sell directly to the retail stores.

B) Lower your costs to $1 so you can sell it to wholesalers for $2 and they can sell it to retailers for $3-4. (Rounding here, obviously based on cost/margin the numbers are different.

That's the problem with the retail space and beverages in particular, you can't really raise prices so the only place to make money is by cutting your costs or cutting out the middleman.

Selling to a distributor is what's killing your margins, especially when it's costing you $2.04 at best case scenario.

[GourmetOnWheels]

I agree with @PartyManiaMD Cut out the middleman and sell to retail so your margin is better and you food cost is at 1.94 (selling without the nice box) sell it at $3.88 they then sell it at $7.75 - $8.00.

And sell it direct to consumers via delivery and farmers' markets for $7.75/bottle then you do not undercut the retailers that you sell to.

When you get traction there, than the big retailer will come knocking and then you have the upperhand in negotiation.

Do not go to distributors yet, nor to Sams Club types of stores

René

[Tamyra_Paunchy]

Yes, I wish I could cut out the distributor. The problem is that a lot of retailers (most mid to large-sized ones especially) won't buy direct. 80% of the wholesale accounts we have currently require distributors. I'll definitely revisit my costs though. It's just hard when everything is increasing in price, to be pressuring suppliers for discounts right now.

[PartyManiaMD]

Yea I could see that. I guess it comes down to how many bottles you can make a day, the amount you need to sell to turn a profit after all costs, rent, labor, packaging, is taken into account, and whether it's worth it or not.

If you can only make 1,000 bottles a day then it's 1,000 bottles no matter what. (For example).

1,000 x $0.74 is $740 ($0.74 per bottle from distributor)

1,000 x $1.50 is $1,500 (Assuming a $2.04 cost and selling each bottle for $3.54)

I don't know what kind of production volume you can hit and also how hard it would be to sell direct based on the limiting factors.

Keep in mind that cogs are going up so it doesn't really matter how many bottles you sell a distributor unless you can stay ahead of inflation. 

[GourmetOnWheels]

@Tamyra_Paunchy If you sell it to the consumer you sell it for $7.75/bottle (I forgot to deduct the box cost) IE a 75% gross margin do not sell them a case of 8 that would be too costly.

Anyone that you sell to that sells to consumers (Retailers) you sell it for $3.88/bottle IE a 50% Gross Margin, not in the expensive case. Use a plastic crate that they return to you. Charge 5.00 for the crate (or the actual crate cost if higher than 5.00) if returned, they get the 5.00 back.

Without the 8-Pack box cost your food cost is $1.94/bottle

If you are selling it for $2.80/ bottle is that with the nice box or without?

If it is with the box you are making $0.76 per bottle IE a Gross margin of 27.1% A good margin, if they buy 100,000 bottles or 12,500 cases of 8 each.

If you are selling it without the box you are making $0.86 per bottle IE a Gross margin of 30.7% That is the right margin for regular wholesale without the 8-pack box

René

[Tamyra_Paunchy]

When I sell it to the distributor for $2.80 that's without the fancy, overpriced box. I put the bottles back in the original 6-pack cardboard box that they're in when I buy them, which is my preference, and sell them that way. The new customer wants an 8-pack though and a custom box... but of course doesn't want to spend custom $$. 

Our max capacity is just about 1200 bottles a day and that's a very long day, though with just a few people working. With an automatic labeling machine and at least 1 other person we may be able to double that. To get the cost of the fancy box down to $0.84 the printer is asking me to guarantee 25,000. 😮 25,000 for an 8-pack is 200,000 units. I'm going to see if this customer will agree to that. If they do not, I think it would just be one more complication and perhaps a sign that this deal just isn't a good one for our small biz (at least not right now). 

[AskRalph]

I have turned down deals when they do not feel right.  I would better stick to my system then go to far outside of it.  I am a delivery guy so when a customer says in addition to delivery I also need you to A) set up or B) Pay for items then bill me, the answer is no. I am not a bank and I do not do setUp even if easy as their are liabilities I take on. 

Another example is a guy was on the floor at the bank the other day, the manager and supervisor could have lifted him but if they did, he collapses again they incur liabilities.  If Paramedic whom were called lift him, they have assessed him and know possible consequences.   It is so tempting  but if it does not go correct you are liable.  Go with your gut and instinct plus stay within your Lane.  As far as getting larger boxes, check outside your inner circle.  Someone may be able to fit that need ?

[GourmetOnWheels]

@Tamyra_Paunchy When you sell it to the customer that wants the 8 Pck that is called "wholesale" if they want to sell it to consumers that are called "retail". If they want to sell it to other businesses (wholesale)

You just need to keep focused on what your food cost is and your margin selling to them. You cannot loose margin as they want to sell retail and wholesale.

Is that customer a retailer?

René

[Tamyra_Paunchy]

The customer is a big box retailer but they sell at wholesale prices. Think Costco/Sam's club. They're selling both to other businesses and to the general public (at the same price). We do have some retail customers that purchase from us and the resell at retail price. They're smaller, independent grocery stores. But this customer in particular is a larger chain store. Essentially they want to purchase from me at distributor cost and resell to their own customers at wholesale. 

[Twiggy]

Can you not change the fold piece so it replicates the top where the raspberries are on the fold is so you don't see the orange ?