November 23, 2008 on 5:15 am | In mybachcars.com |
Markup on coffee, popcorn, etc.
''How much does that REALLY cost?'' I need to find the markups on
common items in our lives such as designer coffee, movie popcorn,
caesar salads in restaurants, that kind of thing. I need four such
items that show obscene markups on things we all pay for willingly --
if possible, including rough associated costs (transportation, etc.)Hello jhabley,
Thank you for your question.
I recall an article, perhaps in Inc or Entrepreneur in the mid 80's,
that claimed that the two highest profit products ever (or at least
for a small business) were popcorn and balloons. Vendors at flea
markets that worked only two days a week were reported as earning over
$50,000 a year NET - and this was mid 80's. Popcorn came in at 98%
profit and balloons just a tad behind that.
TheDesertSun.com confirms what I am sure you already know:
http://www.thedesertsun.com/news/stories/local/996021099.shtml
"Cinemas' profit margin tied more to popcorn than ticket sales
Valley outlets try to boost sales with better concessions
By Carla Martinez The Desert Sun July 25th, 2001
Sure, seats are getting more and more comfortable in movie theaters.
But that isn’t the only bottom line that matters.
When a customer buys a movie ticket, the theater only keeps about 4
percent of the ticket price -- barely enough to cover employee
payroll, said Ted Hane, a manager at the Mary Pickford Theatre in
Cathedral City.
The rest of the ticket price goes back to movie distributors, Hane
said.
Popcorn, soda, candy and other concession sales cover profit and costs
of operation, said Michael Bazdarich, director at the University of
California, Riverside’s Forecasting Center at the A. Gary Anderson
School of Management..."
FunFoodProducts.com reports profits on popcorn as:
http://www.funfoodproducts.com/fundraising/
POPCORN Low End High End
Profit Margin Profit Margin
Popcorn - Small Size Package 82% 87%
Popcorn - Medium Size Package 88% 93%
Popcorn - Large Size Package 88% 92%
Popcorn - Gourmet Carmel Corn 73% 84%
Popcorn - Gourmet Glazed Corn 85% 89%
Compare this to the numbers for other common candy and treats:
Frosted Nuts 72% 76%
Cotton Candy 85% 94%
Sno-Kones 92% 97%
Shaved Ice 88% 93%
Frusheez 69% 84%
Funnel Cakes 75% 85%
Corn Dogs 82% 89%
Flowerin' Onion 79% 86%
Ribbon Fries 72% 80%
Hot Dogs 62% 81%
Pizza 69% 75%
Nachos 47% 64%
Belgian Waffles 62% 77%
Ice Cream - Waffle Cones 84% 90%
Candy Apples 80% 88%
Caramel Apples 60% 76%
You will find an interesting cost analysis on pre packaged microwave
popcorn from the Christian Science Monitor:
http://csmweb2.emcweb.com/durable/2001/07/23/p11s1.ht
"...A three-package box of microwaveable popcorn contains about 10
cents' worth of kernels. Additional costs include 10 cents for the box
itself, 10 cents in labor costs, 15 cents for oil, and 15 to 20 cents
for the microwave-ready bags. Shipping costs vary from a few cents to
a quarter.
Overall, the kernels make up a very small percent of the final price
tag, which averages $2.14.
According to the United States Department of Agriculture, the "farm
value" of an average food product in the US accounts for 20 percent of
its final cost. The farm value for popcorn is less than five percent.
With material costs so low, and efficiency on the farm improving each
year, popcorn vendors make higher margins than do many other food
manufacturers.
About 40 cents on each dollar sale generally goes to the manufacturer,
wholesaler, and retailer as profits and compensation for marketing
costs.
Big-name brands draw significantly more. Ramsey Popcorn, the
ninth-largest vendor of microwaveable popcorn in the US, says that its
Cousin Willie brand costs 60 cents to produce but usually sells for
about $1.30..."
So, even the packaged variety enjoys margins of 57-70%.
E!online quotes their own profit numbers on movie concessions:
http://www.eonline.com/News/Items/0,1,3326,00.html
"...Concessions, on the other hand, are virtually pure profit for
theater operators. The Post reported that as much as 80 percent of
sales at the concession stand go directly to the bottom line.
Do the math: If a soda sells for $3.25, the theater owner pockets
$2.60. Get a "best value"-size tub of popcorn for $5 and the theater
keeps $4..."
Hmmm, just writing about all this makes me thankful once again for the
invention of the DVD.
IndustryBooks.com discusses margin in coffee:
http://www.retailmerchandising.net/coffee/1999/0899/899pains.asp
"Sales Mix Analysis, Part I
How to determine what your profits should be.
by Kent Holloway
In the following months, I will review detailed examples of financials
one could expect to achieve in a typical owner-operated specialty
coffee retail operation (espresso bar vs. drive-through vs. espresso
cafe).
To me, an ideal specialty coffee retail concept boils down to
expertise and margins. The cost of goods sold (COGS - operator's cost
of ingredients and products sold) on a sandwich or fine dessert is
60%, if you're careful, while the COGS on a latte is only 23%.
(Remember, as in golf, the lower the number, the better.)..."
There is an excellent chart of assumptions on costs:
Assumptions
Daily sales goal $1,000
Cost of coffee $7 per lb.
Shots of espresso per lb. of coffee 62 (11 cents per shot)
Cost of milk $3 per gal.; 128 fl. oz. per gal = 2 cents per oz. (9 oz.
per "Double-Tall Flavored $2.75" drink)
Flavored Syrup $3.60 per 24-oz. bottle (3/4 oz. per drink = 11 cents)
Single Shot 1 oz. of coffee by volume
Ounces of drip coffee per pound of coffee 360 (23 cents per 12-oz.
cup)
Food and non-coffee beverage markup 100% (50% margin)
Food shrinkage and supplies 10%
Hours of operation 14 (5:30 a.m. - 7:30 p.m.)
You will want to see the entire breakdown on costs and profits that
follow in this article. But just for example, $1,000 of espresso
drinks can gross $770 based on this analysis:
Double-shot flavored espresso-based drink (coffee 22 cents, milk 18
cents, syrup 11 cents, cup 6 cents, lid 3 cents, condiments/supplies 3
cents)
Retail $2.75
Number sold 365
Cost of goods 23%
Gross profit $770
A few other noteworthy numbers, on packaged coffees here:
http://rwor.org/a/v23/1110-19/1110/coffee.htm
"...The coffee industry is divided into several branches of activity:
growers, exporters/importers, shippers, roasters, and retailers. Only
about 8% of the price of coffee in a U.S. supermarket goes to farm
labor, and another 5% goes to the grower. But 67% goes to the company
that does the roasting, grinding, packaging and shipment, and 11% goes
to the retail store...."
Interesting breakdown.
Balloons:
I first came across Sparklets, which is a unique balloon product and
commands a little less margin to the dealer as noted at TK
Innovations:
http://www.tkinnovationsinc.com/sparklets.html
"Sparklets are a unique balloon made from a special elastic plastic
that protects your latex balloons. Sparklets provide retailers with
high profit margins, added value to their customers, and something
unique to offer. Create new repeat customers that keep coming back for
these amazing, longer lasting, forever shiny, beautiful balloons!
US PAT No. 4966568 ; US PAT No. 5041046...
...Sparklets not only yield high profits but amaze your customers with
the longer float times and magical look. You can expect 70% margin on
the balloon as well as look forward to a returning satisfied customer.
The NEW Sparklet balloon is rarely offered at super markets and is so
new, you may be the first in your town with them! Most retail shops
are charging anywhere from $8 to $12 per Sparklet simply because they
last so long and look so great! By adding on extra balloons and fancy
ribbons, you can expect to reach even higher margins because you have
just turned balloons into an arrangement that expresses special
messages and emotions..."
Cove Services has a great analysis of balloon pricing and profits:
http://www.coveservices.com/pricing.htm
"...In order to best illustrate cost pricing, I'm going to lead you
through a real-life example from my business history. "Once upon a
time," I owned a balloon store in a local mall. I retailed party
supplies and novelty gift items, and provided a decorating and party
planning service, but my 'staple' was a basic balloon bouquet, and I
had to determine how to price it.
The balloon bouquet consisted of seven latex balloons and one mylar
(foil) tied together with ribbon to a weighted base. Follow me now as
I lead you through the pricing process…
Latex balloons come in packages of 144 (12 dozen, called a 'gross' of
balloons). Let's say that the average cost of a gross was $20. Seven
balloons would only be 1/20 of that cost, or a total of $1. The mylar
balloon, on the other hand, was more expensive – the average cost of a
single foil was $1.30.
The helium to fill the balloons was another story – by dividing the
cost of a tank of helium by the number of balloons it would fill, I
determined that my helium cost per balloon was about $.50. Eight
balloons at $.50 equals $4 worth of helium.
Then I need ribbon to tie them all together. By dividing the cost of a
spool of curling ribbon by the number of balloons I could tie up per
spool, I determined that each bouquet's ribbon cost was ten cents.
Let me diverge here for a moment, and talk about this ten cents. You
may say to yourself, "Oh, for heaven's sake, I'm not going to take
every darn dime into account." Well, I'll tell you what – if I sell 6
balloon bouquets a day, 6 days a week, 365 days of the year, and I
don't take that dime into account, at the end of the year I would have
thrown away $131.40! Are you willing to do that?
Okay, back to the balloon bouquet. I just need one more thing now to
complete it, and that's the weighted base to hold it all down. I used
a variety of weights, depending on whether the bouquet was for a
child's third birthday, or for a centerpiece at a very posh wedding. I
always purchased weights by the carton (or in some form of 'bulk'),
and my average cost per weight was $.50.
So … how much has it cost me to put together this basic balloon
bouquet so far? Looks like $6.90 to me!
Now I have to determine labor costs. In order to do that, I have to
take into account two things:
--What am I worth?
-- How long does it take to make a balloon bouquet?
I decided that I was worth $12 per hour, and I knew that I was capable
of putting together 6 balloon bouquets per hour. So what was my total
labor cost for one balloon bouquet?
If you said $2, you're catching on! So now the cost of the balloon
bouquet has risen to $8.90.
But wait – I have overhead expenses! Rental on my little shop at the
mall, all-inclusive, was $1000 month. (And this was ten years ago!) In
order to make each balloon bouquet pay its share of my 'piece of the
rock,' I had to determine two things – how many balloon bouquets I
would sell in a month, and what percentage of my total business
consisted on balloon bouquets.
My calculations determined that fully 50% of my over-all business came
from balloon bouquets – so they needed to pay for 50% of my rent cost.
In other words, $500. And, as I mentioned earlier, I sold
(approximately) 6 per day – at 31 days per month, that's 186 bouquets
monthly. If you divide $500 by 186, you'll discover that the
'overhead' cost to be added to each and every balloon bouquet was
$2.15.
Still with me? If so, you know that the cost of that balloon bouquet
has now risen to $11.05.
I'm not done yet. Now I have to determine an approximate cost for all
my other fixed and variable business-related monthly expenses – car
insurance and fuel, taxes, freight and delivery expenses, etc., etc.
I calculated that all other biz-related monthly expenses came to $375,
of which those balloon bouquets had to pay half, or approximately $1
per bouquet.
So the final cost calculation for a single balloon bouquet comes to
$12.05.
Now here is another place where women tend to err in their pricing
decisions. We are tempted, now, to sell that balloon bouquet for about
$12, because we've even taken into account a generous amount for our
labor.
We'd be sorely cheating ourselves if we do. Indeed, $12.05 is simply
the break-even price for that balloon bouquet.
I don't know about you, but I went into business to make a PROFIT.
I've made the investment, I put in the long hours and the sleepless
nights, I take the risks – I deserve a profit! If I just wanted to
make a wage, I can go to work for someone else!
Besides, particularly if your business grows to the point where you
decide to hire help (as mine did), then you need to cover that labor
cost – it's not going in your pocket then, AND you have the added
responsibility of an employee.
So … would you like to guess at what I sold that balloon bouquet for
now?
Every industry has a "mark-up," which is dictated by several factors –
some of which we'll look at more closely in a minute. I decided to
make my mark-up 75% -- so the balloon bouquet retailed in my store for
$21.95, giving me a gross profit of $9.90 per bouquet.
Sounds good, doesn't it? That means that I made a clear profit of
$1675, monthly, on those balloon bouquets. With no apologies or guilt.
Know why? Because most self-employed folks don't have medical (or even
sick leave) coverage, or pension plans, or daycare subsidies, for
example. And remember – it was my investment, and my risk. And my
business prospered..."
Imagine how much higher the profits for the mylar balloon seller at
the flea market or zoo on the weekends.
And in a similar manner, shaved ice seems to be another high profit
margin product:
http://www.realhawaiianice.com/benefits.html
"High-Profit Margin and No Franchise Fee
Each serving retails for $1.50 & up and cost is only 16 cents. If
you've been considering go into business selling Hawaiian Ice, do not
hesitate, it is the highest profit margin business in the shaved ice
industry..."
...Hawaiian Shave Ice can be sold in virtually any location. It can
be served from hand-cart, hut, shack, and trailer-cart. It is ideal
for carnivals, fairs, fiestas, sporting events, and amusement parks.
If you already have a business, you can increase your customer traffic
and profits with Hawaiian Shave Ice. Shave Ice is an excellent
addition to an existing Ice Cream Parlor, Yogurt Shop, Retail Outlet
as well as Restaurant..."
Tropicalsno.com notes:
http://www.tropicalsno.com/info/question.html
-High return on investment. . . payback measured in days and weeks,
not months or years.
-Low start up cost. . . very limited start-up cost and supplies are
required.
-Low maintenance cost. . . our machines are built for commercial use
and are very reliable.
-Low overhead. . . your shave ice business can be operated in a small
location.
-Low payroll. . . one or two employees can operate a shave ice
location.
-High markup. . . 400% - 800% is normal.
-Low cost of goods. . . typically 20% - 25%.
While Coolies.ca has this to say:
http://www.coolies.ca/catalog/
"...Shaved ice offers a wonderful business opportunity to the
entrepreneur. The profit margins are extraordinary and the product is
fun, refreshing, fat free and no fuss. You won't believe how easy it
is to make money!..."
Even on a rental business model, snow cones are highly profitable as
shown at this school page in Australia:
http://www.fernhillss.qld.edu.au/pandc.html
"SNOW CONES
Machine Hire $70.00 payable when booking
* Bond $50.00 cash payable when picking up
Snow Cone Cups $15.00 per 200
Spoon Straws $7.00 per 250
Syrups – Raspberry, Blue Lemonade, Cola & Green Ice
3 Litre containers with pumps (returnable) $15.00
1 Litre containers (returnable) $6.00
1 bag of party ice (5kg) will make approx 30 snow cones
If you sell 300 snow cones the cost per unit is .56 cents, the usual
selling price is $2.00..."
Even with a machine rental for the day, the margin approaches 75% and
is higher on a permanent business basis as the cost of equipment is
amortized over a longer period of time bringing the daily equipment
cost to just a few dollars a day.
Search Strategy:
popcorn +margin OR markup
coffee +margin OR markup OR profit
balloons +margin OR markup OR profit
"mylar balloon" +profit OR costs OR margin
balloon vending +profit OR margin OR markup
"highest profit" +margin +products
"snow cone" +margin OR profit OR cost
I trust my research has provided fun and interesting insights into the
costs and profits of some common foods and items. If a link above
should fail to work or anything require further explanation or
research, please do post a Request for Clarification prior to rating
the answer and closing the question and I will be pleased to assist
further.
Regards,
-=clouseau=-
edit