CONSUMER PRODUCT INDUSTRY PRACTICIONERS:
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Working from SRP (Suggested Retail Price) backwards, I see the following for FMCG profit margins:
- Anchor price/SRP: Start with SRP to your most expensive channel – which represents your top-most anchor price. The markup from you as vendor to retailer is 50-60% to the specialty/top priced retailers. For non-specialty channels – like drug, mass, grocery, club, figure 45%, 30%, 35% and 14% respectively.
- Tradespend: But, you have to figure an additional 13.5% average of your wholesale price in tradespend fees that you pay to the retailer (payment terms, damaged product allowances, in-store marketing allowances, etc). That is average across all channels. It will be highest in drug and lowest in club/mass.
- Broker fees: If you use them, then it will be as low as 5%, or could be as high as 12% of your wholesale price, depending upon the channel and if you are a startup or new brand, they will be on the high side.
- Distribution: I assume 30% of wholesale price, but that may come down depending on the channel.
- Co-manufacturer: If you manufacturer through a co-packer (you contract it out), assume they want a 20% net profit margin. So, take your cost of goods sold (COGS) and figure 20% of that is net profit margin to the manufacturer (product and packaging).
- Transportation: Assume 5-7% domestically of your wholesale price, but this is if you know how to optimize your logistics, otherwise, assume 10-12%. For international shipping, I assume another 3%.
- Warehousing: assume 1% of your wholesale price.