馃攳
How Much Does A Contract Juice Manufacturer Cost - YouTube
Channel: Synergy Food Group
[0]
Hey, it's Adrian from the Synergy
Food Group here and in today's video,
[4]
we're going to talk a little bit about
how much does a contract manufacturer
[7]
cost. Now this is the
million dollar question.
[10]
If you are delving down, investigating
about getting your product made.
[15]
Really, this is the one key thing
that you're going to want to know,
[19]
before you decide whether it's
worth investigating for you or not.
[24]
So how do you work out what your
product should cost from a contract
[28]
manufacturer? Now, unfortunately,
[30]
the answer to that is really going
to vary from product to product and
[34]
manufacturer to manufacturer.
So in this video,
[36]
I'm going to talk to you a little bit
about the ways that we would cost things
[39]
for somebody and about how you should
be asking a potential company to cost
[44]
things for you as well.
[45]
So the way that we like to do it here
at the Synergy Food Group is to get an
[49]
understanding of where you
need your end price to be.
[53]
So if you're already dealing with a
restaurant or a supermarket or a cafe,
[57]
and you're already selling your
product at a finished price,
[60]
or potentially you're already getting
your product manufactured somewhere else,
[65]
and you know what they're
charging you for the product.
[67]
We like to use that as a starting point.
[70]
Every business is going to
have really different costs.
[72]
So what you want to do is try and work
backwards from that finished cost,
[77]
understand how much labour is
going to be involved to make it,
[80]
or how much you can automate it.
[82]
How much are the ingredients going to
cost and the packaging going to cost to
[86]
make your product. And then from there,
[88]
you'll get a very clear understanding of
what margins left for the manufacturer
[92]
to be able to play with.
[93]
And then also what margins left for
you to be able to put on the finished
[97]
product as well. That will really
form the basis of us as a business,
[102]
knowing whether it's a product
that we're able to help you
[106]
manufacture. Now, if it's not quite right,
[110]
we will sit down with the customer,
[112]
and we will try and find
ways to bring that cost down.
[115]
Maybe there's different ingredients or
different packaging that we can use to
[119]
lower that cost.
[120]
Maybe we need to buy new machinery to
be able to make the product faster,
[125]
enabling us to have a lower labor input.
[127]
If we know what all of
those things are initially,
[131]
and we can work together
with our customers,
[133]
often we can find some efficiencies that
bring that price point to a point where
[138]
we can both work together.
[139]
Now, when you're really small and you're
making the product yourself and you're
[143]
selling direct to a cafe or a
restaurant, you might be selling,
[147]
let's use a juice for an example,
you're selling a bottle of juice for $3.
[151]
They're going to buy it
for $4 50. Fantastic.
[154]
You've made a dollar 50 margin now
in the early days of your business,
[157]
that's fantastic,
[159]
but there's a lot of margins that you
need to consider as you continue to grow.
[163]
You need to build these margins into
your end price to make sure that the
[167]
product is still viable for the
customer whose hand you want it in.
[171]
As an example, you may be wanting
to buy a bottle of juice from your,
[175]
from your manufacturer at $2 a bottle.
[178]
Now you're going to want to make
some money on top of that as well.
[182]
So let's say you make
50 cents here at $2 50.
[185]
If you're going to work
with a distributor,
[187]
they're going to want 30% of that margin.
[190]
So you're gonna have to add another 75
cents to that price for them to be able
[194]
to get the money that they need.
[197]
They're going to want to sell it
to a supermarket or a retailer.
[200]
That retailer is going to want
to make another 50% margin.
[203]
So now suddenly you're
at the $4-$4 50 mark.
[205]
Perhaps that's too expensive
for the end consumer.
[209]
So you then need to work backwards and
try and work out where you can get some
[213]
efficiencies in the manufacturing, to
be able to make all those numbers work.
[218]
Knowing what that end price
is, will help, you know,
[220]
whether the contract manufacturing
price is right for you.
[224]
So when you're working with
a contract manufacturer,
[226]
they're really three key things that
they're going to be charging you for.
[230]
They're going to be charging you for
the cost of goods. So the ingredients,
[234]
the packaging, the labeling.
[235]
They're going to be charging you for
the time that is spent to make the
[240]
product. So the labour,
[241]
the people and then they're going to be
charging you a very small percentage,
[245]
I guess, for their overheads.
And then at the end of the day,
[248]
they need to make some money on
top of those three costs as well.
[252]
So having a clear understanding of how
they break down those costings will
[256]
enable you to be able to find some
savings along the way as well. Now,
[260]
if that costing doesn't work,
[262]
I can speak on our behalf
here at Synergy Food Group.
[265]
We would normally sit down
with our customer and try
and analyze where we could
[269]
make potential savings to make it work.
[272]
If we know you want to be
buying it from us for $2 a unit,
[275]
we need to look back and see, is
there any savings that we can make,
[279]
or compromises that we can make
in the ingredients that we buy,
[282]
or the packaging that we're using to be
able to meet that price point that you
[286]
want to purchase it for. Now,
[288]
then it's just a simple matter of
communicating between the two parties and
[291]
deciding whether you're willing to make
those compromises and for the contract
[296]
manufacturer,
[297]
whether they can make those compromises
to get the price point to a point where
[300]
it works.
[301]
For everybody.
[302]
It's also really important you're aware
of any potential capital outlay that
[307]
you're going to have to contribute to,
[308]
for the contract manufacturer
to be able to make your product.
[312]
A lot of companies might say,
[315]
look we can make the product for you,
[317]
but we're going to need to
invest in some new machinery.
[319]
And if you want us to make it for you,
you'll have to purchase that machinery.
[323]
It will belong to you, but we'll use
it to be able to make your product.
[327]
Maybe that works for
you, maybe that doesn't,
[329]
but it's definitely a consideration that
you're going to have to think about if
[333]
you're doing something that's outside
of the scope of what they would normally
[336]
do.
[336]
So another opportunity to consider if
the contract manufacturer can't get their
[341]
price down is to potentially haggle
with your distributor or your retailers
[346]
and get them to take less of a margin.
[348]
There's definitely been instances in
our experience where the price that we
[352]
offered, we couldn't budge on that,
[355]
but we were able to make product for our
customer by helping them negotiate with
[358]
their distributor or their
retailer to take less money,
[362]
to make all the numbers
work along the way.
[364]
So don't be afraid to haggle because
it can definitely help make the whole
[368]
puzzle come together. In summary,
[371]
although I don't have a perfect recipe
of what it's actually going to cost you
[376]
to make a product,
[378]
what I would say is make sure that you
really communicate with your contract
[381]
manufacturer,
[382]
make sure you've got somebody
who's willing to negotiate
and willing to look at
[387]
other opportunities to make the
numbers work. If you do that,
[391]
it'll serve your business
well going forward.
[393]
We certainly do that here at Synergy Food
Group and if you'd love to have a chat
[397]
to us about how we can make your
product or bring your products to the
[402]
next level, you can reach
[403]
us at www.SynergyFoodGroup.com.au
Most Recent Videos:
You can go back to the homepage right here: Homepage