Pricing rightFor the

marketplace

Deb Foote & Gunta VitinsSunOpta Inc.

February 21, 2009

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MARKET CHANNELS

Farm GateFarmers MarketDirect to StoreDirect to RestaurantDirect to ProcessorThrough DistributorsExport

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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%

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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)

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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

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Farmers Markets

• Farmer’s Price: 95 –100% of retail

• Consider costs: - Product & packaging- Labour- Market fees- Transportation- Structure: tents, tables etc- Presentation & Signage - Scales

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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

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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

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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

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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

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Key Purchase Factors: Produce

Wholesaler – Retailer – Consumer

Quality: appearance, cleanliness, ripeness, taste

Price: competitive (supply & demand)

Supply: consistent, timely

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Recommendations to Growers

Use sales history and market trends to plan for production

Discuss plans with distributors & retailers

Base volumes on sound projectionsSet prices according to supply and

demandFollow market fluctuations Communicate with your customer

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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)

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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

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