happyhousewife Posted 13 Oct 2011 , 5:17pm
post #1 of

First off, I am so sorry if this topic is elsewhere!

I have recently started a home bakery business in Texas and am baking a chocolate gluten-free tiered baby shower cake to feed 50. I am struggling with the pricing since this is my first go at gluten-free. I do know that the ingredients are more expensive.

Anyone have any advice for me?

I would so appreciate it!

Thank you!

14 replies
jason_kraft Posted 13 Oct 2011 , 5:36pm
post #2 of

I run a bakery that specializes in allergy-friendly cakes. We price GF cakes about 15% higher than non-GF cakes due to the more expensive ingredients, but our prices are higher across the board because the baking processes necessary to ensure there is no cross-contamination means extra time for cleanup and limits on how many orders can be made on a particular day.

For example, if you've used flour in your kitchen you need to wait at least 24 hours before working with any GF products or ingredients, since there may still be airborne flour.

happyhousewife Posted 13 Oct 2011 , 5:45pm
post #3 of

Thank you for the information! I will be sure to bake the cake when I am sure the kitchen is flour-free, which shouldn't be a problem! Thank you for your 15% advice! I appreciate it!

jason_kraft Posted 13 Oct 2011 , 5:58pm
post #4 of

No problem, just make sure to follow all the relevant procedures to avoid gluten contamination, here is a list:
http://celiacdisease.about.com/od/cookingglutenfree/a/crosscontaminat.htm

You'll also want to check your ingredients to make sure they are not processed on shared equipment with gluten.

Annabakescakes Posted 16 Oct 2011 , 2:35am
post #5 of

When I first did a gluten free I charged 10% more, then got the supplies and was floored! I used a "mix", which was only about 4 ingredients, and it was 4 times more in cost of a flour mix, for half as much. So 8 times higher for the "base" and then other ingredient costs. My regular cost is .40 a serving, but I charge $2.75, so I took $2.75 - .40 = $2.35 for the "labor". Then the gluten free cost is about $1.55 a serving + $2.35 for labor = $3.90. But I an thinking of making it $4.25 because of the extra work involved making sure every last molecule is gluten free. My other option is tring to reduce ingredient cost and charging the same, or a tiny bit more.

Jason, I know youy make your own "mix". What does it cost you per serving for ingredients alone?

jason_kraft Posted 16 Oct 2011 , 3:46am
post #6 of
Quote:
Originally Posted by Annabakescakes

Jason, I know youy make your own "mix". What does it cost you per serving for ingredients alone?



Our mix is proprietary, but the ingredient cost for our gluten-free mix vs. the non gluten-free mix is about 10-15% higher. The majority of the GF mix is rice flour and tapioca starch, both of which are roughly the same price as cake flour (at our restaurant supply store at least). Most of the added expense comes from sorghum flour and xanthan gum, but those ingredients make up a relatively small percentage of the GF mix.

annabellas Posted 26 Aug 2013 , 2:46am
post #7 of

AI am new to this forum. I too own a GF bakery but it is part of a natural foods store. We are just beginning to sell wholesale to other stores but may have the opportunity to sell to a local restaurant chain. Would anyone have pricing suggestions? Would the wholesale prices be the same to stores and restaurants? I'm thinking bulk purchasing would deserve a discount. Plus it's easier to cost out the ingredients and labor but since the bakery is part of a larger store, utilities, etc are harder to determine. That would be for our general retail selling price.

jason_kraft Posted 26 Aug 2013 , 3:12am
post #8 of

A

Original message sent by annabellas

I am new to this forum. I too own a GF bakery but it is part of a natural foods store. We are just beginning to sell wholesale to other stores but may have the opportunity to sell to a local restaurant chain. Would anyone have pricing suggestions? Would the wholesale prices be the same to stores and restaurants? I'm thinking bulk purchasing would deserve a discount. Plus it's easier to cost out the ingredients and labor but since the bakery is part of a larger store, utilities, etc are harder to determine. That would be for our general retail selling price.

You need to do some research to determine how similar items are priced at other retail stores/restaurants, and compare that with your costs (ingredients, labor, allocated overhead) to see how much room you have for markup, if any. Generally markups for upscale grocery stores are around the 40-50% range, so if this will push the final retail price beyond what your target market will pay then wholesale may not be workable with your current cost structure without giving up some of your profit margin. The acceptable retail price range will probably be higher at a restaurant than a grocery store.

If your product will be put in display cases you need to make sure the issue of cross-contamination is addressed in both the company's processes and training given to anyone handling GF products.

There's also the question of shelf life. As I'm sure you're aware, GF products don't last as long as non-GF products, so this needs to be addressed in terms of delivery, storage (freezing the products may help), and sell-by dates, plus your contract should specify who pays for expired product.

Regarding allocated overhead, you could go with a two tier allocation process where bakery-specific overhead (e.g. depreciation for a commercial mixer) is allocated to bakery items only and regular overhead (e.g. utilities) is spread across all products sold. Or, to simplify things you could just allocate all overhead to all products, regardless of whether or not they are bakery items.

annabellas Posted 26 Aug 2013 , 12:51pm
post #9 of

AJason, I really appreciate your comments. We have made comparisons to other GF bakery items. We are comparable or lower. Some of the sites online say to double the cost to come up with a wholesale price (or retail price for our in store bakery). I wanted to see if anyone out there found that to be a good way to start. Then I could compare this pricing with other GF bakeries. As for wholesaling it to other stores, I've been giving them a discount of 25% so they can use that on top of what they decide to sell the baked goods for and still find the final cost reasonable.

jason_kraft Posted 26 Aug 2013 , 3:21pm

AI wrote an article on my blog about pricing, click the Pricing Formula link in my signature below for the details. Generally relying on a fixed multiple of your costs across the board will result in underpricing or overpricing (or both).

As far as discounting your bakery products for other stores, some discount may be required but you need to ensure you are still profitable enough to make it worth your while. By wholesaling to other stores you are also giving up a competitive advantage and losing out on sales of complementary GF products to customers who come to your store for your GF bakery items.

annabellas Posted 5 Sep 2013 , 1:44am

ASorry but I can't find where you are suggesting to look. Where is the Pricing Formula link and your signature below? I came up with pricing but would like to know more about your suggestions. I understand what you're saying about selling to competitive stores. On the other hand I can't sell wholesale using our retail prices. The prices our wholesale customer would then need to markup our products would be so high that they probably would not sell. So they would need to be discounted - appropriately.

jason_kraft Posted 5 Sep 2013 , 1:56am

AHere is a direct link: http://jasonkraftblog.wordpress.com/2013/05/14/the-magic-pricing-formula/

It's meant for retail pricing, but the same principle applies to wholesale...if you have to cut your profit margin too much to make the final retail price work, don't be afraid to pass on the deal.

annabellas Posted 5 Sep 2013 , 3:43am

AThat was one quick reply! I think we should be okay then. Since I didn't have accurate info to use for overhead, I included an estimated percentage. My final price calculations seemed high to me but we will soon find out. We presented them to a potential customer. They should be getting back to us soon. Thank you again!

Original message sent by jason_kraft

I wrote an article on my blog about pricing, click the Pricing Formula link in my signature below for the details. Generally relying on a fixed multiple of your costs across the board will result in underpricing or overpricing (or both).

As far as discounting your bakery products for other stores, some discount may be required but you need to ensure you are still profitable enough to make it worth your while. By wholesaling to other stores you are also giving up a competitive advantage and losing out on sales of complementary GF products to customers who come to your store for your GF bakery items.

On our latest wholesale presentation.

manicgeisha Posted 5 Sep 2013 , 4:10am

Quote:

Originally Posted by jason_kraft 

For example, if you've used flour in your kitchen you need to wait at least 24 hours before working with any GF products or ingredients, since there may still be airborne flour.



Really?  I`ve never heard that before!   *off to look it up*   Huh, well what do you know.    My husband makes GF desserts at work all the time, I`ll have to pass it along to make them first on bake days.

jason_kraft Posted 5 Sep 2013 , 4:12am

A

Original message sent by annabellas

Since I didn't have accurate info to use for overhead, I included an estimated percentage. My final price calculations seemed high to me but we will soon find out.

If I were you I would find out your accurate overhead spend ASAP...if you don't know how much fixed overhead you need to allocate across your sales, you'll have no idea what your profit will be at any given wholesale price point.

Generally expenses are recorded in your accounting system based on a chart of accounts that separates overhead from operating expense, so this should be relatively straightforward.

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