Supplement Product Financials and COGS
Food & Supplement Product Financials and COGS
It is critical to nail your financials at all points in the product development and production process. Costing and financial data are the central components that are continuously refined and calculated over the course of the product lifespan.
It is critical to know your cost of goods (COGS). Much of the cost of goods comes from ingredients. There’s some key things to remember:
- Some ingredients, like Monkfruit extract used as a natural sweetener, costs a few thousand dollars a pound, or about ten times the cost of a pound of silver.
- The costs of many ingredients fluctuate depending on supply and demand, as well as crop yields and availability of raw materials that change with the climate. Don’t pick some obscure ingredient unless you have at least two sources, and a “Plan B”.
- The cost of ingredients should also account for molar weights, labeling requirements and overages that need to be added, in the case of unstable ingredients.
- Most contract manufacturers do not offer price transparency to their ingredients. Because ingredients are a major source of cost, manufacturers are often incentivized to use cheaper, lower quality ingredients.
- It’s best to always compare multiple sources of ingredients based on factors other than cost, such as quality, availability, consistency and sustainability documentation.
- Packaging can cost a few dollars per bottle, so it is key to understand what the packaging costs per bottle are
- Don’t forget about other hidden costs from QC testing, outer packaging, shipping, warehousing and taxes.
- The #1 goal of the financial analysis for products is to make sure your COGS are aligned with the desired retail pricing and margins required for profitability.
- Vendor Agreements are highly recommended to ensure a consistent level of quality, service and pricing will continue to be delivered for the long term.
Contact us to learn more about how to perform a financial analysis of your food or supplement product.