What is the average retail markup on baby food & where to get it

MrCostington

Hi,

I'm looking into retailing baby food (milk powder etc). I do not have an account with any wholesaler/ cash and carry and they will not talk to me without an account number.

So, in order to decide is there is a business there, I need some idea of the markup is on these products - i.e. if my local shop independent shop sells Cow And Gate 2 Follow On Milk Powder 900G for say €12.00, what might they be paying their supplier for it?

Also, where would I go to get said stock - say I'm in the market for just 100 cans per month for starters?

Thanks!

ironclaw

Are you thinking of entering the market? Thee likes of Tesco's, Dunnes etc have data mined this particular consumer segment to death and probably offer a very low margin, with the idea that a mother / father in to buy will be buying quite a bit to go with it. You won't be able to compete without massive wholesale backing. At the size of Tesco and Dunnes, I'd assume 100% mark up, so they are getting it for €6, that said, retail margin can be as low as ~15%, so they could even be getting it for less than €3. I'd assume the lower end with larger retailers.

Internet 'all in one to your door' business, perhaps, but you'd need everything to go with it and given the bulk of some new born products, shipping might be an issue.

EIREX

MrCostington wrote: »

Hi,

I'm looking into retailing baby food (milk powder etc). I do not have an account with any wholesaler/ cash and carry and they will not talk to me without an account number.

So, in order to decide is there is a business there, I need some idea of the markup is on these products - i.e. if my local shop independent shop sells Cow And Gate 2 Follow On Milk Powder 900G for say €12.00, what might they be paying their supplier for it?

Also, where would I go to get said stock - say I'm in the market for just 100 cans per month for starters?

Thanks!

I think with baby food it might be hard to shift it if you do not have an established retail presence as I can't imagine parents buying formula for young infants at a car boot sale.

Any major wholesaler (Musgrave's) sells baby formula.

Also the price at a corner shop is far higher than a supermarket so I'd probably benchmark whether you can compete at their prices as you will have to offer something very special on price for parents to trust you.

Baby food wholesale prices are available on the internet.

MrCostington

Thanks for your reply.

I'm a little confised by the figures though.

"retail margin can be as low as ~15%, so they could even be getting it for less than €3." - if buying for < €3 would margin not be 300/400%?

Yes, it will be part of a web business, as you say. Any ideas of where to get stock at my small levels?

MrCostington

EIREX wrote: »

Baby food wholesale prices are available on the internet.

Could you please provide a link, as I've been searching the past 2 days and also made some calls without success. Thanks!

EIREX

Not ideal but this will give you a steer

http://www.alibaba.com/countrysearch/UK/baby-milk-cow-and-gate.html

Most of those would sell to you without any complications.

MrCostington

MrCostington wrote: »

Thanks for your reply.

I'm a little confised by the figures though.

"retail margin can be as low as ~15%, so they could even be getting it for less than €3." - if buying for < €3 would margin not be 300/400%?

Yes, it will be part of a web business, as you say. Any ideas of where to get stock at my small levels?

Work the numbers backwards and understand the difference between margin and markup.

EG: (not including VAT), if a product is retailing for 10 euro, and retailer is buying it for 5 euro, they are making a 50% margin. Generally this is a good ballpark figure for retailers in the UK and ireland, although someone more in the know might know the industry standard for this kind of product. Theres a multitude of factors that can make that margin vary.

jimmii

Be surprised if something like that would be having margins like that especially ordering in that sort of quantity.

That second one on the Alibaba list is 1000 units minimum and is £7/unit FOB not much money in that if its being sold at €12.

jimmii

jimmii wrote: »

Be surprised if something like that would be having margins like that especially ordering in that sort of quantity.

That second one on the Alibaba list is 1000 units minimum and is £7/unit FOB not much money in that if its being sold at €12.

Yeah Im used to dealing with big chains that work off bigger margins. Thinking the OP doesn't have a hope in competing unless he is working off a tiny tiny margin though

jimmii

Deleted User wrote: »

Yeah Im used to dealing with big chains that work off bigger margins. Thinking the OP doesn't have a hope in competing unless he is working off a tiny tiny margin though

Yeh if the multis can negotiate 20%-30% off that wholesale price then it starts to look pretty good.

MrCostington

Thanks for all your replies. Just on phone now so will reply in full Monday

pedronomix

So the idea is for a random noname web retailer to sell noname brand baby formula online at discount prices, There is no chance of securing branded supply unless you buy in a cash and carry. There is a world shortage of baby milk formula and China will take all it can get of proper certified quality product. What parent in their right mind would buy such a product for their child?

MrCostington

Rang several wholesalers including Musgraves, none can/will supply.

Found an Irish supplier, BG Schwartz Ltd on Alibaba (sorry cannot post links, new here) yet their site does not list any baby food products - what is going in there, is Alibaba a trusted source?

pedroeibar1

MrCostington wrote: »

Rang several wholesalers including Musgraves, none can/will supply.

Found an Irish supplier, BG Schwartz Ltd on Alibaba (sorry cannot post links, new here) yet their site does not list any baby food products - what is going in there, is Alibaba a trusted source?

I (and most others I'd guess) are not in the slightest bit surprised that you cannot find a supplier. Your posts including the above show naivety at best. You have no idea of even the basics, so give up now, stop wasting time and find another idea, one which does not need handholding on Boards.

pedronomix

MrCostington wrote: »

Rang several wholesalers including Musgraves, none can/will supply.

Found an Irish supplier, BG Schwartz Ltd on Alibaba (sorry cannot post links, new here) yet their site does not list any baby food products - what is going in there, is Alibaba a trusted source?

Alibaba are an online marketplace not a supplier! I am afraid you are way out of your depth and wasting your time.... this is me being as nice as I possibly can be!

ironclaw

MrCostington wrote: »

Rang several wholesalers including Musgraves, none can/will supply.

Found an Irish supplier, BG Schwartz Ltd on Alibaba (sorry cannot post links, new here) yet their site does not list any baby food products - what is going in there, is Alibaba a trusted source?

BG Schwartz Ltd are what appears to be a wholesaler for China gadgets and knick knacks. They are not a supplier or manufacturer. Alibaba and AliExpress are basically an eBay for wholesalers or people looking for bulk purchase, they are a middle man.

As has been said before, baby formula and other dairy whey powders is a huge industry with massive investment. China is a huge buyer from the big Irish players on the count of the scandals there involving tainted supply. You could possibly source abroad in the EU but Ireland is one of the largest suppliers, so you would be mad to. And even at that, you're probably talking orders of €10k's to be seriously considered.

I'm curious as to why Musgraves would not supply to you, I'm imagining it's because you don't have an account?

Can you outline what you reasonably expect to do and achieve here? If its selling the product online, thats fair enough and it's not novel, so you can openly discuss it here. It is however a business that would need a serious brand and consumer trust, after all it involves infants. I would imagine however that you would have little to no room for competitiveness as what I said in my opening post, its a very tightly sought after market. If you get Mum into the shop, she'll buy XYZ as well. It's common practise to cut a margin on one product area to up sell another, and while I have no evidence of it, I'd imagine baby products would be one sector all supermarkets would be interested in capturing.

MrCostington

Hi, my last post was a little less thought out than I intended – I had written a much longer post but when I hit submit my session had timed out and thus I lost my post.

Anyway, it seems most of you here are helpful – this is very much appreciated. Re “random noname web retailer to sell noname brand baby formula online at discount prices” , I’m sure the Cow and Gate company that I mentioned in my OP will not like to hear that!

And yes, I am lacking knowledge, and possibly being naive when it comes to the food industry. If I were an expert I’d not be here asking questions would I?

With regards to Alibaba, yes I do understand they are a market place / search engine and not a supplier themselves (I did say that in my post that got lost). I have not used them before so my question, to anyone with experience, was is it typical that they list a supplier for a specific product, and that when you check the supplier they appear to be selling different products? I my case BG Schwartz seem to sell 'knick knacks'

ironclaw – thank you for your constructive feedback. Yes it is an online business (with the food being part of the mix) and yes I understand trust is an issue. For the avoidance of doubt, I’m not intending to make my own baby milk but stock brands like Cow & Gate etc. I realise it may not work, but my main business is web/software development so creating a site is zero/minimal cost to be (unless I run Ad Words of course). Also, Margraves say they cannot get stock (but yes I expect not having an account was a/the issue)

Update – just rang BG Schwartz – they actually do stock baby food! Person who deals with it is out till next week though.

pedronomix

I was clearly referring to "product" sourced through Alibaba, a rather unlikely marketing channel for Cow & Gate.

donegal.

you could try makro, they have a branch in belfast .

i think the big supermarkets will be working on lower margins than has been suggested on here. I found musgraves to be very expensive , for example babywipes are much cheaper in supervalu.

pedroeibar1

donegal. wrote: »

you could try makro, they have a branch in belfast .

i think the big supermarkets will be working on lower margins than has been suggested on here. I found musgraves to be very expensive , for example babywipes are much cheaper in supervalu.

Who do you think owns Supervalue?:rolleyes:

donegal.

pedroeibar1 wrote: »

Who do you think owns Supervalue?:rolleyes:

Thats why i used that example

makeandcreate

MrCostington wrote: »

Rang several wholesalers including Musgraves, none can/will supply.

Found an Irish supplier, BG Schwartz Ltd on Alibaba (sorry cannot post links, new here) yet their site does not list any baby food products - what is going in there, is Alibaba a trusted source?

Glanbia are shipping baby milk out to China by the ton and you are looking to buy it back?
Your quantities are just too low - wait until Dunnes, Tesco etc do half price milk or do a run to Asda when they have a BOGOF promo and stock up.
The other thing is that people like a certain brand of milk and wont change, no matter what the price. This is their progidy and if they believe they are hungrier babies, or lactose intolerant or colicky then they will never buy your formula. Only the better branded one, or one given away in the maternity wards maybe.
I only bought baby milk twice in my llifetime - and one of those for the dog ... but I went for Aptamil, which when stood surrounded by tins and making this important decision, they sounded like they were proficent for some reason - as opposed to Cow and Gate, which I totally dislike.
Do you want to rebrand a baby food formula?

Re Mark up - brought up in a family grocery and mark up on baby milk was about 18%.

donegal.

donegal. wrote: »

Thats why i used that example

The wholesale is more expensive then the retailer? Sure it wasn't some special clearance offer/loss leader promo or something?

donegal.

Deleted User wrote: »

The wholesale is more expensive then the retailer? Sure it wasn't some special clearance offer/loss leader promo or something?

i noticed loads off stuff that was more expensive.
but alot of stuff i on promotion in the supermarket but not in the wholesaler and baby wipes are very often on promotion.

power101

I presume your plan is to export the product to China where it is being sold at a premium?

http://www.theguardian.com/business/2015/nov/11/chinas-singles-day-blamed-for-baby-formula-shortages-in-australian-supermarkets

Think you'll find it very difficult to find a supplier. They are already doing it themselves and can't satisfy demand.

If you started buying in bulk from wholesalers I could see them cutting you off . They would want to make sure they have enough supply for current customers selling to Irish market. They have even been times when supermarkets in Ireland in the past year have limited supply to 2 cartons as they were being bought and shipped to China and sold for crazy prices.

ironclaw

@power101, I believe the OP is viewing the Irish market.

power101

I was always under the impression the margins on baby formula were very low in Ireland due to competition from suppliers but also Shops who use it as a low margin leader to get the family shop.

Musgraves are very easy to setup an account with. Just put down your an online store etc. (Edit BTW I have always found Musgraves very expensive)

Check their cost and retail prices and knock 10-15% off their cost and thats roughly what you could buy it for direct from the manufacturer. ( I'm not saying they buy it for 10-15%, more like 20-25% less because of quantity but thats what you could buy it for)

sillysocks

makeandcreate wrote: »

Your quantities are just too low - wait until Dunnes, Tesco etc do half price milk or do a run to Asda when they have a BOGOF promo and stock up.
The other thing is that people like a certain brand of milk and wont change, no matter what the price. This is their progidy and if they believe they are hungrier babies, or lactose intolerant or colicky then they will never buy your formula..

Just a bit of insight as a mother, not an entrepreneur. Firstly in Ireland anyway it's illegal to have promotions on baby formula. You'll never see it on offer in Tesco or other shops-apparently if it was on offer cheaply it'd discourage breastfeeding. Rubbish if you ask me but I don't make the rules! Even in the likes of tesco you can't earn extra club card points on formula if there's offers on etc.

Also, yes you're right that people will stick to one type of formula. That's the recommendation, once a baby is happy with a formula you're advised to stick and never to chop and change brands esp when younger. In the hospitals they seem to prefer Aptimel and that's the first one recommended but if that doesn't suit it's trial and error after that.

GerardKeating

sillysocks wrote: »

Just a bit of insight as a mother, not an entrepreneur. Firstly in Ireland anyway it's illegal to have promotions on baby formula. You'll never see it on offer in Tesco or other shops-apparently if it was on offer cheaply it'd discourage breastfeeding. Rubbish if you ask me but I don't make the rules! Even in the likes of tesco you can't earn extra club card points on formula if there's offers on etc.

Only for the 0-6 Month formula, they can do what they like with the formula for "toddler" milk.