Calculating Your Beverage Costs
You know it will take money to make your beverage, but how much do you need at each stage? How much will your final product cost? Will your price be competitive while still making you a profit? What can you do to reduce costs?
Understanding your beverage plan's financial details helps you find, allocate, and align your resources for success. You will be able to make informed decisions and feel prepared for approaching investors, retailers, and distributors.
Working with BevSource to create your Cost of Goods Sold and Cash Schedule helps you clearly understand your current and future business and empowers you to take greater control of the financial side of your business plan.
Two Tools Every Profitable Beverage Needs (Beverage Development Cost Calculations)
Cost of Goods Sold
Once you’ve identified your co-packer, you can start to add up all of the direct and indirect costs that go into your beverage and create your estimated per-case-cost or Cost of Goods Sold. This number influences your price point, margin, and business viability, so all of your costs must be accounted for.
There are a myriad of variables and considerations that go into nailing down your cost of goods sold. BevSource walks you through each input and touchpoint and the fixed and variable costs associated with each.
We know how to account for hidden costs you might not be aware of, like co-packer fees, minimum order quantities, freight and warehousing charges, and liquid and packaging loss. Our goal is to make sure you understand where your costs are coming from and how to track and control them. The more you know about your expenses, the more you can plan and price for them. The result is a profitable and sustainable beverage business.
Cash flow is king in any business. A cash schedule outlines how much cash you'll need to have ready at various points in your production, so you can line up your finances accordingly and be prepared to meet your business's cash requirements.
From one-time fees like FDA label attorney review and print/art setup fees, to recurring outlays like ingredients, freight, and warehousing, your cash schedule helps you understand the total cost for each run of your beverage and how it breaks down between suppliers and orders.
What To Expect When It Comes To Beverage Costs
Starting a beverage company entails formulation, development, and production costs, usually ranging from $100k-$300K*, which largely depends on the nature of the beverage and the scale of the business. This does not include marketing, staff, business premises, and other related running expenses.
You’ll need between $20,000 to $45,000* to create a commercial formula that you can take to a co-packer for production. The total cost depends on the number of SKUs you plan on formulating, the type of beverage, and whether you want to invest in a pilot run before moving into full production.
Pricing runs between $15,000 - $25,000* for a single day’s pilot production depending on the number of SKUs, volume, complexity of the blend, and testing requirements.
Full-scale production of 10,000 cases will cost around $200,000*.
*Estimated Costs Only. Other factors and your number of SKUs can influence your final costs.