Industry sector: Manufacturing

Food manufacturer: Pricing policy

Getting the price right is very important. You must make sure that the difference between the cost price and the selling price of your food items is enough to cover all of your operating costs, including your own drawings.

It's also a good idea to allocate some future income to invest in new equipment and technology. Not only must you be able to replace machinery when it breaks down but also you might want to upgrade to labour-saving equipment to help you to reduce your unit costs.

Your two largest items of expenditure are likely to be on raw materials and staff costs.

So it is very important to monitor your ingredients costs and to make sure that your workforce remains productive and that wasteful processes are reduced as far as possible. Bear in mind that if you import raw materials your costs will be affected by currency fluctuations and also to a degree by fluctuations in farmgate producer prices.

To monitor your performance you could regularly look at the relationship between your raw materials costs and your turnover, and your direct labour costs and your turnover.

Don't forget that if you plan to sell to both trade customers (such as retailers) and members of the public (for example via mail order or online) your trade customers will expect a trade discount from the recommended retail price.