Costing Juices & Bottle Vendors

Juice Business Management
21

Hello,

Question on COGS. I own a Juice and Smoothie cafe. My total COGS are a combination of my merchant account fees, food costs and supplies. We use organic produce and I’m struggling to keep my Food/supplies COGS below 40%. Am I being unrealistic in trying to achieve under 40%. Does anyone achieve between 31-34%? I switched bottle suppliers and I’m hoping to source pallet pricing soon to improve supply costs, but I can’t seem to get my food COGS lower. Any input, much appreciated!!! Thanks!

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This is the first time I’ve seen merchant fees being included in COGS. I view merchant fees more as a fee for accepting credit cards, not as a cost of the goods you’re selling. Removing merchant fees from your cogs would bring the COGS down a lot without really doing much :slight_smile:

Also I’d be curious to know what type of supplies you’re including. Are they just the supplies that are used directly in the product, or other supplies as well?

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23

Charlie, going back to your comment in Dec 2018 on shipping in COGS. To be clear, I meant shipping the supplies to where we produce the juice; not shipping the end product out to the customer. From an accounting standpoint (and granted, there are different accounting rules), typically COGS expenses include:

  • The cost of products or raw materials, including freight or shipping charges and customs duty;
  • The cost of storing products the business sells;
  • Direct labor costs for workers who produce the products;
  • Factory overhead expenses.
24

I agree with most of that, but have a couple of notes:

The cost of storing the products should only be used in COGS if it is a variable cost that goes up and down depending on how many products you are storing / selling that month. If the storage cost is just a fixed cost like rent, you should not include that in COGS, since that is not a direct cost to the product.

Direct labor can be included as long as the labor is tracked to only include the time spent actually making the product. If employees are doing other things like cleaning, stocking shelves, answering phones, talking to customers, doing deliveries, etc., than labor should be looked at as a separate line item. Most food and beverage businesses just look at labor as a percentage of their revenue on their P and L, and do not include it in COGS. A wholesale juice company would be more likely to include labor in COGS.

I don’t think factory overhead should be included, unless it’s only the direct labor as mentioned above. Chances are most of the factory overhead are fixed costs like utilities and rent.

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