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Suppliers and Producers Guide to Retailers’ Margins

Restaurants, Delis and Farm shops are individual businesses and operate different business models, so generalising about their target profit margins is just that, generalising. However, we as Suppliers, Producers, Wholesalers & Importers need to have an understanding of what Gross Margin a retailer will need to achieve to keep their businesses afloat and make the right profit.

What is Gross Margin

This article uses Gross Margin. Gross Margin is the portion of Profit – income less costs of purchase or production – in each Sale. It is expressed as a percentage.

This is NOT the same as Mark-up. For more information on Gross Margin and Mark-up, see the help note on Profit Margins.

RRP and RSP

This is NOT about RRP (Recommended Retail Price) or RSP (Recommended Sale Price). It is (bluntly) none of our business what a retailer charges for our products. We don’t know what their overheads are, what their customers will afford, what minimum whole business margin they need to stay profitable. As Suppliers we need to respond to our customers’ needs rather than dictate what we think they should charge. 

Typical target Whole Business Margins*

Businesses have target margins across their whole business to meet their business plans and target profitability.

Discounters (Aldi/Lidl) 20-25%
Supermarkets 40-42%
Convenience stores 25-35%
Premium Convenience Stores 40%
Farm Shops 35-40%
Delicatessens 40%

Within Whole Business Margins there will be substantial variations by product type: cut cheese will be higher (due to wastage), alcohol will be lower (a highly competitive market).

Here are some indicative Gross Margins*:

Department:                            Vat                      Margin           Assume           Notes                                                                                         envelope

Alcohol +VAT 25% to 32% 32% Very competitive market
Bakery/cakes, bought in, cut/wrapped at counter, take away 50% to 60% 60% Packaging plus higher service and wastage costs
Bakery/cakes, bought in, pre-packed, take away 35% to 45% 60% Standard Whole Business Margin
Bakery/cakes, homemade, take away 55% to 70% 60% Production, packaging, service and wastage costs
Butchery: bought in, pre-pack 35% to 45% 45% Standard Whole Business Margin
Butchery: somebody else’s meat, own butchers 50% to 60% 60% Butchery costs
Charcuterie & Hams: pre-pack 35% to 45% 40% Standard Whole Business Margin
Charcuterie & Hams: slice and wrap 50% to 60% 55% Higher for product with high levels of skin/bones other pieces not sellable at full price
Cheese: cut and wrap 45% to 60% 50% Production, packaging, service and wastage costs
Cheese: pre-pack 35% to 45% 40% Standard Whole Business Margin
Confectionery +VAT 35% to 45% 40% Standard Whole Business Margin
Freezers 35% to 45% 40% Standard Whole Business Margin
Fresh Fish 45% to 60% 55% Production, packaging, service and wastage costs
Fruit & Vege 50% to 55% 55% High wastage costs
Grocery 35% to 45% 40% Standard Whole Business Margin
Horticulture 50% to 60% 55% High wastage costs
Hot drinks takeaway +VAT 85% to 95% 90% Good practice is to include the price of the coffee cup in the margin
Loose olives 35% to 45% 40% For olives only, not the oil or other liquid the olives come in. 
Non-food gifts +VAT 35% to 45% 40% Standard Whole Business Margin
Other ambient grocery Varies by product. 35% to 42% 40% Standard Whole Business Margin
Other chiller cabinet: pre-pack 35% to 45% 40% Standard Whole Business Margin
Other drinks +VAT 30% to 45% 38% Competitive market
Sandwiches take away 65% to 70% 66% Production, packaging, service and wastage costs
Sausage rolls, pies etc: bought in, pre-pack sold chilled 35% to 45% 40% Standard Whole Business Margin
Sausage rolls, pies etc: bought in, pre-pack sold hot Usually no VAT 45% to 55% 50% Packaging, service and wastage costs
Sausage rolls, pies etc: home made Usually no VAT 60% to 70% 66% Production, packaging, service and wastage costs
Serve over deli counter: portion and wrap 40% to 55% 50% Staff costs and wastage

Occasionally Retailers will charge extra margin:

Seasonally branded goods (Christmas, Easter etc) plus 2% to 10% Assume: 5% Stock valueless after date
Hampers and Shop re-packaged plus 5% to 10% Assume: 5% Include packaging in cost of sale, add premium for labour costs

Food Service: Restaurants, pubs, cafes and bistros*

Food service will charge higher margins due to the kitchen and service elements. This has been creeping up recently as staff, property and other costs have increased relative to food costs.

Typical target Whole Business Margins:

Food service 65%-70%

Gross Margin* by product type

Food service VAT? Gross Margin envelope Use for Reality Check
Assume:
Notes:
Alcohol +VAT 50% to 80% 66%
Other drinks +VAT 50% to 80% 66%
Starters/main courses/puddings +VAT 60% to 75% 70% To include the VAT, simply multiply the ingredients by 4 to get the menu price.
Bakery/cakes, bought, eat in +VAT 60% to 70% 66%
Bakery/cakes, homemade, eat in +VAT 60% to 70% 70% Production costs
Hot drinks drink in +VAT 85% to 95% 93% Good practice is to include the price of the coffee cup in the margin.

*           Gross Margins are responding all the time to business needs.  These margins are a summary of the experiences of businesses we have worked with and updated as often a possible.  Contact Charlie direct on charlie@delishops.co.uk if you have any feedback at on these figures, positive or negative.  It is important we stay as current as possible.  We really want to hear from you.

Updated on 1st May 2019

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