Our most popular blog to date is How to Price Your Microgreens. I wouldn’t change anything about that blog, but I do want to tackle the subject from a different angle. I recently saw a Facebook post asking what to charge a wholesaler, since they charge $5.00 per ounce at the farmer's market. In the blog mentioned above, I provided a table outlining a high and low price per ounce for dozens of common varieties. I included data on what we charge our restaurants and what we charge our wholesalers. The problem is those are our prices. I want to offer a general framework. It will help you set prices for different customers based on your current rates. There are only a few types of customers in this world. Each customer type expects a certain gross profit margin (GPM) when buying microgreens. Most farmers start by selling direct-to-consumer (DTC) via home deliveries or farmers' markets. That category of customers is willing to pay the most for your product. The framework below assumes you've set your own prices for those customers. We will extrapolate from there to suggest a price for each customer type based on their expected GPM.
Let’s start by defining the customer. In my opinion, the customer is the person opening the clamshell of microgreens. They might not be the individual eating the microgreens, but they’re the one “using” them. For example, a farmer’s market patron is both the user and the end consumer. That person will take the microgreens home, add them to a smoothie, and then drink the smoothie. A restaurant chef is also a customer, even though the restaurant patron is the ultimate end consumer of the microgreens. The chef is still the one “using” the microgreens by taking them out of the packaging. I define a customer this way because it will make the pricing framework more logical. So, what are the types of customers you'll encounter?
Home Consumers - Customers who buy your microgreens at the farmer’s market. They can also be individuals and families to whom you deliver directly to their home or who pick up at your farm. These would be DTC or direct-to-consumer relationships.
Restaurants - Standalone mom-and-pop places, Michelin-starred ones, and caterers. Anyone using microgreens to prepare food for others. This would also include smoothie shops.
Grocery Stores - Local co-ops, health food stores, and national chains.
B2C Distributors - Wholesalers acting as intermediaries to other end consumers. I define 1st degree distributors as those who sell to end users, mainly in the food service industry. A good example would be FreshPoint. FreshPoint works with many types of customers, but I know them best for wholesaling to restaurants. We also sell to local food aggregators and grocery delivery services. For example, The Produce Box will source food from local farmers. They use an online platform to then sell that produce to local home consumers, which they then deliver. You can think of this supply chain as having three stakeholders. You, the distributor, and the end consumer. Another common variation of this model would be selling to a local CSA platform. CSA stands for community-supported agriculture. CSAs are a type of farm business model where customers buy a “share” of a farm’s produce at the start of the season. Each week the customer gets a box of various local and seasonal produce. It’s common for farms offering a CSA to include produce from other local growers, such as microgreens. We'll call these buyers "B2C distributors". Their customers are usually end consumers, either home users or chefs.
B2B Distributors - You can think of this supply chain as having four stakeholders. You, the distributor you sell to, the intermediary the distributor sells to, and then the end consumer. For example, you sell to a local distributor. They would drive the product to another city or state. There, they would sell it to a grocery store. The store would then sell it to home consumers. We'll call these business-to-business (B2B) distributors. Their customers are usually other businesses, like grocery stores.
Let’s see how your price will change depending on who’s buying your product. Remember that every customer type has a minimum gross margin they need to stay in business. It can vary from buyer to buyer, but most industries have predictable standards. Home consumers and chefs aren't reselling the microgreens, so they won't have a gross margin target. If you want a full explanation of gross margin, please read our blog How to Price Your Microgreens: Part 2. In short, the gross profit margin is revenue after paying your COGS, or direct costs. For an intermediary such as a distributor, COGS equals your selling price.
Gross Profit (GP) = Revenue - COGS
Gross Profit Margin (GPM) = (Revenue - COGS)/Revenue * 100%
GPM = GP/Revenue * 100%
For example, you’re selling a clamshell of microgreens for $10.00 to a distributor. They then sell that clamshell to a restaurant for $14.00. The $10.00 is the distributor’s COGS and the $14.00 is their revenue.
GPM = ($14.00 - $10.00)/$14.00 * 100%
GPM = $4.00/$14.00 * 100%
GPM = 0.2857 * 100%
GPM = 28.6%
It's hard to make a table that compares all customer types. Different customers want different product formats. You won't find an eight-ounce clamshell of microgreens at a grocery store. Yet, food service distributors only buy eight-ounce clamshells of microgreens. The table below has different volumes based on customer type. It reflects the reality of the situation. Farmers' markets, grocery stores, and some B2B distributors prefer two to three ounce clamshells. The food service industry and its distributors often prefer larger formats, like eight-ounce clamshells. Again, though, these are broad statements and they can vary widely.
| Customer Type | Their Desired GPM | Your Price to Them | Their Selling Price | Their Actual GPM | Your Price Compared to the Base Price |
|---|---|---|---|---|---|
| Home Consumer or Farmer’s Market | N/A | $5.00 / 2 oz. | N/A | N/A | Base Price |
| Restaurant or Caterer | N/A | $22.00 / 8 oz. | N/A | N/A | 90-110% |
| Grocery Store | >33% | $3.50 / 2 oz. | $5.99 / 2 oz. | 41.6% | 70% |
| B2C Distributors | >33% | $14.00 / 8 oz. | $20.00 - $22.00 / 8 oz. | 30-36.4% | 64% |
| B2B Distributors | >20% | $2.75 / 2 oz. | $3.50 / 2 oz. | 21.4% | 55% |
I assume the home consumer or farmers' market price is the base price. That's where most microgreen farmers start. If you’re reading this article and you’ve sold anything thus far, it’s most likely to those consumers. In my experience, restaurants and caterers will pay more than home consumers. However, it can vary depending on the specific type of microgreens. Our chefs won't pay $2.00/oz for sunflower shoots, but our farmers' market customers will. Farmers' market patrons won't pay $8.00/oz for beet microgreens, but our chefs will. Regardless, on average, our direct consumers and our chefs pay the same price per ounce. Grocery stores demand a 30% or greater GPM for their produce department. We price the same farmers’ market products at $3.50 for grocery store customers. We suggest to them to sell it for $5.99. Intermediaries will often ask the seller for a suggested resell price. This is called the MSRP or manufacturer’s suggested retail price. Knowing what each buyer expects for a GPM will help you align the MSRP with their expectations. B2C distributors are similar to grocery stores. Finally, B2B distributors will expect a lower GPM than B2C distributors and grocery stores. There are more stakeholders involved - you, the B2B buyer, the B2C buyer, and the end consumer. As a result, you should also expect to charge less and earn less because there are more people who need their cut.
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