Great gluten free products are everywhere – and new products are arriving in our stores every day. But if you’re anything like me, sometimes you’ve got to ask yourself “why are all these products 3 times the price of normal products (or more!)?!?” Below you’ll find some of the reasons for those up-charged prices.
There are a lot of certifications that typically go into gluten free products. Apart from the obvious (gluten free) certification, these products are often meeting the needs of other special communities, like kosher, allergen free, vegan, organic etc.
The cost of any given certification is determined by the size of the company and number of products being certified, but it usually hovers around $700 per product line/flavor, per $100,000 sold per year, or roughly to about $.05-$.10 per unit per certification.
Multiply the number of certification seals on your product’s box by this range, and you’ll see that the cost of certifications can be a large part of the ‘upcharge’ in a product, making up between $.10 and $1.00 of the total added costs.
Lack of Farm Subsidies
One of the advantages of using huge, commodity crops, in our country is that the real cost of foods are often covered or partially covered by subsidies at all levels of growth, distribution, and manufacture.
A specialized grain, grown in certified conditions, tends to be grown in much smaller quantities and outside of this over $8 billion ‘cradle’ of pricing support. Commodity crops, particularly wheat, benefit from an artificial reduction in final consumer costs of between 11% and 27% of the equivalent costs to produce those goods.
Gluten free crops (like rice and sorghum) in general receive less subsidization than wheat, and specialized, small scale certified farms may receive little or none.
Although it will vary based on the grain involved and amount used in your product, these costs should hover between $.11 and $.50 for each 1lb of product you are using.
David versus Goliath in the Distribution Network
Now, this particular hidden cost will depend on which company you are buying from. Nearly all distributors and larger grocery stores require special marketing funds to be paid to them in order for products to get placement on shelves, typically about $50-$75 per product line/flavor per single location. In addition, these entities also require the companies to remit about 15% of their price back to the company in marketing dollars and sales discounts.
Larger companies (like General Mills) will use profits from other lines of products, investment capital, subsidies (see above), or higher profits from increased volumes to cover these costs. However small companies must work the cost of these ‘kickbacks’ into their price in order to ensure they survive.
In addition, small companies generally pay between 3 and 10 times more for their ingredients, packaging and freight than the larger companies can, simply by not being able to run enormous quantities.
As an example, a package of cake mix from a small gluten free company will typically contain about $.15 more in packaging alone than a gluten free or regular cake mix from a large national consortium and an additional $.02-$.09 in freight.
Combine the packaging, freight, and required market costs, and the total additional fee for a small gluten free company can hover between $.71 and $1.00 per unit.
So, how do I help bring down the hidden costs??
With $2.50 or more going into the cost of a gluten free product from a smaller company, how can you get those costs reduced?
Buy DIrect or Online
Well, one way you can help to cut out the extra costs associated with getting placement in stores is to buy directly from the company or by shopping on sites like Amazon.com. Online vendors often do not require the same kickbacks for product placement, and you may find slightly lower prices simply for this reason.
Buy In Bulk
When you buy in bulk or on sale, you may find the saving is substantial. Try to buy online, in bulk, on sale, with reduced or free shipping where possible.
Take Advantage of loopholes
Have a resale tax id or a small baking company? Ask the companies if you can set up a wholesale account – especially the smaller companies are usually happy to oblige, giving you the additional savings by cutting out all those extra add-in costs.
DO YOU HAVE TIPS? I’d love to hear them – just hit the reply button to let me know your tips for bringing costs down.