One of the major causes of food business failure is poor pricing. Many first-time founders focus heavily on product development, packaging, and branding—but underestimate the importance of a realistic pricing strategy. A product can generate strong customer interest and still lose money if it is priced incorrectly.
Pricing is not simply about choosing a number that “feels right.” It is a business decision that must account for production costs, operating expenses, market positioning, customer perception, and long-term profitability.
For food entrepreneurs, especially those using contract manufacturing, pricing discipline is essential from the very beginning.
As discussed in the Implementation Workbook, From Idea to Store Shelf, pricing should be approached strategically—not emotionally.
Understand Your True Cost of Production
Before setting a selling price, you must know exactly how much it costs to produce one unit of your product.
This is commonly referred to as Cost of Goods Sold (COGS).
For food products, COGS may include:
Ingredients
Labour and production costs
Packaging
Labels
Shipping and freight
Import duties
Storage fees
Manufacturer’s handling fees
Many founders make the mistake of calculating only ingredient costs while ignoring secondary expenses such as transportation, packaging revisions, spoilage, sampling, or retailer deductions.
A seasoning product that costs C$2.50 to manufacture may actually cost C$4.00 per unit after all hidden costs are included.
If your pricing is based on incomplete cost calculations, profitability becomes difficult.
Do Not Ignore Operating Expenses
Your product price must also help sustain the business itself—not just cover manufacturing costs.
Operating expenses may include:
Website hosting
Advertising
Social media marketing
Product photography
Insurance
Accounting software
Business registration fees
Warehousing
Fuel and transportation
Sales commissions
These costs exist whether or not you sell a single unit. This is why sustainable pricing must account for both direct production costs and broader business expenses. A common approach is to calculate your total operating expenses over a given period, estimate your expected sales volume or inventory quantity, and allocate a portion of those expenses to each product unit before adding your desired profit margin.
Understand Your Market Position
Pricing communicates value.
Consumers often associate price with quality, credibility, and positioning.
Ask yourself:
Is your product a premium product?
Is it designed for the mass market?
Is it health-focused?
Is it artisanal or handcrafted?
Is it positioned as an affordable everyday value?
For example, a natural, salt-free seasoning with premium ingredients like Nochiz All-natural Complete Seasoning should not necessarily compete on price with heavily processed alternatives containing fillers and additives.
Trying to become “the cheapest” product in the market is usually dangerous for emerging brands because large manufacturers often have economies of scale that smaller businesses cannot match.
Instead, focus on communicating why your product deserves its price.
Research Competitor Pricing
Competitor research is essential.
Study:
Retail shelf prices
Package sizes
Ingredient quality
Brand positioning
Customer reviews
Do not compare your product only on price. Compare overall value.
A customer may willingly pay more for:
Better ingredients
Health benefits
Cleaner labels
Local manufacturing
Unique flavour profiles
Better packaging
Stronger brand identity
The goal is not necessarily to be cheaper than competitors. The goal is to be worth your price.
Build Profit Into Your Pricing
Profit is not greed. Profit is what allows businesses to survive, improve, and grow.
Without profit:
You cannot reinvest in marketing
You cannot expand your distribution
You cannot absorb unexpected costs
You cannot scale sustainably
Many food founders underprice products because they fear customers will reject higher pricing.
But underpricing often creates bigger problems:
Cash flow shortages
Inability to restock inventory
Weak marketing capacity
Burnout from low margins
Your pricing should allow room for:
Retailer margins
Distributor margins
Promotional discounts
Inflation
Business growth
If your margins are too thin, growth can actually increase financial pressure instead of improving profitability.
Understand Retail Pricing Structure
If you plan to enter retail stores, remember that retailers also need profit margins.
For example:
Your landed cost may be C$4
You sell to retailers at C$6
Retailers sell to customers at C$9.99
Many first-time founders fail to account for wholesale pricing requirements and later discover their business model is unsustainable.
This is why pricing must be planned with your future distribution strategy in mind.
Avoid Emotional Pricing
Do not price your product based solely on:
Personal attachment
Fear of rejection
Desire to please everyone
What friends say they would pay
Price based on:
Data
Costs
Market positioning
Sustainability
Long-term business viability
A profitable business is more valuable than a popular but financially unstable one.
Test and Refine Your Pricing
Pricing is not permanently fixed.
As your brand grows, you may need to adjust pricing due to:
Rising ingredient costs
Inflation
Improved packaging
Expanded demand
Retail expansion
Premium repositioning
Monitor customer response carefully.
Key questions include:
Are customers repurchasing?
Are margins healthy?
Are retailers comfortable with the price?
Does the price reflect perceived value?
Strong pricing evolves alongside the business.
Conclusion
Food entrepreneurship is both creative and financial. A great product alone is not enough; the business model behind it must also work.
Pricing is one of the most important strategic decisions a founder will make because it directly affects profitability, scalability, brand perception, and long-term survival.
In my Implementation workbook, From Idea to Store Shelf, pricing and profitability are treated as foundational business disciplines—not afterthoughts. The workbook guides entrepreneurs through practical exercises on calculating costs, understanding market positioning, defining target profit margins, and building sustainable pricing models for long-term growth.



