I’m knee deep in a decision to switch my case-pack from 12 jars to 6 jars. And like I’ve done before, I’m going to write my thoughts down on “paper” and let you know what I decide to do in a follow-up post.
When you start your food business, you’re pretty much focused on getting something in the jar or box and slapping a label on it. You want your minimum viable food product on the shelf. You’ll refine the look later and get your food product cost down, too.
But, when you start to experience growth, decisions have a lot more weight. They affect a larger part of your business and reversing them could cost you thousands of dollars. For example, you may be considering rebranding your food product, or using a co-packer – both of which are HUGE decision.
Another decision, while not as glamorous, is deciding on your case-pack size.
What is a case-pack?
Case-pack is the number of units you put in a box for sale to a distributor or a retailer. For example, many value-added products like mustard, jelly, and bbq sauce, come in a case-pack of 12. Larger bottles like salad dressing or even hot sauce, come in a case-pack of 6. And then you’ve got small packs, like 4 oz glass jars, that come 24 to a case.
It’s all over the board — and mainly depends on what’s available from your supplier.
Why does case-pack matter?
It’s all about shelf-space at your retailers, but it’s also a financial decision that impacts you, the manufacturer, and everyone else is in the distribution channel because your pricing gets passed all the way down to the end-consumer.
There are a lot of reasons case-pack is a big decision. Below, I’ll explain the pros and cons of switching my mustards from a 12-pack to a 6-pack. Hopefully you find this helpful for your own food business.
The pros of changing your case pack:
1. More inventory turns
If your product sits on the shelf collecting dust for months, well, it’s simply not moving. Get stuck in that situation (of which I’ll write about next month) and you’ve got a bigger problem on your hands. With small case packs, you’ll “move more cases” and increase the performance of your product across the category. With that being said, the more manufacturers who move to smaller case-packs, the more this “pro” becomes a moot point.
2. Happy retail buyers
Buyers LOVE smaller case-packs. They are able to better manage their inventory, order what they need, and fit it all on the shelf – with limited back-stock (which takes up less space. And we all know you’ve got to keep those retailer buyers happy, right? This and #4 on the pros list, to me, are two BIG reasons to decrease case-size.
3. More SKUs on the shelf
With a smaller case pack, retailers can order more SKUs because they won’t be stuck with 12 of each of them. This means you get more shelf space (yes, please) and a better selection for your retail customers. Plus, if you launch a new flavor, it’s a lot easier for buyers to bring it in when they have to get 6 of them just to try it out.
4. No split-case costs
This is one of those hidden costs if you deal with a larger distributor – split-case costs. Let’s say you package a case-pack of 12 jars and send it off to a larger distributor. Then, a retailer orders half a case. All of a sudden, your distributor has to split the case of 12 you just sent them. (In some cases they literally have a machine that splits the case). This costs the distributor money – and it gets charged back to you at the rate of $0.30-$0.50/case. Yep – It’d be great not to pay those. Ever.
The cons of changing your case pack:
1. Increased product cost
Changing your case-pack costs money (see #3 on the cons list). Especially if your glass already comes in a box with cardboard protectors. Sure, it’s included in your total cost, but it’s nice to have the glass nicely packed away.
So, how much of an increase are we talking?
I have been in touch with corrugated box companies looking at quantities near 5,000 and 10,000 boxes. I figure if I’m using roughly a pallet of glass a month (roughly 400 twelve-pack cases) that’s 800 boxes a month to pack in a 6-pack. That means yearly demand of 9,600 boxes (which gets rounded up to 10,000 for a bulk rate). Plus, the divider to protect the jars during shipping.
When all said and done, it’ll be roughly $0.75 a box (keep in mind, I get boxes for FREE now).
When spread over just 6 jars, a case-pack of 6 jars of mustard would increase roughly $0.13/jar — a large increase in our overall price per unit to retailers and distributors.
That leaves one big question: Will retailers pay extra for the convenience of a case-pack of 6 jars? It’s something I’m hoping to find out with a couple of our direct accounts over the next few weeks.
2. More storage space required
Remember those 10,000 boxes I mentioned? Where the heck am I going to put 10,000 boxes? That requires storage space far beyond my basement (my parent’s basement, I should say!).
3. Capital investment for the switch
10,000 boxes isn’t cheap. At $0.75 a piece, that’s $7,500 I don’t have (or I’d rather put towards marketing activities). To switch to a 6-pack would require a capital investment. I’ve looked at ordering a lesser quantity, but it’s not cost effective and would increase my unit cost more.
I still haven’t made a decision. What I may do is get a smaller quantity of 6-pack boxes and split them myself if I need to. With that being said, I’ve also split my own cases – two flavors in one 12-jar case – and my direct accounts have been fine with that. But, as we grow, I need to think about what my customer wants and if it’s cost-effective for me to make the change.
If you’ve changed your company’s case-pack size let me know how you came to a decision – I’d love to know!