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When we started our home bakery in 2007, we knew the one rule we must follow in order to be successful: keep the costs as low as possible. Through diligent shopping and price comparisons, I know the cost of a cup of flour at one store and how much that tablespoon of pure vanilla extract will cost at another.
I've had other cottage food vendors tell me I need to raise my prices and customers have mentioned that our prices are better than others. While I believe quality will always outweigh price for people who shop at farmers markets, I'm not intentionally undercutting another's prices. We've just learned to shop smart and maximize our profits while providing value to our customers.
These are my secrets to being able to compete with major grocery stores on price while providing homemade quality.
Buy in bulk
I don't have the upfront cash or the storage space to buy a semi-trailer full of bread flour. But, if a five-pound bag costs $4.89 at Kroger and a 50-pound bag is $15.79 at Costco, which is going to provide the highest profit?
I don't keep an organic kitchen, so I'm able to price-shop on many items. If eggs are cheaper at Aldi, I buy them there. I buy yeast in one-pound blocks and pure vanilla by the pint. We ran into a last-minute order for extra banana bread and my boyfriend went to a small-town grocery hoping for some extra-ripe bananas. He came home with a 30 pound case, ready to use, for about 10 cents a pound.
Each spring, we take a day to visit each of our stores and compare prices on the items we use most. Unfortunately, I'm not able to buy everything at one location but we've worked out a route that takes the least amount of time.
GFS Marketplace offers the best price for the yeast I buy and it's also the only place in Columbus where I can buy stone-ground wheat flour in bulk. In the past, I compared prices at Sam's Club and Costco. While Sam's did have a lower price on a few items, Costco is only 21 miles from my house and overall the prices are lower. The membership at each is the same price - $50 - and I save more money with Costco.
Quality does matter as much as price
For some items, paying a bit of a higher price gives a better tasting end product. My experiment included extra virgin olive oil and Asiago cheese. I'd used Kroger brand extra virgin olive oil for years and loved the taste, but Costco's Kirkland brand was about $1 less for the same size package. Given the volume of oil we used for our artisan-style breads, we thought "a buck is a buck." The Kirkland brand was heavier tasting and it came through in the bread.
We bought blocks of Asiago cheese from GFS Marketplace for three years until they discontinued it. Costco offered a different brand at a slightly lower price, but it was softer, didn't grate as easily and the flavor disappeared next to onions and garlic. We learned we would be able to special-order shredded Asiago from GFS in a large quantity and made the switch.
Shop less often
Rising gas prices cut into any small business owner's profit margin. We don't have the storage space to shop once a month, but have cut it down to every other week.
Our standard supply shopping involves a 75-mile round trip in a huge Chevy Suburban. Whether I'm buying 200 pounds of flour and sugar or 400 pounds, I can be in and out of Costco in less than 30 minutes. I'm not only saving more than $20 in gas, the three hour trip is my valuable time being conserved.
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