Gross margin
= (price − cost) ÷ price. Markup = (price − cost) ÷ cost. A 25% markup is only a 20% margin, which is why pricing by markup and reporting by margin causes surprises (gross margin, markup).
Gross margin calculator
Gross margin calculator for food distributors: margin, markup and target price
Cost$8.00 landed
Price$10.00
Gross margin20% of the selling price
Markup25% of the cost
TargetThe price that hits the margin you want
Use landed cost as the cost. Margin is on the price; markup is on the cost.
Short answer: This free gross margin calculator works out gross margin and markup for a food distributor from a unit cost and a selling price, or the selling price you need to hit a target margin. Margin is profit as a share of the price; markup is profit as a share of the cost. It runs in your browser and nothing is sent anywhere.
Updated
Gross margin calculator
Gross profit: $2.00 · Gross margin: 20.0% · Markup: 25.0%
Price needed for that margin: $10.26
Margin vs markup
For a food distributor, use the landed cost (purchase price plus freight, duty and fees) as the cost, or margins look better than they are (landed cost).
Worked example
A case of chicken thighs lands at $38.00 after freight. Sold at $47.50, the margin is ($47.50 − $38.00) ÷ $47.50 = 20%, and the markup is $9.50 ÷ $38.00 = 25%. To hit a 25% margin on the same case, the price has to be $38.00 ÷ (1 − 0.25) = $50.67. Set the target margin in the calculator and it does that division for you.
What a healthy margin looks like
Independent distributors usually run gross margins between the mid-teens and the high twenties, with produce and commodity proteins at the low end and specialty, frozen and private-label items at the high end. The number that matters is margin by customer and by item, not the company average: a few accounts priced at a stale markup can hide behind a healthy total. Price levels, customer specials and bid pricing in an ERP exist to keep that margin visible on every order line (price level, bid pricing).
Frequently asked questions
How do you calculate gross margin?
Gross margin = (price − cost) ÷ price.
What is the difference between margin and markup?
Margin divides profit by the price; markup divides profit by the cost. A 25% markup is a 20% margin.
Which cost should a food distributor use?
Landed cost: the purchase price plus freight, duty and fees.
Is the calculator free?
Yes. It runs in your browser and nothing is sent anywhere.
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