My Supplier Raised Prices: How Do I See What Each Candle Costs Now?

When wax, oil or jars cost more, every candle that uses them costs more, usually by a few cents that add up. Redo the cost per candle with the new price, then see what it did to your margin. Craftybase says to review prices whenever a key material rises more than 10 percent or a supplier raises prices, and CandleScience says to update your costs every few months so rising expenses do not quietly eat your profit.

What are the steps?

1. Find the new price per unit. Divide the pack price by the pack size, in the same unit your recipe uses, such as per pound or per ounce.
2. Put the new price in your cost sheet or app, and keep the old one with its date.
3. Redo every recipe that uses the material. Multiply the new price per unit by what one candle uses.
4. Work out the margin again, retail and wholesale. Margin is (price - cost) / price.
5. Decide. Hold the price, raise it, or change something else. The decision is below.

Worked example: wax goes from $2.80 to $3.35 a pound

All numbers are examples. One candle uses 6 oz of wax, which is 6 / 16 = 0.375 lb. Its full cost before the rise is $9.40, and the wax part is 0.375 x 2.80 = $1.05. It sells for $24.00 retail and $12.00 wholesale.

New wax cost per candle: 0.375 x 3.35 = $1.256, or $1.26. That is $0.21 more. The wax price rose 3.35 / 2.80 = 1.196, about 19.6 percent. The full cost went from $9.40 to $9.61, only 0.21 / 9.40 = 2.2 percent.

Retail barely moved. Wholesale lost about 1.75 points. That fits what Craftybase says: check wholesale first, because rising costs can break wholesale margins before retail ones. To keep the old wholesale margin of 21.67 percent, the new price is 9.61 / (1 - 0.2167) = 9.61 / 0.7833 = $12.27, so you might round up to $12.50.

Which price do I use if I still have old wax on the shelf?

This depends on how you cost stock. Craftybase describes two common ways. First in, first out (FIFO) uses your oldest purchase first. Weighted average blends all your purchase prices into one average per unit, and it says every new purchase updates the average, so every recipe that uses the material reflects the new cost.

Say 20 lb is on hand at $2.80 and you buy 30 lb at $3.35. Weighted average: (20 x 2.80 + 30 x 3.35) / 50 = (56.00 + 100.50) / 50 = 156.50 / 50 = $3.13 a pound. A candle's wax then costs 0.375 x 3.13 = $1.17, so the full cost is $9.52 and the retail margin (24 - 9.52) / 24 = 60.33 percent. Under FIFO, the first 20 lb would still be costed at $2.80. Pick one method and use it every time.

Craftybase's own example, from soap, shows why this matters. Coconut oil rose from $3.50 to $4.80 a pound, and a recipe that is never updated keeps using the old figure. Craftybase puts the miss at 37 percent. That is the size of the rise: (4.80 - 3.50) / 3.50 = 0.371. Measured against the new price, the old figure is 1.30 / 4.80 = 27 percent low. Either way, it is a real gap.

Should I raise my prices?

Craftybase suggests raising prices when your numbers show you need to, and lists a gross margin below roughly 30 to 40 percent as a signal. Its advice on how:

• Base the new price on your costs, not your old price.
• Look at competitors, who may face the same rise.
• Make one honest increase, rather than several small ones.
• Tell returning customers in a short, plain note with the date.

You can also hold the price, use a little less of the material, change the recipe, or look at another supplier. In the example, nothing needs to happen at retail. Wholesale is the one to watch.

Common mistakes

• Updating the price in one place and not in the recipes.
• Not keeping the old price and the date.
• Looking only at retail and finding out about wholesale months later.
• Mixing FIFO on some materials and averages on others.
• Raising prices every few weeks in small steps.

Questions

How often should I check my costs?

CandleScience says every few months. Craftybase says at least yearly, and also when a key material rises more than 10 percent or a supplier raises prices. For products you make a lot of, while costs are rising, it suggests quarterly.

Do I tell wholesale shops straight away?

I did not find a source that gives a rule. Check your agreement with each shop, and see our wholesale pricing guide for how to work out a new price.

Does a small rise matter?

Look at the per-candle change, then at what it does to margin. In the example above, a 19.6 percent wax rise added $0.21 to a $9.40 candle. Multiply by how many you make: 200 candles a month is 200 x 0.21 = $42.