How to Calculate Cost of Goods Sold: Juicing Business 101

One of the many things you must take into consideration when adding a new juice or snack to your menu is your profitability. To determine your profitability, you must learn how to calculate cost of goods sold (COGS). Mastering your COGS helps you make informed menu, purchasing, and financial decisions. Let’s dive into how to master this financial aspect of your juicing business.

What is cost of goods sold?

In the restaurant industry, COGS is a calculation of the total costs of the raw materials and ingredients used to create a finished product. As a juice bar, this is your fruits, vegetables, juice add-ins, prepackaged snacks, and the ingredients for any other food items you prepare. It also includes the dry goods you serve dine-in and to-go items in. This includes your cups, lids, straws, disposable cutlery, napkins, and takeout packaging.

You’ll also need your COGS to calculate your gross profits and a variety of other financial metrics. But for now, let’s explore COGS further.

Is labor included in cost of goods sold?

Yes, a portion of your labor line is included in your cost of goods sold—but not your entire labor line. The only portion of COGS included in your labor line is the time your team commits solely to food prep. As a juicing business, this is the time before you open, while you’re open, or after hours dedicated to washing, peeling, chopping, and pre-juicing. Also, to prepping any other snacks or food products you sell.

Optimizing food prep time is one of many reasons juice bars upgrade to Zumex juicers. Our juicers minimize or eliminate the need to peel and chop produce, while accelerating juicing time—and optimizing juice yields.

Should your juice bar implement perpetual or periodic inventory?

Your inventory count is required for calculating your cost of goods sold. Perpetual inventory is the standard for all businesses in the food and business industry. Let’s explore the difference between the two.

• Perpetual inventory: Most juice bars count their inventory on a weekly basis. With a perishable inventory and constantly fluctuating food prices weekly inventory counts ensures you keep your finger on the pulse of your business. Weekly inventory also helps you with forecasting, identifying shrinkage (theft), and taking a proactive approach to food waste.
• Periodic inventory: Monthly or quarterly inventory is more common in retail settings or for inventories that are comprised of primarily physical and non-perishable products. You may also sell physical products, such as reusable beverage containers, reusable straws, and branded tees and swag. Your physical products can be counted monthly instead of weekly.

What is FIFO?

One thing to assess when completing your weekly inventory is whether your team is properly performing first in, first out (FIFO). FIFO is a key aspect of inventory management. When your weekly or biweekly perishable goods are delivered, your team must implement rotation. This means placing new food items further back on shelves, and older items in the front. FIFO minimizes food waste by minimizing expiration and spoilage.

Is cost of goods the same as operating costs?

Operating costs and COGS are not the same calculation. However, you must calculate both to monitor your financial performance. Your operating expenses (aka. overhead) include all day-to-day expenses. They are a subset of your controllable costs.

This includes:

• Your full labor line
• Rent
• Utilities
• Marketing expenses
• Office supplies
• Maintenance and repairs
• Licenses and permits
• Technology
• Pest control
• Towel, mat, and apron cleaning
• One-off and periodic purchases
• And more

What is the formula for calculating cost of goods sold?

While you must manually count your inventory, once you input your numbers, your POS software or integrated inventory software will do the math for you. If you don’t have inventory management software yet, or you want to understand where your numbers are coming from, the basic cost of goods formula is below:

Beginning inventory + new inventory – ending inventory = cost of goods sold

What is a good COGS percentage?

Once you’ve calculated your COGS, you need to determine your COGS percentage. This metric helps you assess whether you’re spending too much on your raw materials. If your percentage is high, you may need to raise your prices or remove ingredients from your menu that are currently too expensive.

The lower your COGS percentage the better. For the restaurant industry, you should aim for between 30% and 35%. Anything below 30% is outstanding!

The basic calculation for cost of goods percentage

After calculating your COGS, divide your total food and beverage costs by your total revenue.
For example, if your May COGS is $4,500 and your total sales for the Month of May are $15,000 your COGS is 30%.
$4,500 / $15,000 = 0.3
0.3 x 100 = 30%

Here’s to mastering your juicing business financials

Sustainable juice bars are profitable juice bars. If numbers aren’t your strong suit, seek the expertise of a financial advisor. That said, you’ll need to learn some basics to ensure you keep your finger on the pulse of your financials.

Zumex wants to see you succeed, which is why we’ve curated a range of tips to help you optimize your financial performance.