Costing and Pricing

Costing and pricing in beekeeping means working out what a kilogram of honey or a colony really costs you and setting your selling price on the basis of that calculation and the market. The most common commercial mistake is setting prices without knowing costs; the result is often a loss that goes unnoticed for years. This page gives no figures; it explains the method: which items are counted, how the calculation is done and how a price is built.

Why do costs stay hidden in beekeeping?

In beekeeping, expenses are spread across the year: equipment in winter, feeding in spring, jars in summer, treatments and sugar in autumn. Income, on the other hand, is squeezed into a few weeks. After the harvest the money in the till looks large, but when everything spent over the year is added up, the picture changes.

Many items are also never counted at all: your own labour, travel and fuel, colonies lost in winter, equipment wearing out over the years. A "profit" calculation made without them really means giving away your own labour and capital for free.

What are the cost items in beekeeping?

Direct (variable) costs

Costs that rise as the number of colonies or the amount of product increases:

• Feeding: Sugar, syrup, fondant, pollen substitute
• Health: Licensed varroa products and other veterinary costs
• Foundation and frame replacement
• Packaging: Jars, lids, labels, cartons
• Buying queens or the cost of rearing them
• Transport: Moving and site costs in migratory beekeeping

Indirect (fixed) costs

Costs that are independent of the number of colonies in the short term:

• Depreciation: The annual share of equipment used for many years, such as hives, supers, extractor, settling tank and vehicle
• Protective clothing, smoker, hand tools
• Fuel and travel
• Rent for the apiary site or the share given to the landowner
• Registration, union fees, insurance, analysis and paperwork costs

Costs that aren't counted but are real

• Your own labour: You cannot calculate profit without putting a value on your hours. The simplest measure is the wage you could earn doing another job in those hours.
• Colony losses: Every colony lost in winter is an asset that has to be replaced.
• Replacement: Making your own nucs is not free either; those colonies produce no honey and need feeding and labour.
• Opportunity cost of capital: What the money tied up in equipment would earn elsewhere.

How is unit cost calculated?

The calculation needs all the records for a season. The method is as follows:

1. Add up the direct costs: All the feeding, treatment, packaging, foundation and queen costs for the year, from invoices and receipts.
2. Calculate annual depreciation: For each piece of equipment, purchase price ÷ expected years of use. Do this separately for hives, extractor and vehicle, then add them up.
3. Add the other fixed costs: Travel, rent, fees, insurance, analysis.
4. Add your labour: Total hours worked × hourly value. If you don't know your hours, start recording them this year.
5. Add the losses: Number of colonies lost × cost of replacing one colony.
6. Divide: Divide the total cost both by the number of colonies and by the amount of saleable produce.

If you produce more than one product, allocate shared costs (travel, depreciation, labour) to the products according to the time spent on each. Otherwise you cannot see which product is paying.

How is the price of honey set?

There are three basic approaches; most beekeepers use them together:

• Cost-plus method: A profit margin is added on top of unit cost. It is simple and prevents selling at a loss, but it takes no account of what the market is willing to pay.
• Market price method: You look at the shelf and market prices of similar products. It is competitive, but may not cover your costs, especially when compared with cheap, adulterated or imported products.
• Value-based method: The product's distinctiveness is priced: separately harvested monofloral honey, quality backed by analysis, traceability, comb honey, a known producer. A small producer cannot compete on quantity but can on quality; that is why this is usually the soundest route.

The practical order is: first find the floor (cost per kilogram), then look at the market range, and finally choose your position within that range according to what sets your product apart. If the floor is above the market price, the problem is not the price but the cost structure or the choice of product.

Added value: the same honey, different income

The same honey can bring in very different income depending on how it is sold. The general order, from lowest to highest:

1. Bulk sales (to a wholesaler, in drums or tins)
2. Jarred and labelled honey
3. Separately harvested, documented monofloral honey
4. Comb honey and speciality products
5. Direct sales to consumers (markets, at the apiary gate, regular customers)

The last item often makes the biggest difference and does not require a large investment in equipment; but it takes time, communication and compliance with labelling rules. When moving to jars, packaging, labels, filling labour and the registrations and permits required by food legislation must also be added to the cost.

Common mistakes

• Copying your neighbour's price: Their costs, yield and market are not the same as yours.
• Not counting labour: The years when you say "it covered its costs" are often years when your labour was given away for free.
• Deciding on the basis of a single year: Use an average that includes the bad years too.
• Not counting losses as a cost: Every winter loss is a cost for the following year.
• Trying to win market share by selling cheaply: Raising the price later is harder than setting the right price from the start.

Records: the notebook that tells you your price

A simple notebook or spreadsheet is enough. Keep four columns: expenses, amount produced, sales and time spent. The first year will be incomplete; by the second year this notebook will tell you which product pays, which apiary does not cover its costs and where the floor of your price lies.