I'll offer a simple example based upon a 3rd party item being sold into a retail store such as GNC or any other brick n' mortar retail outlet.
Btw, my ref to a "3rd party" item is so to differentiate a private label item, such as is Pro Performance w/in GNC, to that of the other branded items being sold through a retail outlet.
Also, to keep things simple, I'm going to use approximate dollar amounts:
EXAMPLE: Product Sold Thru a Distributor Prior to Being Sold Into Retail:
- SRP $100
- Wholesale Cost (i.e. what the retailer pays) = $50 (pills/tabs)
- Distributor Cost (if applicable) = $30
- Product Cost = $10.50
(note: Manufacturing/line costs will account for approximately 25% of the Product Cost; Raw Material Suppliers receive the shortest margins, w/ mark-ups not generally exceeding 25%, but as low as 5% on commodity items such as creatine, protein, glucosamine, etc)
Thus, for anyone whom believes that the brands (ex: Biotest) are rolling in the $$$, let me further explain that, in the above example, the $19.50 per unit only represents the Gross Sales Revenue. The costs associated w/ Advertising, Marketing, Promotions, Legal/Insurance, R&D, Clinical Trials, Payroll, and other overhead (ex: utilities, trade shows, sponsorships, etc, etc) all come out on the bottom of a PnL statement. Thus, the NET Profit of a product is radically different than the top-line Gross Revenue amount.
A couple of other things to keep in mind:
If the product doesn't go through a distributor, then the retailer will typically demand a higher margin % (ex: 60% or greater on pills/tabs, 55% or greater on powders, 50% or greater on bars or RTDs).
Also, if the product is private label (i.e. if it's a house brand), then you can assume a minimum mark-up of at least 70% on pills and an extra 5%-10% on powders and bars or RTDs.
If the retailer also has their own manufacturing capabilities, then the margins will be even higher (ex: GNC manufactures all of its own pills, tabs and gel caps. BTW, if you didn't already know, Optimum Nutrition manufactures the great majority of GNC's powders and RTDs).
This isn't, by any means, meant to pick on GNC. Margins are roughly equivacol across the board of potential retail outlets...though, GNC does generally demand a greater margin % from its 3rd party vendors then, say, VitaminShoppe.
Vitam World and Hi Health, however, are in line w/ GNC, though. Mass Market outlets demand roughtly the same margins or slightly less than GNC, but there's almost always a brokering (i.e. think realtor) or "slotting" fee that the brand has to pay to get their product into one of these distribution outlets which includes mass market, c-store, drug store or big box segmentation.
Hope that helps answer your questions.