Costing and shrinkage in the butcher shop

Costing is a distinct subject area in the gourmet butcher training program, and with good reason. When you buy a whole animal or a whole cut, you need to calculate what the individual portions must cost for the business to work. The key is understanding shrinkage — what you cannot sell at full price.

§What is shrinkage?

Shrinkage is the difference between what you buy in and what you can sell. Bones, sinews, fat and trimmings give weight loss, and aging gives additional water loss. If you buy 100 kg and can only sell 70 kg as cuts, your yield is 70% — the rest must either be sold cheaper (minced meat, bones for stock) or discarded. The price you calculate per kg sellable goods must cover the entire purchase.

§Yield percentage

§Contribution margin and sales price.

The contribution margin is the sales price minus variable costs (purchases, packaging, shrinkage). It's the contribution margin that must pay for wages, rent, refrigeration, and profit. When you calculate you therefore add a reasonable contribution margin on top of the cost price per salable kilo — often expressed as a calculation factor. If the factor is set too low the shop loses money on every sale even if customers are happy.

§The whole animal is good economics

The gourmet butcher's old principle of using the whole animal is also sound business. The fine cuts sell easily, but the cheaper pieces and offcuts can be refined into sausages, minced meat, meatballs, stock and spreads with good profit. By refining what would otherwise be low-value waste, you raise the total profit margin on the animal — and you waste less.

• 01Weigh and note the yield when butchering — then you know your actual waste.
• 02Ennoble off-cuts and cheap pieces instead of selling them cheaply.
• 03Adjust the calculation when purchase price or shrinkage changes.
• 04Compare the calculation with the actual turnover to catch errors.

“The one who knows their waste knows their business.”

— Costing principle