How to calculate the landed cost of imported food
Landed cost is what a product actually costs once it has reached your warehouse and is ready to sell, not just what the supplier invoiced you. Buyers who price only against the supplier's quote consistently underestimate their real cost and, without noticing, their real margin.
Product cost
The price you pay the producer or supplier for the goods themselves, before freight, insurance or duty.
Freight
The cost of moving the shipment from the supplier's location to your destination port or warehouse, by sea, air or road.
Insurance
The cost of covering the shipment against loss or damage while in transit.
Customs duty
The tariff applied by the destination country's customs authority, usually calculated as a percentage of the value of the goods plus freight. The exact rate depends on the product's tariff classification, its origin and the destination market, so you enter it manually in this calculator.
Other import costs
Anything else the shipment picks up on its way to you: customs clearance and brokerage fees, port or terminal handling, and inland transport to your warehouse.
Landed cost per unit
Total landed cost divided by the number of units in the shipment. This, not the supplier's per-unit quote, is the true cost you should price against.
Target gross margin
The share of your selling price you want to keep as gross profit, expressed as a percentage of the selling price, not of the cost.
Margin vs. markup
Margin and markup are both expressed as percentages, but against different bases, and confusing the two leads to underpricing. Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. A 30% gross margin is not the same calculation as simply adding 30% to your cost.
Worked example, with a landed cost per unit of €10.00:
- 30% markup: €10.00 × 1.30 = €13.00 selling price. Profit of €3.00 is 23.1% of the €13.00 selling price, not 30%.
- 30% margin: €10.00 ÷ (1 − 0.30) = €14.29 selling price. Profit of €4.29 is 30% of the €14.29 selling price, as intended.
This calculator uses the margin formula, since a target margin is what most importers and distributors are actually trying to hit.