If you’re new to the wine or spirits industry, it can be challenging to figure out how much you should spend on packaging design for your product. (Even for marketing pros with packaged-goods experience, budgeting for bottle and label design is difficult.)
It’s understandable. Design is a form of expertise; unlike the product you’re bottling, it’s not made up of components that each have their own cost. So it can be tricky to get your head around what you should expect to pay for packaging design services. And that uncertainty complicates all kinds of other decisions, including who you should hire to create the design.
While there isn’t a set formula to calculate packaging costs, there is a smart way to think about budgeting so you have fairly accurate expectations. We’ll help you do some back-of-the-napkin math in a moment.
When Setting a Packaging Budget, Don’t Do This
But first, here’s what not to do when thinking about your packaging design budget:
1) Guess. Many wine or spirit brand owners, especially those who are launching their own brand, follow their gut instinct about how much they should pay for bottle, label, and box design. Which all but guarantees that they’ll either underpay and wind up with a lackluster bottle that doesn’t do the brand justice, or overpay and divert dollars that could be better spent on marketing.
2) Google. Beware of typing “how much does packaging design cost?” into an online search field. You’ll likely land on one of those “design by the pound” crowdsource sites where inexperienced creatives deliver ridiculously low bids. You get, as they say, what you pay for: work that doesn’t align with your brand objectives or, worse, that’s been copied from another brand’s look.
How to Estimate a Packaging Design Budget
There are different ways to calculate packaging expense; this is our perspective on how to think about it. Often when clients come to us, it feels like their budget number is hanging in the air without context. And the biggest financial considerations to keep in mind are the number of units and your cost of goods sold (COGS).
It’s helpful to look at packaging as a two-part expense: design + production. Design is a fixed, up-front investment that is spread out over time and the number of units produced. Packaging is not redesigned every year; it is meant to have a multi-year lifespan. Production costs are variable based on not only the production run but also on materials, special printing effects, and other options you can choose.
So here are four questions to consider:
1) What is the production volume I’m planning for the next five years? (Five years is the average lifetime of the packaging design before it requires a facelift or complete upgrade.)
2) What is my COGS budget per unit? We can calculate that based on the wholesale price of the product which is usually about 30% of the retail price.
Here is a hypothetical example: Say you’re going to sell your whisky for $50 at the liquor store. Your wholesale price then is $15. Of that, let’s assume 40% is the profit margin ($6), leaving you with $9 for the liquid and packaging.
The liquid might cost you $5 to produce, leaving you with $4 for the packaging. A bottle costs about $1.50, a cork is cents on the dollar, and a label cost per unit (depending on the quantity of the print run) can be as low as $0.25. So your per-unit packaging budget line might look like this:
$5 – $1.50 – $0.10 – $0.25 = $2.15 for design
3) What’s my real packaging design budget? If you’re planning to produce 100,000 bottles, you potentially could spend up to $215,000 on the design and still remain profitable. This is the real budget you have. It might seem like a lot — and we agree — but it helps you to understand how much you actually can spend, and stop relying on a gut feeling.
4) What are our business goals for the brand? If you’re offering a premium product at a comparable price point, packaging will be essential in making the sale. The right packaging conveys your brand story, creates engagement, and elevates the perception of your wine or spirit before the consumer has had his first sip.
Armed with your budget framework, then, we can help you make smart use of those dollars by wisely sourcing materials and choosing cost-effective processes and vendors. We’ll help you add value to the brand through eye-catching design that generates sales.
The most savvy marketers we work with understand that design is more an investment than an expense — and they want to see a return on that investment in terms of added value and sales growth.
You’re not paying for design; you’re paying for performance on shelf. What is that worth to you?