Volume discounts can significantly lower your food cost, but only if you calculate them correctly. Many entrepreneurs accept a discount without checking what the effect is on their food cost and selling price. In this article, you'll learn step-by-step how to calculate the effect of volume discounts and how to translate this to your menu price.
What is a volume discount?
You get a volume discount from your supplier when you buy more than usual. For example, 10% off if you buy 50 kg of potatoes instead of 20 kg. It always seems attractive, but you need to calculate whether it's really beneficial.
💡 Example volume discount:
Your supplier offers:
- Regular price beef: €22/kg
- At purchase of 25+ kg: €19/kg (14% discount)
- You normally use 8 kg per week
Question: is it worth buying 25 kg?
Calculate your new food cost per dish
When you get a volume discount, your purchase price per kilo drops. This directly affects the food cost of your dishes. Use this formula:
New food cost = (New purchase price × Quantity per portion) + Other ingredients
💡 Steak calculation:
Steak 200 grams per portion:
- Old meat food cost: €22/kg = €4.40 per portion
- New meat food cost: €19/kg = €3.80 per portion
- Savings per portion: €0.60
- Other ingredients: €3.20
Total food cost drops from €7.60 to €7.00
Calculate the effect on your food cost percentage
A lower food cost means a lower food cost percentage. This gives you room to improve your margin or lower your selling price. Calculate it this way:
New food cost % = (New food cost / Selling price excl. VAT) × 100
💡 Food cost effect:
Steak selling price: €32.00 incl. VAT = €29.36 excl. VAT
- Old food cost: €7.60 / €29.36 = 25.9%
- New food cost: €7.00 / €29.36 = 23.8%
- Improvement: 2.1 percentage points
Your food cost drops by 2.1 percentage points
Pass through to new selling price (optional)
You can pass the savings through to a lower selling price. Handy if you want to be more competitive. Use this formula:
New selling price = New food cost / (Desired food cost % / 100)
⚠️ Watch out:
Only lower your selling price if you're sure the volume discount is structural. For temporary promotions, it's better to keep the savings in your margin.
Calculate the total impact on an annual basis
To see whether a volume discount really pays off, calculate your total savings per year. Don't forget to include the extra inventory costs.
💡 Annual impact calculation:
Steak: 80 portions per month, €0.60 savings per portion
- Monthly savings: 80 × €0.60 = €48
- Annual savings: €48 × 12 = €576
- Extra inventory costs: 17 kg × €19 = €323 one-time
Net benefit first year: €253
Risks of volume discounts
Not every volume discount is beneficial. Watch out for these pitfalls:
- Waste: If you buy more than you can use, you lose money through spoilage
- Cashflow: You pay more upfront, which can affect your liquidity
- Storage space: Do you have room for the extra inventory?
- Shelf life: Can you use everything before the expiration date?
⚠️ Watch out:
Always calculate how much you use per week. Only take volume discounts if you can use the product within 2-3 weeks for fresh products.
Digital help with food cost calculations
Calculating the effect of volume discounts takes time, especially when comparing multiple products. An app like KitchenNmbrs helps you quickly see what the effect is on your food cost per dish and your total food cost. You enter the new purchase price and immediately see the effect on all your dishes.
How do you calculate the effect of a volume discount? (step by step)
Calculate your current food cost per dish
Add up all ingredient costs for one portion with the current purchase prices. This is your starting point to measure the effect of the discount.
Calculate the new food cost with the discount price
Replace the old purchase price with the new discount price and recalculate the food cost per portion. The difference is your savings per dish.
Calculate the effect on your food cost percentage
Divide the new food cost by your selling price excl. VAT and multiply by 100. This gives you your new food cost percentage.
Check if you can use the extra inventory
Calculate how many weeks you'll have with the minimum purchase. For fresh products, this must be used within 2-3 weeks.
Calculate the total annual impact
Multiply your savings per portion by the number of portions per year. Subtract any additional inventory or storage costs.
✨ Pro tip
When checking volume discounts, always look at the expiration date of your current inventory. If you still have a lot in stock, wait until it's almost gone before taking the discount.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Should I always say yes to a volume discount?
No, only if you can use the extra quantity within the shelf life and the savings are greater than the extra inventory and storage costs.
How do I know if I have enough storage space?
Measure your current storage space and check if you can store the extra quantity without compromising quality. Think about refrigeration, freezing, and dry storage.
Can I pass a volume discount through to a lower menu price?
You can, but only do this for structural discounts. For temporary promotions, it's better to keep the savings in your margin for better cashflow.
What if I can't use the extra inventory?
Then you lose money through waste. Always calculate how much you use per week and don't take discounts on products you can't use within the shelf life.
How often should I update my food costs after a discount?
Immediately after you start using the new inventory. Update your recipe costs so your food cost calculations match the actual purchase prices.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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