How to Price Food Products in Australia (Start With Your Customer)
- 4 days ago
- 10 min read
Most food businesses price from their costs. The ones that last price from the value their customer feels. Here is the difference, and how to find it. It's a snippet of what we teach in the FoodLab program.
To price food products in Australia, do two things. First, work out the true cost of one serve: every ingredient (yes, even the salt), the packaging, a fair wage for your own time, and a share of your stall fees or kitchen hire. That number is your floor, the price you must never go below. Second, set your actual price by the value your customer feels they are getting, not by what it cost you to make. The gap between those two numbers is where your business lives.
Almost everyone does the first step badly and skips the second step completely. So let's walk through both properly: why the usual method keeps food businesses poor, and how to price for value instead.
What should I charge for my food?
Your price has to clear three bars at once.
First, it has to cover your true costs. Every ingredient, your packaging, and your own time. Most people forget to pay themselves (or leave it out so the final price is cheaper), but a business that doesn't pay you is not a business... it's an expensive hobby.
Second, it has to leave a real margin. The margin is what funds your next batch of stock, your growth, and the slow weeks.
Third, and this is the one so many people miss, it has to match the value your customer feels they are getting.
Most food business owners only do the first one. They add up what a dish cost them, add a bit on top, and call it a price. That's called cost-plus pricing, and it's a terrible trap.
Why cost-plus pricing keeps food businesses poor
Cost-plus pricing feels like it's safe. You know your numbers, you add a margin, and you're covered. But it has a serious problem: it prices your food as if the only thing you're selling is the food.
You are not just selling the food.
Think about your best customer. The one who comes back again and again. They could buy the same ingredients you use. They could cook it at home for a fraction of the price. But they don't. They come to you. Why?
Maybe your food tastes like home. Maybe it tastes like their childhood. Maybe yours is the one meal that week they didn't have to cook themselves. Maybe it's that you remember their name, and their kid's name. They are not paying you only for rice and spice. They're paying for a feeling.
When you price with cost-plus, you charge for the rice and the spice. You leave the feeling, the most valuable thing you offer, completely unpriced. You give it away for free. That's why two stalls can sell a similar dish, and one scrapes by at $12 while the other comfortably charges $18 and has a huge queue. The second one is charging for the value, not the ingredients.
You are not your customer
There's a big barrier with business owners when we teach this in the program. It's difficult for people to believe or grasp.
There's a reason for it: you are not your customer.
You cook the food you love. You price it the way you would want to pay. You talk about it the way you think about it. And then you stand at your stall, after days of cooking and prepping and packing, and watch people walk straight past. You go home with containers full of unsold food, and you can't work out why.
Picture going fishing. You love pizza, so you put a slice on the hook. You sit there all day and catch nothing, because the fish don't want your pizza, no matter how good it is. The fish want a worm. If you want to catch the fish, you have to stop thinking about what you love and start thinking about what they want.
Pricing works exactly the same way. You cannot price for a customer you haven't taken the time to understand. The food is the hook that gets them in once. The feeling is the worm that brings them back, and it's the worm you've been forgetting to charge for.
How to work out your food cost: a worked example
Before you can price for value, you need to know your floor. Here is what that looks like in real numbers.
Say you sell beef rendang with rice at a Saturday market, and you make 60 serves. Your costs for the day might look like this:
Ingredients (beef, spices, coconut milk, rice): $252 for the day, or $4.20 a serve
Packaging (container, lid, napkin, bag): $48, or $0.80 a serve
Your time (9 hours of shopping, prep, and the stall, at $33/hour): $297, or $4.95 a serve
Stall fee and transport: $120, or $2.00 a serve
True cost: $717 for the day, or $11.95 a serve
Now watch what happens at different prices, if you sell all 60 serves.
At $12 a serve, the “safe” price that feels fair because it covers your costs, you take $720 for the day. After costs, the business keeps $3. Three dollars. For a week of shopping, cooking, packing, and standing at a stall, your business made less than the price of one coffee. You paid yourself a wage and nothing more. There is no money left to grow, to survive a rainy Saturday, or to fix the freezer when it breaks. Nothing to pay your insurance or other registration fees.
At $18 a serve, you take $1,080. After every cost, including your own fair wage, the business keeps $363. That's money for more stock, better packaging, a second market, a slow week. That's a business.
One warning before you fall in love with that number: it assumes you sell out. Sell 40 serves instead of 60 and the business keeps about $100, because your time and your stall fee cost the same whether the queue comes or not. The quiet weeks are exactly why the price matters more than the queue. Building a good social media presence is important here - see our article about how to do that with Brendan Pang.
The difference between those two prices is not greed. It's the feeling you were giving away for free.
One more thing this example shows: most people who think they know their costs have never included their own time. If you take only one number away from this section, take that one. Pay yourself first, in the costing, before you set any price.
How to price for value, not ingredients
So how do you actually do it? You identify and surface the real feeling (or value) you really provide to the customer, then you price toward it. Here is the order that works.
1. Know your floor. Cost one serve properly, like the example above: all your ingredients (yes, even the salt), the packaging (yes, even the napkin), a fair wage for your own time, and a share of your fixed costs. This is the price you must never go below. Remember, it's a floor, not a target.
2. Find what your customer is really paying for. Pick one real, regular customer. A person with a name, not “everyone”. Ask yourself: why do they really keep coming back? Push past “because my food is good”. Good food is everywhere. We get hundreds of applications to FoodLab each year... you are not alone. What do they get from you that they can't get cheaper somewhere else? That answer is your value.
Don't have regular customers yet, or unsure if you offer any value or feeling? Well, you'd better start thinking about it, as you won't last very long. As we said, good food is everywhere. You have hundreds of thousands of other choices to compete with at any given moment. You are not alone.
3. Price toward the value. Once you can name the feeling, whether it's reliability, a taste of home, one less thing to worry about, or simply being known, you'll see that your customer's willingness to pay sits well above your ingredient cost. Price into that gap with confidence, and a little bit of experimentation. You're not overcharging, you're finally charging for everything you actually deliver. Remember, if people want to eat at home - they can.
4. Watch what happens, then adjust. Pricing is not a one-time decision. Try a price. Watch how customers respond. Adjust. The best food businesses treat their price as an ongoing experiment, not a number they're stuck with forever.
The fastest way to learn what your customer values: be the customer
There's a way of running a business, born on the factory floors of Toyota, that the world now calls lean. One of its strongest ideas is: be the customer. Don't stand behind the bench guessing what people experience. Go and experience it yourself. Stand in your own queue. Walk up to your own stall the way a stranger would. Order online, yourself, regularly. See what they see, and feel what they feel. Be frustrated by what they are frustrated with.
Henry Ford, who built one of the biggest companies in the world, put it like this:
“If there is any one secret of success, it lies in the ability to get the other person's point of view, and see things from their angle as well as your own.”
You can't do that from behind the bench, guessing. You have to ask. You have to experience. And you have to listen.
How to price food for a market stall
Market stalls make all of this a bit more pointed, because the customer is right in front of you and the competition is three stalls down. A few practical pointers:
Don't race to the bottom. Being the cheapest stall is the worst position to hold. It attracts customers who will leave you the moment someone undercuts you, and it starves you of the margin you need to survive a slow week.
Round prices for fast, cash-friendly service. Whole dollars keep your queue moving and your float simple.
Bundle to lift the average sale. A main meal, plus a drink, at a fair combined price, often earns more than a main alone, and feels like more value to the customer. Remember, value.
Watch your sell-out, not just your takings. If you sell out every single week with a queue left over, that is the clearest signal in the world that your price is too low.
Ask the people already buying. The customer mid-purchase is your best market research. “What made you come back this week?” tells you more than any online research could.
Don't forget the legal and safety side
Pricing sits on top of running a compliant business. There's no point pricing beautifully for a stall you're not permitted to trade from. In Australia, selling food generally means you'll need things like a Food Safety Supervisor certificate, the right council registration and permits for where you trade, and appropriate insurance. The rules vary by state and council, so check your local requirements (in NSW, the NSW Food Authority is the place to start) and get proper advice for your own situation. It's not the fun part, but it's the part that keeps the business going.
Common pricing questions
What is a good food cost percentage in Australia?
A common guide is to keep ingredients and packaging under about a third of your selling price. In the rendang example above, $5.00 of ingredients and packaging at an $18 price is 28%, right in the healthy zone. But treat percentages as a guide, not a rule. Your floor and your customer's sense of value matter more than an industry ratio.
Should I charge less because I'm just starting out?
No. New does not mean worth less. A low price doesn't buy loyalty; it attracts bargain hunters who leave the moment someone is cheaper. Start at a price that clears all three bars, and let your quality and consistency do the talking.
When should I put my prices up?
When the signals tell you. You sell out every week. There's a queue at pack-down. Regulars don't blink at the price. Your ingredient costs have risen and your price hasn't. Any one of these is a reason to test a higher price on your next batch and watch what happens.
How do I price homemade food to sell from my home kitchen?
The method is exactly the same: cost it fully, including your time, then price for value. But check your council's rules first, because home-based food businesses still need to be registered or notified in most parts of Australia. And when you outgrow the home kitchen, a shared commercial kitchen is usually the most affordable next step. We've written a guide to shared kitchens here.
One small experiment to run this week
If you take one thing from this, make it this small experiment. Pick one real customer. Ask them one question, something like: “What made you come back?” or “Why do you order that one?” Then do the hard part. Listen. You don't need to defend or explain anything. Just listen, and write down their exact words.
What they value most is almost never the thing you thought you were selling. And once you can name it, you can price for it.
Where this fits at FoodLab
Pricing for value is one of the foundations we teach inside the FoodLab training program, and it grows straight out of an earlier week built entirely on one idea: you are not your customer. Across the program, we take the guesswork out of running a food business in Australia, from costing and pricing to customers, sales, and the legal side of trading.
We built FoodLab for food entrepreneurs from refugee, migrant, First Nations, and low-income backgrounds who are already cooking, already selling, and ready to build something that lasts. Cooking is the easy part. Running the business is harder. That's why we exist.
If you want to learn the rest of what we teach, take a look at the program here. If you're ready to grow and need a commercial kitchen to work from, have a look at our shared kitchen. And if you believe more food entrepreneurs deserve this kind of structure, you can support the work here.
If you want to support the work that makes free training like this possible, find out more about donating to FoodLab here.
If you are a food entrepreneur and want to know more about our training program, find out more here.
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