Why the True Cost of a Concentrate Is Unknown
Most producers know the cost per kilogram of a scent they have built themselves only "approximately". Knowing approximately means either underquoting or losing the customer. The true cost of a concentrate is calculated from the price and proportion of every raw material in the formula, and this calculation gives results different from what is assumed: a natural absolute at 2 per cent can cost more than the cheap solvent making up 40 per cent of the formula.
This article builds the TL/kg calculation on a formula basis step by step: raw material cost, solvent coming from dilutions, waste, labour and what goes on top. Once the calculation is set up as a spreadsheet, it takes minutes for each formula.
The output of the calculation is two numbers: the concentrate's TL/kg cost and this concentrate's share in the finished product. The second is the input for the cost-in-use calculation.
Formula Cost Table: Example
The example below is the skeleton of a cost table for a simple 100 gram woody-citrus concentrate. The prices are illustrative; the structure is real.
| Raw material | Proportion (%) | Price (TL/kg) | Cost in 100 g (TL) | Cost share |
|---|---|---|---|---|
| Iso E Super | 25 | 900 | 22.50 | 13% |
| Hedione | 15 | 1,400 | 21.00 | 12% |
| Bergamot oil | 12 | 3,500 | 42.00 | 24% |
| Vetiveryl acetate | 8 | 4,800 | 38.40 | 22% |
| Ethylene brassylate | 10 | 600 | 6.00 | 4% |
| Linalool | 8 | 700 | 5.60 | 3% |
| Vetiver oil (50% DPG) | 6 | 6,000 (neat: 12,000) | 36.00 | 21% |
| DPG (from dilutions + solvent) | 16 | 120 | 1.92 | 1% |
| Total | 100 | — | 173.42 | 100% |
The table teaches two things. First, 67 per cent of the cost comes from three raw materials (bergamot, vetiveryl acetate, vetiver) that make up 26 per cent of the formula. Cost reduction work is done on these three lines, not on the solvent. Second, the price of a diluted raw material is entered on the basis of the dilution (50% vetiver: half the neat price) and the DPG coming from the dilution is totalled on a separate line; otherwise the cost is counted either twice or not at all.
This 100 gram table gives the concentrate's cost per kilogram directly: 173.42 TL/100 g = 1,734 TL/kg raw material cost.
What Goes on Top of Raw Materials: Waste, Labour, Control
Raw material cost is not the whole cost of the concentrate. Four more items are added; in small production they can exceed the raw materials.
Waste. In weighing, left in the vessel, lost in the filter, gone to samples: 3–5 per cent. It is added to the raw material cost at this rate. 1,734 TL × 1.04 ≈ 1,803 TL/kg.
Labour. Weighing, mixing, maceration, filtration, record-keeping. 1–2 hours for 1 kg of concentrate is a reasonable starting estimate; it is multiplied by the hourly cost. In a large batch labour per kg falls; this is the real source of economies of scale.
Quality control and documentation. Retained sample, odour check, IFRA and allergen calculation, external laboratory analysis if required. It is a fixed cost per formula; it is divided by the kilograms produced. For a formula produced at 20 kg a year it is significant per kg; at 500 kg it is negligible.
Development. The mods, raw materials and time spent developing the formula. It is spent once and spread over the kilograms sold during the formula's lifetime. For a customer-specific formula this item is written separately into the quote.
Setting Up the Cost Table: Step by Step
Once the table is set up correctly, it is reused for every formula.
- Create a raw material price list
For each raw material: current purchase price (TL/kg), purchase quantity, supplier, date. For raw materials bought diluted, the dilution ratio and dilution price in separate columns.
- Enter the formula as neat material and weighed amounts
The formula table: raw material name and the proportion weighed; the price is pulled from the price list. For a diluted raw material the weighed proportion is on the basis of the dilution.
- Calculate the line cost
Proportion ÷ 100 × price. The sum of the lines is the raw material cost of 100 g of concentrate.
- Calculate the cost share
Each line's percentage of the total. This column shows where to look when reducing cost.
- Add waste, labour, control and development
Each on a separate line, with its assumptions written down. The total is the full cost of the concentrate (TL/kg).
- Carry it into the finished product
Concentrate cost × fragrance oil rate in the product = fragrance cost per kg of product. This is the input for the cost-in-use and product pricing calculations.
- Set a price update rule
The price list is updated every three months or at every purchase; the table recalculates automatically. A table that is not updated means a wrong quote six months later.
Frequently Asked Questions
The most common questions about calculating concentrate cost.
How do I calculate the cost per kilogram of a concentrate?
How do I enter a diluted raw material in the table?
Which price should I use, sample or bulk?
What should the waste allowance be?
How do I calculate labour?
Where should I start to reduce cost?
How often should I update prices?
Should I show the customer the cost table?
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