Beekeeping Multiproduct Costs and Break-even Calculations

Introduction 

This fact sheet provides information regarding the production and pricing of honey and related products. This paper specifically discusses the potential for lip balm and lotion. More generally, we aim to aid beekeepers in the creation, budgeting and marketing of bee-related products. Costs associated with production may vary by location, and breakeven prices may exceed what consumers are willing to pay. This fact sheet is to serve as an information guide and includes an interactive Excel sheet. Information regarding the startup costs associated with beekeeping can be found in fact sheet AGEC-2002¹ . To fill out the budget for this fact sheet, you will need to first complete the interactive Excel sheet from fact sheet AGEC-2002. Alternatively, you can use the example startup cost of $684.20 from the example calculations. If you need information about how to harvest honey, it can be found in fact sheet AGEC-272. 

 

For many beekeepers, the goal each year is for your bees to produce enough honey that you have some to sell. Other products can be made and sold using the wax your bees produce. Deciding to use wax to make products may depend on your management style and stage of beekeeping. Many beekeepers keep the wax harvested for use in their own hives². Wax is valuable to help bees start on new frames. It is often recommended to add wax to plastic frames to encourage bees to build comb. If you have sufficient wax, you may choose to sell wax in blocks to other beekeepers. Further processing your wax can allow you to create creams, candles and natural cosmetics. Of course, this further processing takes time, some skill and practice.

 

As a producer, it is important to consider the liability you face when selling products. Farmers Market insurance is a great way to combat legal repercussions and protect personal property. There are numerous options for insurance plans that can be found by calling local insurance companies or doing a search online. You should find an insurance plan that best suits the annual income of your enterprise as well as the coverage you may need. This analysis used Flip’s farmers market insurance as an example coverage plan³.

 

At an estimated cost of $300 a year, this plan provides up to $2 million in product liability, $1 million in personal and advertising injury, $300,000 in damages to rented premises, $300,000 in workers compensation and $5,000 in business personal property.

 

 

Lip Balm and Lotion Bars 

The general directions for making lotion bars is as follows. Exact recipes vary greatly, and the following information is provided to give the reader a general feel for production requirements. A simple internet search gives numerous options on how to customize both products to fit a wide variety of tastes. This analysis used the lotion bar recipe from SoapQueen.com⁴ . To make one batch of lotion bars yielding approximately six bars, you will need 3½ ounces of olive oil, 3½ ounces of shea butter, 2½ ounces of wax, 3 milliliters of essential oil (or your fragrance choice) and a 6-cavity silicone wax mold. In a heat-safe container, combine the olive oil and wax and microwave in 30-60 second increments until completely melted. Once melted, add shea butter and stir until incorporated. If needed, place back into the microwave in 15-20 second increments until all the ingredients are fully melted. Many other recipes recommend the use of a double boiler to melt the main ingredients. After adding in the essential oils, the molds are ready to be filled. Allow the bars to set in a cool place overnight to solidify. There are many molds available, allowing for the creation of holiday specific lotion bars. Many beekeepers choose bee-themed molds as a nod to the product contents.

 

Like lotion bars, there are many lip balm recipes available on the internet. The lip balm recipe used in this example was found at whatgreatgrandmaate.com  and yields approximately 18 tubes of lip balm⁵ . To make the lip balm you will need two ounces of beeswax, two ounces of shea butter, 1 tablespoon of coconut oil, 40 drops of essential oil and empty lip balm tubes. Combine the beeswax, coconut oil and shea butter in a double boiler and heat for 10 minutes or until completely melted. Alternatively, other recipes recommend the use of a microwave. Remove from heat and add the essential oils. Carefully pour the mixture into the empty lip balm containers and allow cooling for 30 minutes before putting on the cap.

 

The Food and Drug Administration has guidelines for cosmetic labeling. It is important to note that if your cosmetics alter the structure or function of the body, such as sunscreen, they are also considered a drug and have additional labeling requirements. The ingredients used in the lotion bar and lip balms used in this discussion are solely cosmetic. Additional information on cosmetic labeling can be found in the FDA’s cosmetic labeling guide⁶. A cosmetic product label should include a principal display panel on the outside of the product or packaging. The display panel should include the name of the product, identification of the product or its intended use, a warning label for misuse and the net quantity of ingredients. The product must also include an information panel. The information panel is to be printed directly on the product. The information panel must include directions for safe use, warnings, name and address of business, and a list of ingredients ordered by prominence⁵.

 

 

Interactive Excel Sheet 

The companion Excel sheet to this fact sheet includes an example analysis of two different scenarios. The first scenario is producing 8-ounce containers of honey and the other is producing 1-pound containers. Select the tab of the Excel sheet associated with the scenario you are considering. For these scenarios, it is assumed the wax harvested will be used to create lotion bars and lip balm. The general structure of the Excel sheet includes an example with example values and areas for you to fill in your own numbers.

 

The first section of the Excel sheet provides cells where you can enter the startup cost associated with your beekeeping enterprise (Figure 1). This number can be calculated using the fact sheet AGEC-2002. If you do not provide a number for the startup costs, the example number will be used.

 

Moving to the next section (Figure 2), you will list the pounds of honey harvested. You may estimate the number of pounds harvested by inputting the number of frames you harvested. For more precise results, you may weigh your honey and list the pounds harvested. For more details about the honey portion of this fact sheet, please visit AGEC-272. On average you will get 1-2 pounds of wax for every 100 pounds of honey harvested. In our example calculation, we split the difference and assume 1½ lbs of wax per 100 pounds of honey (converted to ounces). Alternatively, you can weigh your wax and provide an exact amount in the space: total oz wax. If you are running different scenarios, you may want to put the number provided in estimated total wax. Next, you will type the amount of wax in ounces you are allocating to lotion bars and lip balm. If the total wax used for making lip balm and lotion bars is greater than the total ounces of wax produced, a warning will appear saying “insufficient wax.”

 

In the fixed cost section (Figure 3), you will list the number and purchasing price of each piece of equipment used for general honey production, as well as general fixed costs associated with lip balm and lotion production.

 

Similarly in the variable costs section (Figure 4), you will list the number and production costs per unit for honey produced.

 

If you make lotion bars, the next part of the Excel sheet is where you include the number of ingredients and the cost (Figure 5). We have suggested common ingredients, but there is the option to add other costs. We include the option of including the price of wax. You could put the value of the wax you would receive from using the wax in another way, such as selling to another beekeeper. Including a cost for wax accounts for the opportunity cost of using this wax for another purpose. The variable cost per bar is calculated in this section after you provide the number of bars made (toward the bottom of the Excel sheet).

 

The same information is needed to calculate the variable cost per lip balm in the next section (Figure 6).

 

Although you can estimate how many bottles of honey you will produce, there may be product loss. For example, although you may expect 40 pounds of honey to produce 80 8-ounce jars, there may be less once you are done bottling. To account for this, there is a section to record how many bottles of honey, lotion bars and lip balms you produced (Figure 7). The total fixed cost, total variable cost and total cost are calculated in this section as well.

 

To calculate the Annual Ownership Cost (AOC), depreciation was calculated using the straight-line method over five years with a salvage value of zero (Figure 8)7. This is a conservative assumption; with good hive care, equipment should last beyond five years. Note, depreciation is a way of spreading the fixed (sunk) costs over a period of time, hence recovery of those fixed costs is spread over the years of depreciation. Interest, or the opportunity cost of investing your money elsewhere, was assumed at 10% for the example. You can put your own interest rate under the Your Values column. Repairs were assumed at 5% per year. Insurance was based on Flip’s farmer’s market plan and was estimated at $300 per year. Under the Your Values column, you can put your actual insurance cost.

 

 

Break-Even Prices 

Calculating the break-even price when considering multiple products is more difficult than the calculations for a single product. We present two scenarios. In the first scenario, you set the price for honey and lip balm and calculate the breakeven price for lotion bars. In the other scenario, you set the price for honey and lotion bars and calculate the breakeven price for lip balms. It is important to remember that the breakeven price for any product may exceed what a consumer is willing to pay. To generate breakeven prices, provide the expected price for two of the three products. In the first section, you provide the honey and lip balm prices and the breakeven lotion bar price will be calculated. In the second section, you provide the honey and lotion bar prices and the breakeven lip balm price will be calculated. In both scenarios, you provide the price for honey. The price of honey is an easier price to estimate because it is likely dependent on the local and commercial price of honey.

 

It is likely that you are estimating the price for honey and a second product. You may not know the highest price a consumer would pay for honey, and you may be interested in how increasing or decreasing the price will impact the breakeven calculations. Therefore, we provide a table on the right-hand side of the Excel sheet that gives a range of break-even calculations. In the example above, we put in an $8 price for honey and a $5 price for lip balm, resulting in a break-even price of $13.77 for a lotion bar. Across the top of Figure 10, the given honey price is varied in $1 increments. For the lip balm on the left-hand side, the price is varied in $0.50 increments. To consider another combination, pick a honey price, a lip balm price and follow across to find the lo tion bar breakeven. So, using Figure 10, if honey was priced at $8 for 8 ounces and lip balm was priced at $5.50 each, the breakeven price for lotion bars would be $11.82.

 

Figure 11 is a screenshot of what your break-even table could look like. Notice some combinations of prices say “VC." This means you have already made enough money from the other products to cover your costs. It is recommended to at least charge the variable cost for your product. The variable cost is the cost used to produce one more unit of that product. The variable cost is calculated for you in this Excel sheet, and the location is shown in Figure 12.

 

Figure 12 pulls the number from the table you should charge to breakeven based on the numbers you provided. Notice, in this example the costs of production are already covered, so the recommendation is to charge at least variable cost. The variable cost will appear to the right of the table. In this example, the beekeeper should charge at least $3 for their lotion bars.

 

Once you have decided the prices you will charge and the number of products you are selling, Figure 13 will help you calculate potential profit. You just need to indicate how much you charged for each product and the number of units sold. The Excel sheet calculates your total revenue, profit with total fixed costs and profit accounting for AOC. The profit with total fixed costs would be used if you anticipate paying off all of your fixed costs in the first year of production. If fixed costs are high, it is unlikely you will be paying them off your first year of honey production. Another way to consider your fixed costs is to take into account your AOC. Profit accounting for AOC does not include your total fixed costs but instead the annual ownership cost.

 

Table 1. Excel area for startup costs. 

 

 

Table 2. Excel area for honey and wax production. 

 

 

Table 3. Excel area for fixed costs.

 

 

Table 4. Excel area for honey production variable costs. 

 

 

Table 5. Excel area for lotion bar variable costs. 

 

 

Table 6. Excel area for lip balm variable costs. 

 

 

Table 7. Excel area for production numbers as well as fixed, variable and total costs.

 

 

Table 8. Excel area for annual ownership costs. 

 

 

Table 9. Excel area for inputting prices and calculation of break-even price for third product. 

 

 

Example Lotion Bar Breakeven

8oz Honey Prices on top and Lip Balm Prices on the left.

Table 10. Breakeven. 

 

 

Your Lotion Bar Breakeven 

Honey Prices on top and Lip Balm Prices on the left.

Table 11. Example breakeven. 

 

 

Table 12. Table that shows the break-even combination of prices. 

 

 

Profit Calculation

Table 13. Profit calculations. 

 

 

Conclusion 

There are many opportunities for a beekeeper to produce products in addition to honey. The decision to include other products will depend on your time and interest in creating such products. When considering breakeven prices, it is important to remember if you want to make a profit, you will need to charge a price higher than the breakeven. Keep in mind consumers may or may not be willing to pay the break-even cost calculated.

 

References 

All figures listed in text can be found on pages 4-6. Bir, C., Talley, J., & Jones, J. (2021, August). Beginning Honey Beekeeping Equipment and Associated Costs (AGEC-2002). 

 

Blackiston, Howland. Beekeeping for dummies. 5th edition. John Wiley and Sons inc: Hoboken, NJ, USA.

 

Flip (Food Liability Insurance Program). FLIP Food Insurance Program. (2022, March 16).

 

Berry, B. (2017, January 24). Beeswax & Honey Lotion Bars DIY. Soap Queen. 

 

Choi, J. (2019, November 19). Homemade Beeswax Lip Balm (All-Natural and Toxin Free!) + 5 Ingredients to Avoid in Store-Bought Lip Balm. What Great Grandma Ate. 

 

Center for Food Safety and Applied Nutrition. (2022, February 25). Cosmetics Labeling Guide. U.S. Food and Drug Administration. 

 

Beierlein, J. G., Schneeberger, K. C., & Osburn, D. D. (1986). Principles of Agribusiness Management. Prentice- Hall.