The Weighted Average Retail — The Number You Can’t Neglect

When you build a product for supermarket shelves, it’s easy to look at the price tag and think that’s the story. “If my sandwich sells for $8.00, I’m building my cost base around $8.00.” That’s a comforting number. But it’s not the truth.

The truth is that supermarkets don’t just sell at shelf price. They sell with promotions, deep cuts, catalogue deals, and half-price offers. That means you never really sell all your units at $8.00. Some move at $8.00. Some move at $4.00. What you actually earn across the year is the weighted average retail (WAR) — a single number that blends shelf price and promo price by their share of sales.

The equation you can’t ignore

Here’s the clean version:

Weighted Average Retail (WAR) = Base Shelf × (1 – PromoDepth × PromoWeight)

Where:

• Base Shelf is your regular shelf price (ex-GST).

• PromoDepth is the discount in decimal (50% off = 0.5).

• PromoWeight is the share of units sold on promo (half your volume = 0.5).

If you’re on shelf at $8.80, but half your sales are at 50% off, your weighted average retail isn’t $8.80. It’s $6.59. That’s the number you need to model from — not the sticker.

The step most founders skip

Once you’ve got your WAR, you apply the retailer margin. If Metcash or Coles is taking 35–42%, your required sell cost (what you pocket per unit ex-GST) isn’t based on shelf, it’s based on WAR.

Using the example above:

• Shelf (ex-GST): $8.80

• WAR (ex-GST): $6.59

• Required sell at 35% margin: $4.28

If you built your cost base thinking you’d land $5.70 sell price, you’ve just hidden $1.42 of cost leakage into your model. Multiply that by thousands of units, and suddenly the business doesn’t stack up.

Don’t blame the supermarket

This is where founders get frustrated. They launch at a price that works on paper, only to watch it collapse when promotions hit. It’s easy to blame the retailer. But the supermarket margin is stable and predictable. What broke was the model.

Supermarkets aren’t tricking you — they’re running the playbook they always run. It’s your job to calculate your product’s economics with those plays built in.

Why it matters

If you ignore WAR, you’re flying blind. You set prices on a number that doesn’t exist in practice. But when you factor WAR in, you:

• Protect your margin from being eaten by promos.

• Know your true cost position before launch.

• Avoid expensive mid-year “price increase” conversations with retailers.

• Build a business that survives the supermarket cycle instead of being broken by it.

The takeaway

Your base shelf price is not your business model. Your weighted average retail is.

If you want your product to survive beyond launch, don’t just cost it against the shelf. Cost it against the weighted reality. That number is the bedrock of a sustainable supermarket business.