When Ingredient Costs Rise — How to Reprice and Protect Your Margins
Butter costs more. Eggs cost more. Fragrance oils, coconut wax, shea butter: all up. If you haven't updated your prices, you're quietly losing money on every single order.
You noticed your ingredients got more expensive. Butter, eggs, fragrance oils, coconut wax, shea butter. Costs that were stable for years started creeping up. And you kept going. Kept making. Kept selling.
But did you update your prices?
Most makers don’t. Repricing feels uncomfortable. It feels like you’re asking your customers for something, like you need to justify yourself. So instead, you quietly absorb the extra cost and hope it evens out.
It doesn’t even out. It compounds.
You’re not just losing a few cents per order. You’re losing money on every batch, every market day, every Etsy sale. If your margins were already tight, you may already be in negative territory without knowing it.
The real cost of absorbing ingredient increases isn’t what you lose on one order. It’s what happens when you’re suddenly very busy but no more profitable than when you were selling half as much.
This guide walks through exactly what to do: audit your recipes against current costs, calculate the real margin impact, and decide with data (not feelings) whether to raise your prices.
Step 1 — Audit your recipes against what ingredients actually cost now
The first step is figuring out how far your actual costs have drifted from what you charged when you set your prices.
This is the part most makers skip. They remember roughly what they paid for butter or wax six months ago. They don’t remember the exact number, and they haven’t gone back to check.
Start with your top 5 selling products. Pull out whatever you use to track ingredients: a spreadsheet, a costing tool, or your purchase records.
For each product, write down:
- Every ingredient and how much you use per batch
- What you paid for that ingredient the last time you bought it
- What it costs now (check your last invoice or retailer price)
If you use Craftybase, your recipes already have ingredients and quantities attached. When you update the purchase cost of a material, Craftybase recalculates your cost per unit automatically across every recipe that uses it. You don’t have to hunt through each product manually.
A worked example
Say you bake brown butter chocolate chip cookies and sell them by the dozen. Your original recipe cost was calculated when butter was $4.50/lb and eggs were $3.00/dozen.
Today, butter is $6.20/lb and eggs are $5.80/dozen.
Here’s the impact on a batch that yields 4 dozen cookies:
| Ingredient | Original cost | Current cost | Increase |
|---|---|---|---|
| Butter (1 lb) | $4.50 | $6.20 | +$1.70 |
| Eggs (1 dozen) | $3.00 | $5.80 | +$2.80 |
| Total increase | +$4.50/batch |
That’s $4.50 more per batch. Spread across 4 dozen cookies, that’s $1.13 more per dozen. If you were selling at $12/dozen, your ingredient cost alone went from roughly $4.80 to $5.93 per dozen. That’s a margin reduction of more than 18%.
Same principle applies across verticals. A candle maker who uses coconut wax and premium fragrance oils, a soap maker whose olive oil and lye prices have climbed, a formulator whose niacinamide and emulsifier costs shifted. The maths is the same. Add up the cost increases per unit of your most-sold products.
Step 2 — Calculate the actual margin impact
Once you know what your ingredients cost now, you can calculate how much your margin has actually moved.
Margin isn’t just “what I charge minus what ingredients cost.” It has to cover labour, packaging, overheads, platform fees, and whatever’s left over for profit. But ingredient cost is usually the biggest variable, and it’s the one that shifts without warning.
The margin delta formula
Work out your cost per unit at old prices versus new prices. The difference tells you exactly how much ground you’ve lost.
Old cost per unit: $X
New cost per unit: $Y
Cost increase: $Y - $X
Old margin: (Sale price - $X) / Sale price × 100
New margin: (Sale price - $Y) / Sale price × 100
Margin delta: New margin - Old margin
Continuing the cookie example: if you sell at $12/dozen and your old ingredient cost was $4.80, your old gross margin (ingredients only) was 60%. With a new cost of $5.93, your margin drops to 50.6%.
That’s nearly 10 percentage points gone from ingredient costs alone. Add in packaging, labels, boxes, platform fees, and your time, and you can see how quickly a product that looked profitable stops being one.
Don’t forget compounding costs
Ingredient prices rarely move in isolation. If butter costs more, so do eggs. If coconut wax is up, fragrance oils likely are too. They’re all affected by the same supply chains. A 5% increase in one ingredient plus a 12% increase in another plus a 7% jump in a third adds up to a real change in your per-unit cost, even if each individual movement felt minor when you noticed it.
This is why a systematic audit across all your recipes matters. You’re looking for the cumulative picture, not individual surprises.
If you’re using Craftybase, your COGS report will show current cost per unit based on your latest material prices. It’s a fast way to compare where your margins actually sit today versus what you assumed when you set prices.
Step 3 — Decide whether to raise prices or absorb the increase
This is where most makers get stuck. The question isn’t really “can I justify a price increase?” The question is “can I afford not to?”
There are situations where absorbing a temporary cost increase makes sense. And there are situations where it’s a slow bleed you can’t see until it’s too late. Here’s how to tell the difference.
When you might absorb the cost temporarily
- The increase is small (less than 3-5% of your total cost per unit) and looks genuinely temporary: a short-term supply disruption, seasonal price spike, or one-off purchase at a higher price
- You have a specific sales window coming up (a big market, holiday season, a wholesale order already confirmed) and raising prices mid-cycle creates more disruption than the cost warrants
- Your margins are healthy enough to absorb it without going below your minimum acceptable return
Even in these cases, set a review date. Don’t just absorb indefinitely. Put a note in your calendar: “Review ingredient costs in 6 weeks.” If the cost is still elevated, it’s no longer temporary.
When you need to raise prices
- Your margin per unit has dropped below what makes the work worth doing
- You haven’t reviewed your prices in more than 6 months and ingredient costs have moved
- The increase is across multiple key ingredients at once. That’s a structural shift, not a blip
- You’re busy but not noticeably more profitable
The reality is that most makers wait too long to raise prices. They absorb, then absorb a little more, then one day they run the numbers and realise they’re making less per hour than they’d earn at a part-time job.
Raising prices is not a betrayal of your customers. It’s running a sustainable business. Customers who care about your work will accept a reasonable increase, especially if you frame it honestly. “I’ve absorbed rising ingredient costs for a while now, and I need to make a small adjustment to keep making this.” That’s not an apology. It’s a straightforward explanation from someone who runs things properly.
How much to raise
Don’t just cover the ingredient cost increase. Use this as an opportunity to check your full cost stack:
- Start with your current cost per unit (ingredients + packaging + labour + overhead allocation)
- Check that your labour rate reflects what you actually want to earn per hour
- Apply your target margin on top of the full cost
- That’s your new price floor. Set your actual price at or above it
If you haven’t reviewed your overhead allocation recently, it’s worth recalculating. See how to calculate overhead costs for handmade products for a step-by-step method.
A premium pricing approach also helps here. If your products are genuinely differentiated (handcrafted, small-batch, made with better ingredients than anything in a supermarket), the case for a price increase writes itself.
A note on telling your customers
You don’t need to make a big announcement. For most small makers, a simple price update is the right move. Update your listings, adjust your wholesale price sheet if you have one, and move on.
If you have regular customers or a newsletter list, a short, matter-of-fact note is appropriate: “Ingredient costs have increased and I’ve updated my prices to reflect that. Thank you for your continued support.” Done. Real customers who value your work will stay.
What doesn’t work: excessive apologising, discount offers to soften the blow (which trains customers to wait for sales), or burying the increase without acknowledging it at all. Honest and direct is always the right approach.
For a fuller framework on knowing when the data says it’s time, when to raise your handmade prices covers the specific signals and calculations in more depth.
Frequently Asked Questions
How often should I audit my recipes against current ingredient costs?
Review your ingredient costs against your recipe costings at least every 3 months, more often if you're in a volatile category like dairy, oils, or fragrance. The quickest trigger is any time you notice a material purchase costs noticeably more than the last time. That's the signal to check whether your selling price still makes sense. Craftybase recalculates cost per unit automatically when you record a purchase at a new price, so you can see the impact on margins immediately rather than discovering it at tax time.
What's a simple formula for calculating the margin impact of an ingredient cost increase?
The formula is: new cost per unit minus old cost per unit = cost increase per unit. Divide the increase by your sale price to get the margin percentage you've lost. For example, if your cookie recipe cost went up $1.13 per dozen and you sell at $12/dozen, you've lost 9.4 percentage points of margin. Add up the impact across all affected ingredients for the full picture, because cost increases rarely happen to just one material at a time.
Should I raise prices for all products or just the ones with the highest cost increases?
Start with the products where the margin impact is largest. Those are the ones losing you money fastest. But use the audit as an opportunity to review your full product range. Products that haven't been repriced in 12+ months often have creeping cost issues that haven't been addressed. A systematic pass is better than spot fixes, which can leave you with inconsistent margins across your range and create customer confusion when prices are different for similar items.
How do I know if a cost increase is temporary or permanent?
Check whether the increase is supplier-specific or market-wide. If multiple suppliers have raised prices on the same ingredient, that's a structural shift. Treat it as permanent. If one supplier raised their price but alternatives are still at the old level, you may have a substitution option. A practical rule: if an ingredient cost is still elevated after two consecutive reorder cycles, it's not coming back down on its own. Price accordingly and stop waiting for relief that isn't coming.
Does Craftybase automatically update my costs when ingredient prices change?
Yes. When you record a new purchase in Craftybase at a different price, it recalculates the cost per unit for every recipe that uses that material, using weighted average costing. You don't need to update each product manually. You can then check your COGS report to see the real-time impact on your margins across your full product range, which makes it straightforward to identify exactly which products need repricing and by how much.
Ingredient costs change. That’s the reality of running a product-based business. The makers who stay profitable aren’t the ones who never face cost increases. They’re the ones who catch them early, calculate the actual impact, and reprice before the damage compounds.
If you’ve been absorbing higher costs for a few months, now’s the time to run the numbers. Pull your top sellers, check what ingredients actually cost today versus when you last set your prices, and find out exactly where you stand.
Craftybase tracks your material costs and automatically recalculates your cost per unit every time you record a purchase at a new price. So instead of discovering a margin problem at tax time, you see it the moment it happens.
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