Understanding the Real Cost Structure for Emerging Brands
For many new brands entering the freeze-dried fruit and vegetable industry, international sourcing can be both exciting and confusing. One of the most common questions that arises early is: “Why are freeze-dried ingredients so expensive?”
This perception becomes even stronger in high-tariff markets where import duties and VAT significantly increase landed costs. When supplier prices are compared directly with final imported costs, the gap can appear dramatic.
This article is written to provide a neutral, transparent overview of how freeze-dried product pricing works internationally. Its purpose is not to justify any specific price, but to help brands clearly understand which cost elements are negotiable, and which are structural and unavoidable.
1. Factory Price Is Only One Part of the Total Cost
A common mistake when budgeting for freeze-dried ingredients is focusing solely on the EXW or FOB price. In reality, the final landed cost consists of three major components.
1.1 Supplier-Level Costs
These are the costs directly controlled by the manufacturer and are typically the main area for commercial discussion:
– Raw material cost (fruit/vegetable grade, origin, seasonality)
– Freeze-drying processing costs (energy, yield loss)
– Product format (whole, slices, dices, granules, powder)
– Formulation differences (sweetened vs unsweetened)
– Order volume and SKU complexity
This is where realistic negotiation and optimization are possible.
1.2 Trade and Tax Costs
These costs are determined by national regulations and are independent of the supplier:
– Import customs duty
– Value Added Tax (VAT)
– Additional parafiscal or administrative charges
In many non-FTA markets, freeze-dried fruits are classified under dried fruit HS codes (commonly within the 0813 group). Import duties can reach up to 40%, with VAT often applied at 20% on top of the CIF value. These costs apply regardless of whether the product originates from Asia, Europe, or elsewhere.
1.3 Market and Operational Costs
These costs depend entirely on the brand’s own business model and include:
– Local packaging or repacking
– Warehousing and inland logistics
– Distribution margins and retail markups
– Marketing, branding, and compliance
– Currency and financing risks
2. Why Lower Factory Prices Often Do Not Solve the Problem
In high-tariff environments, import taxes and VAT can represent more than 60% of the total landed cost. When this is the case, even significant reductions at the factory level result in relatively small changes to the final cost.
This means that price pressure alone cannot overcome structural cost barriers. Understanding the tax framework is essential before making sourcing decisions.
3. Product Specifications Matter More Than Expected
Products that appear similar at first glance can have very different cost structures. For example, unsweetened freeze-dried strawberries require higher-grade raw materials and tighter processing controls than sweetened versions, leading to a substantial price gap.
Without clearly defining specifications during the testing phase, price comparisons between suppliers can be misleading.
4. Testing Phase vs. Scale Production
Early-stage brands often expect volume-level pricing during the testing phase. However, small-batch development typically involves:
– Multiple SKUs
– Low quantities per item
– Higher operational complexity
Sustainable supplier relationships usually differentiate between test pricing and future scale pricing, with optimization occurring once specifications and volumes stabilize.
5. Smarter Cost Control in High-Tariff Markets
Rather than focusing solely on unit price reductions, brands can often achieve better results by:
– Reducing the number of test SKUs
– Clarifying product formats and formulations early
– Optimizing pack sizes and yield efficiency
– Separating test-stage discussions from long-term pricing frameworks
Conclusion
Freeze-dried ingredients are part of a complex global supply chain. Long-term success depends not only on price negotiation, but on understanding cost structures, regulatory environments, and development stages.
When both brands and suppliers operate with clear expectations, cooperation can move from short-term negotiation to long-term partnership.