Marketing Compost (EAWAG) - The Water, Sanitation and Hygiene

Production costs include variable costs (which change according to how much
compost is produced) and fixed costs (costs incurred whether or not compost
is produced, such as ground rent). All costs have to be calculated on the basis
of a fixed period of time (e.g. one year, half a year).
Examples of variable costs
raw material
packaging
transport
energy consumption
labour (seasonal)
Examples of fixed costs
rents
regular labour (do not forget to
include your own salary)
maintenance
interest on loans
depreciation of investments
Table 6.1: Examples of variable and fixed costs in compost production
According to this method, the price of compost is simply calculated by adding
a profit margin to the unit cost. Thus:
PRICE = unit costs + profit margin
The profit margin depends on the willingness and ability of the market to pay
for compost. The case study in Table 6.2 presents a breakdown of costs for a
small compost producer in India.
If you feel you cannot cover all your production costs with compost sales,
you may consider developing other sources of revenue. Some compost producers
generate income through household waste collection services, trading
recyclable materials, or through establishing nurseries. Others are exploring
income from the Clean Development Mechanism (CDM) or Carbon
Trading.
Some compost producers, such as local authorities, do not depend on full
cost recovery or profit through the sale of compost, as they receive subsidies
through municipal taxes. Therefore, they can base their pricing more on customer
willingness to pay.
Discussing CDM opportunities is beyond the scope of this book. Interested readers
may consult local energy agencies or the wealth of information available online, including:
http://cdm.unfccc.int/index.html
72 Marketing Compost—Product pricing