Comparing Ingredient Supplier Models: Which Fits Your Business?

Posted by Hannah Broaddus

Oil suppliers can look very different, each with their own unique strengths and business models. They can be very large or very small, set in their ways or very flexible. They may only supply oils — or even just one type of oil — or they may supply lots of different products.

Each type of supplier will serve your company’s needs differently and bring their own pros and cons to the table. To do a truly helpful comparison, it’s important to first understand the different types of suppliers and how their different business models work.

 

Wholesaler 

Wholesalers are similar to Costco or Sam’s Club. They buy products nationally and typically sell for a discount.

However, they are often set up to serve larger families or small businesses, but they’re not the best fit for food manufacturers.

The two biggest issues is that you will find is:

  1. they carry smaller packaging and
  2. that you have to repeatedly send your staff (or yourself) to the store to pick up product

Sending your staff for routine pick ups definitely disrupts the normal flow of business and is not efficient as you are scaling up.  That said, they contract prices nationally so they are typically pretty competitive and you don’t have to pay for any freight.

Keep an eye out for olive oil quality in these stores. While Costco has historically been known for good olive oil quality, many other wholesalers are focused on low prices to a detriment of quality and you won’t always get what you think you’re buying.

 Quality of what you are actually getting when you buy the oil

Regional Food Service Distributor 

A regional food service distributor carries multiple items and they are set up to serve small businesses, restaurants, hotels and large family consumers alike.

They often ship mixed deliveries to you, and while they may ship to you on a pallet, this pallet is usually a mix of different items shipped together. The driver won’t just drop off the pallet outside too — they often include inside delivery and your own sales rep that visits in person on a weekly or monthly basis. These companies often on their own trucks as well, so you can get on a regular delivery route with them. Service is key for them!

Many smaller or regional food service distribution companies fall with him this category. A good example of these regional distributors would be FSA, International Food Products, Azure Standard or Shamrock Food Distributors.

The good thing about these companies is that you can get multiple ingredients if you need them, and you don’t have to stock up with more than a few weeks of inventory. That means that your capital investment in your ingredients will remain low. The other pro is that you won’t be sitting on many months of inventory for a long time, which can put strain on space, capitol, and keep the oil stored for longer than the shelf life that you might prefer.

However, each of these companies is buying from a variety of brands and manufacturers, and they have to pay their own sales staff and overhead for local warehouses — plus their fleet of trucks. You may not pay shipping from a company like this but you will definitely pay a higher price on each of the items because they have to build in their own margin to keep their businesses running.

 

Bulk Supplier / Manufacturer 

ecomm smaller packaging amountsA bulk supplier is the manufacturer of the finished product that you are receiving. With oils, this is a great example of Centra Foods business model. We manufacture and label the final products that you are receiving. They ship directly from our warehouse to distributors or manufacturing customers like you.

Because we are planning internal production runs that require segregation and cleaning, we have minimum orders of one pallet. This means that you can’t get just a few cases from Centra Foods like Amazon or a wholesaler above.

You also have to think about the shipping from a supplier like us. There are only a few large suppliers located throughout the United States, so wherever you are you are located, you are most likely going to need to include freight shipping in your total costs. Because we work with customers located nationally, we do not own our own truck fleet and instead contract with third-party carriers for the lowest rates.

This shipping component also plays into our minimum orders – we have one pallet minimums because shipping less than that is cost-prohibitive. Imagine how much it would cost to ship 5 of the 35 pound containers across the country via UPS: the answer is at least a few hundred dollars (those jugs are heavy!). Shipping 5 containers via UPS is around the same cost that it would be to ship it on a pallet. This means that shipping a smaller volume becomes cost prohibitive, and the only good way to go about it is to have a supplier like Centra Foods sell to a local distributor and have you get smaller volumes of product from there.

If you want less than a pallet, we’ve now started selling as little as 20 35 Lb. Containers direct from our online storefront. You can visit our store here!

With all of that in mind, each different type distributor can play a role in the way that you want to bring in your oil. All of this will be decided by how much you are using and the packaging that you want to receive it in.

Topics: Food Manufacturing, Purchasing & Procurement, Business & Leadership

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Looking To Buy Oils In Bulk?

Now you can buy online, without talking to a salesperson.  In our online store, you can see live prices on a variety of non-gmo and olive oils in totes, drums and pallets of 35 lb. containers.  You can also get a custom shipping quote to your facility, and place an order online with a credit card.  Pallets ship fast, within 1-3 business days.
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