Who you should buy your olive oil from is always a big question-- usually one that restaurant owners and chefs approach in an effort to cut their costs.
But who you buy from doesn’t just determine how much you spend. It also affects how easily you can bring inventory in, store it, access it and a whole slew of other affects on your business.
That being said, it’s important to buy your olive oil from the right kind of supplier. One that fits your needs and can provide real value to you-- not just the lowest price.
You're Not Alone: The Typical Restaurant Owners’ Quest For Cheaper Olive Oil
Many restaurant owners and chefs, after they’ve been buying olive oil from their food service distributor, seek out alternative sources. Why? Olive oil is a high priced item, and anyone in your shoes is going to want to go “directly to the source” to cut costs.
But will side stepping your broad line distributor fit in with the rest of your business needs? And more importantly, will it actually cut your olive oil costs enough to make it worthwhile?
Debating the Pros & Cons Of Buying Olive Oil From A Distributor vs. A Manufacturer
A Distributor Is...
A food service distributor buys and re-sells already packaged items. Their service is to provide a wide variety of the right products, and they’ll deliver them directly to your door in one swing.
Food Service Distributor Pros
They allow you to buy only what you need when you need it, lowering your large capitol expenditures. Manufacturers typically produce only one category of things, like oils. They have minimum orders for that one thing that require a very large purchase. Distributors buy that larger volume of inventory and store it, and sell it to you little by little.
This means that by working with a distributor you don’t have to make a $5,000 purchase on one ingredient that you won’t use up for 6 months. And even better, you’ll be able to use your money elsewhere in the meantime.
They deliver only what you need, especially if you don’t have much space. Distributors store pallets of products in their warehouse and deliver them to you by the case. This allows you to only bring in what you need (say for example, 5 cases that fit on a shelf and can be used in one week). This means you don’t have to clear a 4 ft. x 4 ft. space in the back to store a pallet.
You get personal attention from a sales rep, who comes to your restaurant. There are so many things that can be recommended by just seeing them in person at your location. Your food service sales rep has insights into your business that a bulk manufacturer can’t match, simply because they can’t see the layout of your space.
Food Service Distributor Cons
Their products cost more. A distributor has to build in their own costs. They’re buying the oils outright, storing them in their warehouse and sending their reps out to you. That all comes at a cost.
However, distributors get the best exclusive rates from manufacturers, and because they buy such large volumes, they can often negotiate the best deals-- which are passed along to you.
Their costs may be higher than a manufacturer’s, but usually it’s only by a little bit.
A Manufacturer Is...
The manufacturer is the company that is making the finished product that you hold in your hand. In the edible oil business, this is the company that is taking the oil from the mills in large tanks and packaging and labeling it into smaller, manageable sizes. They sell directly to distributors.
Manufacturer Pros
They have the lowest prices. Manufacturers, because they’re at the top of the “food chain”, have the lowest prices. You can get the same item through a manufacturer, and pay less for it because no one else is building in their margin.
Manufacturer Cons
They have large order minimum requirements. Most manufacturers won’t sell less than one pallet (about 250 gallons of oil). Other manufacturers sometimes require a minimum order of one truckload.
That’s the trade off for working with a large company. To keep their prices low, they sell large volumes to direct to distributors who can break the pallet up from there. If you want to work with a manufacturer, you’ll need to buy 1 pallet or more. There’s no way around that fact.
Delivery can be challenging for a restaurant. Most restaurants are used to receiving their deliveries on a truck from their distributor. Someone wheels their products inside the kitchen and leaves them in a pile to be put away by the chef.
If you work with a manufacturer, they will work with a 3rd party freight company who will use an 18-wheeler to deliver the pallet to you. This delivery is different. Once they arrive, they will drop the pallet off on the sidewalk, and you will be responsible for bringing it inside and putting it away.
Shipping is more expensive. Shipping is also more expensive to a restaurant. Your location is not meant for 18-wheelers to deliver to. They prefer delivering to large warehouses, with loading docks and fork lifts. Shipping to a restaurant also requires a lift gate, which lowers the pallet from the truck to the ground if you don’t have a loading dock.
All of that adds up to a higher shipping rate-- shipping products to you is more expensive than shipping them to your distributor.
Which Option Is Better For You?
For most restaurants, working with a distributor is the cheapest and easiest option.
If you need to lower your costs, you can contact a manufacturer to get a price quote. Only consider this option though, if you can handle the requirements you’re going to have to meet.
- Do you have $2-6,000 to spend at each order?
- Do you have a 4 ft. X 4 ft. space to store the pallet?
- Can you order 250 gallons at a time and use it within 6-10 months?
Still sounding good? Request a price quote.
Topics: Small Businesses Advice
