4 Ways For Manufacturers To Avoid The Rising Costs of Bulk Olive Oil

Posted by Hannah Broaddus

4 Ways For Manufacturers To Avoid The Rising Costs of Bulk Olive OilThe price of olive oil is going up this year. In short, global production is down by 25%, which is causing oil prices to increase around the world. If you use olive oil as a food manufacturing ingredient, this change affects your business and your profit margins.

You probably want to bring your cost of ingredients down -- not up -- right?

This is a common concern and is more challenging to achieve in poor olive harvest seasons. It requires you to look closely at your buying strategy and make some tough business decisions.

That’s why we’ve outlined the 4 changes that you can make to bring your costs down and avoid price increases as much as you can. While the overall state of the commodity market is out of your control, these factors are straightforward changes you can make to your buying strategy to bring you price down today.

4 Ways To Keep Olive Oil Costs Low, Even When The Commodity Market Goes Up


Be Open To Different Countries Of Origins

Different countries have different prices for their olive oil. Those prices depend on how good the olive crops were in that country, and how much oil they produced (or plan to produce) this harvest season.

When the price of olive oil is rising around the world, it’s extra important to be open to a variety of different countries of origin. Being willing to accept oil from one country or another can save you thousands of dollars each year.

Here’s the short version of how the pricing works:

  • If one country has experienced drought, wind or any unusual weather that has damaged crops and caused a lower yield in olive oil production, their price will go up.
  • Other countries that have better production levels will have steadier prices.
  • If the country doing poorly is Spain, everyone’s prices will go up because they are the “price driver” of the world market.
  • If the poor production was found in any other country, prices will not be affected as much.

Your best bet to save money? Be open to receiving bulk olive oil inventory from any country. This allows your supplier to source the best quality oil that’s available for the lowest price. You’ll see the payoff for this flexibility in lower prices throughout the year.


Look At Logistical Ways To Save Money

If olive oil prices are up, there’s only so much you and your supplier can do to lower your cost. That is the nature of a commodity market; like gasoline, prices fluctuate due to aspects outside of your control.

So what’s the best plan of action when the commodity market is out of your control? Bring your price down using every way possible that IS in your control.

Things like the packaging you choose, how much you order at one time, and the supplier you work with are all in your control. Work on lower your costs by changing these components.

Learn exactly how by downloading this eBook, The Ultimate Guide To Buying Bulk Olive Oil For Manufacturing.

Download the Manufacturing eBook


Change your olive oil grade or consider an oil blend

One of the best ways to save money is to change the type of oil that you’re using. This is a long term change that requires R&D and your marketing department’s involvement. But it is one of the most effective ways to cut your costs.

If you’re buying Extra Virgin Olive Oil and need to drastically cut your costs, the #1 way to achieve that is to receive a lower quality grade of olive oil, like Olive Pomace Oil. In fact, you can lower your costs by 20-30% by making this sort of switch.

If you’d like to keep Extra Virgin Olive Oil in your formulation and on your ingredient label, some manufacturers opt to switch to a blended oil. This could be an Extra Virgin Olive Oil and Olive Pomace Oil blend, or it could be an Extra Virgin Olive Oil and Canola blend, or anything else you could dream up.

Whatever you choose, you’ll have to adjust your ingredient label accordingly, so keep in mind that this change will take a bit of time to put into place.

Note: This option is a last resort for many suppliers.  It is one of the most effective ways to reduce your prices, but it also means that you're changing your ingredient quality and marketing features of your product.  Choose wisely based on your industry and target market.


Lock In Olive Oil Contracts At An Ideal Time

Another great way to save money is to lock in contracts for your olive oil at an ideal time. Of course, you’re probably wondering, when is an ideal time?

That depends on today’s commodity market, and where producers and suppliers expect the market to go.

Olive oil contracts can help you avoid price increases, but can also lock you into high prices if the market goes down.

The best thing to do is to set up a consult with your supplier to discuss the market as it stands today and get advice for how to move forward this year.


Bonus Tip

We also suggest subscribing to the Olive Oil Times to stay up to date on the latest olive oil industry information.

Topics: Food Manufacturing, Prices & Saving Money



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