As a small business continues to grow, it’s important to improve the efficiency of your buying power to save money on your ingredients and lower your costs. We work with a lot of small business through this transition, but we’ve noticed a difficult trend: many small businesses contact a bulk supplier too soon.
Trying to work with a bulk supplier before you’re ready will end up costing more than your current situation. We’ll explain why this is (it’s mostly due to freight shipping) and what you can do instead. But let’s start at the beginning, so that we’re all on the same page.
What is wholesale buying?
Most small businesses using olive oil are already buying in wholesale volumes. Wholesale purchases are those that are larger than you would buy at a grocery store, but they are still small enough to handle individually, pick up in a store or ship in the mail.
A case of olive oil is a great example of a wholesale purchase. You can pick it up in your arms, move it around, but it’s not something that you can readily buy at a small retail store.
Many stores are specializing in wholesale items now, either geared towards serving the consumer (e.g., Costco) or businesses (e.g., Restaurant Depot).
What is bulk?
Many small business contact us looking for what they consider to be “bulk olive oil”. However, we’ve learned pretty quickly that the term ‘bulk’ is all relative-- it means different things to different people.
To Centra Foods, ‘buying in bulk’ means purchasing at least 1 pallet, which is around 250 gallons of oil. Most often, the term ‘bulk’ refers to oversize packaging like drums and totes, though it can refer to buying many cases (60+) of 1 or 5 gallon containers for re-sale.
The easiest way to tell the difference between bulk and wholesale is that all bulk purchases are loaded onto a pallet and shipped on a freight truck, where wholesale purchases are smaller boxes that are shipped using UPS or FedEx, or picked up in store.
Making the leap
Making the leap between wholesale and bulk buying requires a big jump for businesses.
Bulk orders will ship on a freight truck, which is a separate cost that can run from $100 to $500 for a pallet. A pallet holds 4 drums, and most often, shipping one drum costs close to the same price as shipping a pallet of four. Consider these real numbers: if a pallet costs $400 to ship and you load 4 drums on that pallet, your shipping cost is $100 per drum. If you only ship one drum at a time, your shipping cost is $400 per drum. Because of the cost of freight shipping, it means that for a bulk shipment to make sense, you must order a full pallet of 4 drums at a time.
Because you’re buying that much oil at one time, you will buy less frequently. If you can use that oil (220 gallons total) within 6-10 months, we recommend making the switch.
So what’s the problem?
The problem for many small businesses is that they need more than a few cases of olive oil, but buying 4 drums at a time is too much.
When you work with a bulk olive oil supplier, there isn’t a lot of gray area between these two options, wholesale and bulk. Because of these two different logistical systems at play, moving towards buying in bulk requires a full scale shift affecting buying frequency, storage, packaging, and shipping for it to make financial sense for your business.
Where else can you buy?
If you’d rather not make the leap, working with a different type of supplier that can offer all of your ingredients at each order may be a good solution. Here are some alternative suppliers that might be able to help you as you continue to grow, before you’re ready for buying in bulk:
Topics: Small Businesses Advice