If you need to meet a particular price point on your bulk oil ingredients that may seem unreachably low, you do have a few options.  You can reach your price goals, but you'll have to make some choices, and prioritize what's most important to you.

This discussion is especially pertinant for manufacturers who are trying to reach a particular target customer (which means you'll need to keep your own product within a particular price range) or if you're a co-packer that is packing for a brand that has specific price restrictions.

I worked with a customer in this situation a year ago.  They came to me wanting a "really low price for Extra Virgin Olive Oil".  It had to be Extra Virgin, and it had to be under $1.00 per pound.  Unfortunately, I explained to them, that's just not going to happen.  

So where do you go from there?  Here's theadvice I gave them, on the best ways to drastically reduce bulk oil costs, meet the customers' price goals and move forward with a strategic plan.  

Want to lock in a contracted rate for for your bulk oil ingredients?  As a purchaser buying raw ingredients for a manufacturing company, this can be a very smart thing to do.  

Signing a price contract can give your company stability on your cost of ingredients, and allow you to stategically plan your budget.  In addition, it can provide you with a bit of cushion if the commodity market unexpectedly goes south.

But, if you lock in your rates at the wrong time, you'll be required to pay more than the market price for oils.  It takes a firm understanding of the market and good help from your suppliers to lock in pricing at the right time.

So in the debate of whether to sign a supply contract or not, the definitive answer is yes, go for it-- but only at the right time.  When is it the right time?

You'll need to ask the right questions and the answer will emerge naturally after that.

Unfortunately, the commodity market for your bulk food ingredients often just is what it is, and it's completely out of your control.

Most people would agree that at the end of the day, there's only so much a purchasing manager do can do to lower your ingredient costs-- which includes bulk oils.  You just have to go with the flow, they say, even though it could be slashing your profit margin, or possibly even sinking your business.  

Well, we don't agree.  We think you'll just have to get creative when it comes to how you're buying.

It's true, there's nothing that you can do about the prices mandated by the commodity market.  But you can make lots of little other changes that can makem that all factor into your total price. These add up to big savings. 

Here are the best 4 ways we know of to begin lowering your bulk oil ingredient costs.  Even better?  You don't have to wait for the commodity market to be high-- you can start saving money right now.

High quality, non-GMO and organic oils are in high demand right now. 

If you use natural or specialty oils as a bulk ingredient in your manufacturing, you already are well aware.  You may even be feeling the market pressure.  Perhaps, even, you've wondered what other non-gmo or organic bulk oils you could be using as an alternative.  

Today we're going to focus on price-- always the giant elephant in the room.  Here's how the pricing of some of the most common healthy, non-GMO or organic oils compares: Extra Virgin vs. Safflower & Sunflower Oil (see graph with actual prices below).

The first thing that you should know about bulk olive oil prices is that they change all the time.  

The second thing is that there are a number of different grades of olive oil, and each one comes at a different price, because it represents a different quality.  

The third thing is that the packaging you choose and the total volume that you buy affects your prices.  

It can be confusing to get pricing from so many different suppliers for bulk oils. Each offers their pricing in different units: US suppliers give pricing in pounds or gallons, european suppliers give pricing in metric tons (MT), liters or kilograms.

Converting the metric to the english system (or vice versa) can be confusing-- any middle schooler will agree with you on this. Especially when your bulk olive oil prices depend on accurate calculations.

That’s why we’ve created a set of conversion standards for you, so that you can convert all of the weights you receive quickly and simply. This will help you convert your pricing into many different forms so that you can accurately compare options across the board.

Have you ever tried to buy something, only to realize when you’re 

about to pay that there’s a whole bunch of extra fees that you didn’t know about before?

Like when you join a new gym only to find out that there’s a $50 new member fee.

Or when you buy concert tickets online and there is a $5 “convenience fee” shown at the end of check out.

Or when you sign up for a new cell phone plan, and there’s a list of a bunch fees you’ve never even heard of, listed in small print at the of your contract. To top it off, most of the time you can’t even figure out what you’re supposed to be paying extra for!

These kinds of extra fees and hidden charges still happen all the time, in all different industries. And the customer response is almost always the same: disgruntled compliance.

Most often, we there’s no way around these fees. And it’s not that we don’t want to pay them. We just want to know what they are, outright and in full, before we pull out our credit card to pay. We want to know the final cost that’s going to be charged. Total price, delivered cost, all-in. Common sellers, just be straightforward!

In other words, we all just want to be informed buyers.

One of the best ways to buy bulk olive oil for less is to change the way that it’s packaged. Packaging can affect your landed price substantially. The standard rule is, the more packaging there is, the more you’ll pay for your bulk ingredient.

If you’re a large manufacturer using a substantial amount of drums or totes, it may be time to consider if moving to a larger storage size is right for your business. The next size up is large in-house storage tank installed in your facility, with deliveries of olive coming in flexitanks or tanker trucks depending on the type of oil. Putting storage tanks into your facility allows you to store the oil in it’s largest bulk form and save as much money as absolutely possible.

If your job is to purchase ingredients for a manufacturing company, we know much of your day revolves around money. Well, money and planning, that is.

It’s every purchasing managers’ job to keep the cost of ingredients down to a reasonable rate so that the business can continue to profit. It’s also your job to make sure these ingredients show up on time, that they can be easily used by production, and that they meet all of the requirements set forth by QA and R&D.

That’s a tough job! You’re responsible for finding lower prices all the time, but you can’t change the ingredients. And as you know: you get what you pay for, and sometimes things just cost what they cost.

Olive oil is a commodity. Well, kind of…

Let’s start at the beginning. I’ll first explain what a commodity is, and how olive oil fits into that. And then… how it doesn’t.

A Commodity Is A Standardized Product

A commodity is a bulk, raw ingredient that is the same no matter where it’s come from. Sugar, wheat and soybean oil are great examples. Across the board, Soybean Oil is Soybean Oil, no matter where it’s come from. Many manufacturers opt not even to put a new Soybean Oil supplier through product testing, because the oil will be the same as what they’re already getting.

As a manufacturer, you may debate whether it’s better to receive your ingredients in LTL (Less Than Truckload) shipments, or if it’s better to order a full truckload at a time. This is an important question, because it will affect the total delivered cost of your ingredients.

This discussion will help you compare each option and come to a good conclusion about which you should choose for your business.

The first question we get as a bulk oil supplier is... drum roll please... How much does your oil cost?  But of course!  You knew that already right?

Price is one of the biggest factors as manufacturers and distributors compare bulk oil ingredients options.  There's a good reason for this: it's one of the easiest characteristics to compare because it's a quantitative comparison (aka, it's a numbers game).  This type of comparison is a lot easier to make than the qualitative comparison that QA and R&D will have to make (based on quality, taste profiles, etc.) .  

That's why most companies start the sourcing/procurement process by looking at the price and narrowing down their options from there.  Quality and R&D testing becomes a secondary act to help narrow down the options even further and final a final selection (or two or three) that will work well.

If price is a key component for your company, here's a collection of the most popular (and pertinent) bulk olive oil articles we've written, surrounding the topic of price and cost.

Do you buy your oil in bulk? The next packaging size larger than drums and totes is a full truckload of oil, flowing loose in a truck. In fact, your oil will deliver in one of two different types of trucks, and it’s important to know the differences. That way you can be to be fully prepared to unload your oil when it arrives, and it will help you make the lowest cost choice.

There are two key points to understanding why Spain’s olive harvest affects your own olive oil prices. Taking these points as givens will help you understand the complexities of the international commodity market.

Olive Oil Fact #1 

The price of bulk olive oil changes on a daily basis around the world and it is, in essence, a commodity item.

What is a commodity?

A commodity is, by Webster’s definition, “a raw material or primary agricultural product that can be bought and sold.” Many raw food ingredients are considered commodity items; to name a few, wheat, sugar and soybean oil are good examples here in the US. For the most part, commodities are bought in very large volumes (many truckloads or railcars at a time) and contracting prices is common.

One of the characteristics of a commodity is that price can change by the day, hour or even minute. It is affected by things like supply and demand, import and export trade policies, international politics, local and global crop production and many other factors. In the US, many of our commodities are regulated by the Chicago Board of Trade which gives buyers and sellers a baseline for their prices.