That’s the amount of time it took to make the round-trip down to the New England Produce Center in Chelsea, MA – just outside Boston. I headed down to pick up Red Fresno Chiles, a pepper we use in our Ragin’ Rooster Sriracha mustard.
Why go to Boston?
Price. The peppers are more than half the price we pay for them in Vermont:
- Vermont Produce Supplier: $8.92/pound
- New England Produce Center: $4.00/pound
I’ve purchased peppers from the produce supplier before – at $8.20/pound. At that price, I was losing money selling to my distributors. Thankfully, I still made money selling direct to stores and customers. But why so expensive?
The produce supplier:
While picking up the peppers from our supplier, I mentioned how expensive they were in Vermont. He asked where I got them. I told him the name – and he laughed.
“They buy the peppers directly from us – at the same price”.
This produce supplier was making $4.92/pound – or a $738 PROFIT on my 150 pound order. That’s absurd.
Now, you might be saying, the peppers aren’t really $4.00 a pound. You have added costs to drive to the produce center. You’re right, I do. Below, I factored those costs in – and even paid myself:
- Peppers: $4.00/pound
- Gas: $40
- Labor: $105 (7 hours at $15/hour)
- Prep-time: $150 (kitchen staff to de-stem and chop all 150 pounds)
Total cost: $895
Per pound cost: $5.96/pound
Yes, still expensive. But, travel and prep time included, I saved $443. Not bad.
The story you just read, spurred this post. I know many of you struggle to get your food product cost down. Getting your cost down ultimately means you make a better margin. And better margins mean more money in the bank.
So, let’s get started.
5 Places to Find Cheaper Ingredients
No matter if you operate a food truck, restaurant or a food product, finding ways to cut ingredient cost is one of the levers you have to increase profitability of every sale without passing along the cost to consumers.
Sometimes finding cheaper ingredients means reducing food quality, but not always. It depends on the ingredient.
Will your consumers notice if you swap out for lower-quality meats? Most likely. Will they notice if you replace your artisan salt sourced from the Middle East with something more widely available? That’s unlikely. There’s always a balance between food cost and delivering a high-quality product.
It takes hours to find the perfect supplier for all your ingredients. If you’re making cookies, you’ve got a milk, butter, eggs, chocolate, flour, and vanilla. Each of those ingredients likely comes from a different supplier. And it’s not all created equal. Besides price, you have to factor in quality, texture, quantity, flavor, and attributes like gluten free, nut free, and non-gmo.
It’s a hassle.
But, as many food business owners know, cost is king. So, here’s a couple places I’ve found cheaper ingredients than simply running to the corner store:
1. Local & national ingredient suppliers
Food distributors (and even some produce distributors) have better pricing than your grocery store because they’re able to service multiple customers in the same area. This reduces their costs, which in-turn reduces yours. With that being said, you may be able to find better pricing nationally – if you can hit the minimums. Often searching for “[ingredient] industrial supplier” yields many results. For example, I can get my mustard powder and white vinegar price cut in half by purchasing from commercial ingredient suppliers.
2. Ingredient tradeshows
Why spend money to go to a convention, when you can just browse the exhibitor list? That’s what I did when I couldn’t make it to the IFT Tradeshow in Chicago in July. I simply searched for what I was looking for and results popped up. My research was done – and all it cost me was 15 minutes of time. There are many other ingredient tradeshows across the nation – and world.
3. Warehouse clubs
Believe it or not, I still buy some of my ingredients at Costco. It’s a mile from my kitchen and the prices are often cheaper than trough distributors. It’s great if I don’t need much of an ingredient for production (or I screw my inventory up). Things like sugar, flour, and spices are often cheaper here — but they have to have exactly what you’re looking for to make it worth it. (And you have to deal with long Costco lines!).
4. Produce centers
If you have a produce-heavy product like salsa or hot sauce, produce centers are going to be your savior. There are tons of supplier to find produce from. If you live near a major port, there are locations. I use Cooseman’s to buy peppers. Here’s a list of their locations. Chances are, they have other produce distributors near them. This is where you get pricing produce distributors get. It dramatically reduces your product cost.
5. Purchasing power
The more of an ingredient you buy, the better the price. The best way to order more of an ingredient is to partner with other small food producers who use the same items. I’ve been able to get great deals on local products we use because of teaming up. This purchasing power also applies to grocery stores. You may get a good price at a grocery story (I still buy salt at Shaw’s) because they have better purchasing power. Ask the produce and grocery buyer to place a special order with their buyer.
With all these unique places to get cheaper ingredients for your food business, you may be wondering, is this even worth it? Yes, yes it is.
How much of an impact can cheaper ingredients make?
I’ve been tirelessly working to reduce my product cost, in preparation to lower my cost on the shelf. And it’s been night and day. Just by sourcing larger amounts of ingredients, I’m able to drop my ingredient cost by $0.25 – $0.50 per unit.
That’s a huge cost savings.
I sold 34,000 jars of mustard last year. If I had $0.35 per unit cost savings, I would have generated $11,900 MORE in profit each year. And that was mostly from three ingredients: mustard powder, mustard seeds, and vinegar. The challenge is finding the money to purchase large amounts. More on that in a later blog post.
See how this makes a huge difference?
One major mistake I’ve made in running my mustard company is not reducing costs early enough. From day one, we could have been making much higher margins. Instead, I chose to make a mere $0.20 – $0.30 on each jar of mustard.
When you’re starting out, you have the opportunity to do it right. Invest time and research into sourcing your ingredients to find better pricing. Then, order what you can. As you grow, put many of the profits back into the business. Continue to increase those margins!
Ingredient purchasing (and the supply chain that goes with it) is not an easy hurdle. That’s why larger companies have employees dedicated to purchasing – and negotiating – the best deals they can find.
You probably don’t have access to a purchasing manager. But, do your best. With the sources above, you’re well on your way to cheaper ingredients, better margins, and a thriving food business.
Where do you find your ingredients? Share in the comments below or let us know on social media.