2012 February: Ask Big Dave

Tim Ridout, via Facebook
Big Rounds
Ravenna, Michigan

Hey, Tim. Without exception, I can’t think of any ingredient that has gone down in price. Since cheese is the costliest ingredient on our pizzas, and we buy so much of it every week, it comes to mind first. The wholesale price of mozzarella is fixed every Friday afternoon at the Chicago Mercantile Exchange (CME). A weekly average for trading on the exchange based on supply and demand is posted under the weekly block average. Your distributor uses this price when they purchase. Since the block price is a starting point, costs must be added on before you receive it and pay for it.

Typically these costs to your distributor are not cheap. They pay for transportation from the dairy to the warehouse, transportation to your restaurant, warehouse and refrigeration fees, administration, the distributor’s profit and the salesman’s commission. You can see what they see every week by visiting PizzaToday.com and clicking on the “Cheese Market News” tab on the left side of the page.

After the distributor has all of the hidden costs added up, they pay the dairy, or broker, Block + xyz cents over. The price of cheese is very fluid. Surprisingly, every distributor I know doesn’t make very much profit selling cheese. After all is said and done, a nickel or dime a pound may be the entire margin they earn on a refrigerated, clock ticking, expiring commodity.

I bought all of my cheese from one distributor. I never asked him the price of mozzarella for the last 15 years of my business. We agreed with a handshake that I would pay him Block + so many pennies over. This is confidential information and his buyer will probably have to sign off on it. The question that begs to be answered is this: what’s a fair markup? The answer depends on several factors.

1. What kind of cheese do you desire? They are all not created equally. Budget cheeses will be less expensive than premium cheeses.

2. What is your weekly volume? Do you pay your invoices promptly? Do you play one distributor against the other for the cheapest price? Are you a loyal buyer?

3. Every step up the convenience ladder will affect the cost per pound. Diced and shredded costs about 20 cents a pound more than loaf. Also, blends increase the cost.

Generally speaking, you get what you pay for. Cheap cheese is just that. Premium cheese is not. Ask for samples from several manufacturers and conduct a blind, side-by-side bake off. Only then will you know the right cheese for you. That said, ask the distributor if they would quote you on a weekly locked cost based on how many cents over CME you can both live with.

Finally, if you don’t portion control cheese on every pizza, why would you even care what it costs? After I implemented using cheese cups for every pizza every time, my weekly purchases went from 1,000 pounds a week to 800. I have turned on hundreds of operators to my method, and the majority of them report a 20-percent reduction in cheese purchases afterward.

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer.