Steve,
There was a PMQ article in the spring of 2004 in which Big Dave Ostrander discussed the pricing of mozzarella cheese. I assume that the practice has not changed since then, although actual numbers may have. I have excerpted below the relevant part:
How Mozzarella is Priced
The Chicago Mercantile Exchange – CME
The wholesale price of mozzarella is the same as the Cheddar Block price posted everyday on the web at www.cheesereporter.com/prices.htm. Most suppliers buy cheese off the CME’s weekly average. They pay the Block price, plus a little more. Your distributor has now purchased finished product. They need to pick it up at the backdoor of the plant and truck it to their distribution center. They will then rotate it into their cooler inventory, pull the order, load into a route refrigerated truck and deliver it to your back door. Your distributor will need to cover all transportation, warehouse, administration, sales commission and company margin on this transaction. The majority of distributors make very slim profits on mozzarella. They make just pennies a pound. They are aware that mozzarella is usually a commodity ingredient and the competition for your order is fierce.
The Best Way to Buy Cheese
After sampling available cheeses in your area, narrow your choices. In order to call a cheese mozzarella the USDA has developed Federal Standards of Identity. These are a set of minimum and maximum percentages of ingredients in the cheese with a heavy emphasis on the Moisture and Milkfat in Solids. When a cheese has too much water or not enough milkfat in it, it can’t be called mozzarella. It can be called Pizza Cheese or Cheese for Pizza. More than a few of the large chains use this cheese because it’s cheaper to make that the real thing. Check out a few menus and you’ll see. The proof is in the dumpster.
You will now start to buy your cheese on a Block Plus program. The supplier will quote you a weekly price for your cheese based on the CME weekly Block average, plus an agreed upon cents over Block up-charge. This up-charge will cover their freight, warehousing, shipping to you, plus profit margin and commissions to DSR’s. Most supplier sales reps will need to contact their dairy buyer to arrange for your invoice cost to be ‘locked in’ for a one to three, or six month, period.
For over 15 years, I never asked my DSR the price of cheese. The pricing was completely out of his hands. I simply went to the web, checked the weekly average, added my 13 cents over block price and saw it reflected on the invoice. I bought a good quality, packer label mozzarella in loaf form. If I wanted to buy shredded or diced, I’d expect to pay and additional 12 to 15 cents a pound to cover this cost. If you choose to use a high end, name branded, premium cheese you should expect to pay an additional 50 to 70 cents a pound. These dairies pay a premium for the extra high quality milk they must use in their cheese. They also generally run tighter specifications. When you enter into a Block Plus program you’ll commit 100 percent of your cheese to one distributor. They commit the lowest possible price. If you start falling for lowball pricing and start shopping around they will end the program. Mozzarella is a perishable product. If the buyers have commitments for X tons a week and the cheese isn’t purchased, it may cause an over-inventory problem that could lead to throwing cheese in the dumpster that is out of date. In the long term, this is the most cost-effective way to purchase cheese. It eliminates the adversarial weekly dance with the rep. Remember: If you’re everybody’s date…you’re nobody’s steady. Now that you’re buying right, the next interventions are completely under your control. To this point, you’ve been reacting to situations out of your control.
