Olive Oil Profit Margin: Bottles, Shops and Restaurant Tins

A grove makes a fixed amount of oil each year, so the margin question for an olive oil producer is where each liter goes. Harvest and milling cost about $5.50 a liter; a bottle sold direct keeps most of its price, and the same bottle to a shop keeps less. With a year's oil limited by the harvest, every liter sold wholesale is a liter not sold at the farm stand. Margin = (price − cost) ÷ price. In the example below, a 500 ml bottle costs $7.43 to make and sell direct and goes for $28.00, a 73.5% margin. A month of four ways of selling brings $11,570 of sales and about $8,020 of gross profit.

The short version

• Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
• Count your time as a cost, even if you don't pay yourself yet.
• A 500 ml bottle direct: $7.43, $28.00, 73.5%.
• Harvest and milling: about $5.50 a liter.
• The harvest limits the year's oil: choose where each liter goes.
• Shops keep less a bottle; restaurant tins less again.
• TaroStack costs each bottle from what each batch used. More below.

A bottle, costed

Tule Fog Olive Co., the made-up olive oil producer near Oroville, California, I use in these examples, mills about 1,900 liters a year from a six-acre grove:

The grove's year is in olive oil business plan, and margin against markup in markup vs margin.

Margins by channel

The shop bottle keeps 60% and the restaurant tin 64.7%; both earn far less a liter than the bottle at the farm stand, at 73.5%.

A month's numbers

A December for Tule Fog Olive Co.:

A liter in direct bottles earns about $41 of gross profit; a liter to a shop about $18, and in a tin about $15. The shops still matter: they sell the oil in the months the farm stand is quiet, and their names on the website bring direct orders. The owner caps the shops at a share of the harvest each year. Gross margin itself is in gross margin formula.

Get the calculator

Download the olive oil margin calculator. One sheet: one line for each product and channel, with its price, materials, packaging, labor and fee rate; the cost, gross profit, margin, markup and the price your target margin needs fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

The calculator holds one cost a liter. A light harvest raises the cost of every liter, and by spring nobody knows how much of this year's oil is left, or how much of it is promised to shops.

How TaroStack does it

TaroStack costs each bottle from what each batch used, so margins sit on real cost.

True cost from the batch. Each batch takes oil and bottles at the price of the deliveries they came from, so a price rise shows in the next batch's cost.

Labor on the batch. The minutes a batch took are recorded on it, so the hours behind each product are on record.

Margins by product. Margins are reported per product on that actual cost, and a price-creep report per supplier shows whose prices moved.

Recipes, batches, costing and margin reports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

What is a good profit margin for a olive oil business?

In the example, 73.5% on direct sales before overhead; wholesale earns less, so a business that sells both should know its mix.

Is a olive oil business profitable?

It can be: the example's month of $11,570 in sales leaves about $8,020 of gross profit, before rent, insurance and the owner's pay.

What is the markup on olive oil?

In the example, a 500 ml bottle direct marks up 276.9% on its cost.

Is selling olive oil wholesale worth it?

In the example, a bottle to a shop keeps 60%, much less a liter than direct, so the owner caps the shops' share of the harvest.