How can imported oils be cheaper than locally-made ones?

When people compare local products with imported alternatives, price is often the first difference they notice. Local products are sometimes more expensive, and the reasons for that aren’t always obvious.

One reason is scale. Most local producers work on a much smaller scale than large international manufacturers. They don't buy raw materials in the same quantities, they don't produce millions of units, and they rarely have access to the same level of automation. As a result, the cost of producing each item is higher. For Liven, it would be more economical to produce much larger batches (particularly for the base oils), but we chose to make smaller batches with greater frequency to preserve freshness.

A second reason is higher overhead cost. Most of the products in our industry are made in so-called “developing” countries where labor and other costs are extremely low. There have been many exposés on abusive labor practices in coffee, textile and other industries, and other investigations into the exploitation of raw materials (renewable and non renewable) through time and until today. 

The cost of water and energy, and paying a fair and legal wage impacts also our production cost and the production cost of our suppliers, since we work only with local farmers. We have recently installed PV panels (which we are waiting to be switched on), and we hope as Cyprus improves its energy and water management policies, the costs for everyone in our sector will become more competitive. 

The third reason might be a bit counterintuitive. If local producers buying from local suppliers have less transport, storage and administrative costs (less middle men), then how come their products tend to be more expensive? This is a question that probably needs to be asked on a case by case basis. Even if a local producer like us pays a slightly higher overhead cost than a distiller in India for example, the majority of the cost of our products goes to the raw material and local labor. For us it is important to not pay the lowest price possible for a raw material or our labor, but to get quality and reliability above all.

For an imported product, you can assume 40-50% goes to the local retailer, and then how much goes to the transport, customs and storage fees (middle men), and in the end how much went to the actual labor and raw material? In some cases it can “add up” because of the imbalances in currencies that causes very low labor and raw material costs and preserves the colonial model between “developed” and “developing” countries. In other cases there is no way for the end product to remain “pure” as perhaps claimed, with all the parties taking their profit along the way. 

Knowing some of this info, the question is less about whether a local product is worth the price, and more about what you are actually paying for when you choose it.