Facing the Facts: Foodservice Industry Forecasts 4.9% Growth in 2022*
COVID-19 continues to shake up the food industry. But your focus on increasing efficiency and productivity is a good move. A cloud-native digital pricing solution can help by automating lower-value tasks, unlocking key insights, and driving growth. Especially right now, as the fight for manufacturing capacity to meet surging retail demands threatens the restaurant and hospitality sectors. With margins continuing to dwindle, your first instinct may be to cut costs. But is this the best move? Before we talk about a better strategy, let’s look at the margin leaks that may be taking a bite out of your bottom line.
*According to the International Foodservice Manufacturers Association.
External Factors Draining Profit
Despite strong bottling partnerships and fully integrated marketing activities – there are still factors that can impact your margin right now that are typically out of your control. Here are a few:
Currency FluctuationsExchange rate fluctuations and a decline in export and import activity are having an effect.
Shifting Consumer Patterns
Both a rapidly evolving digital landscape and increasing health concerns are reducing demand.
Commodity & Energy Fluctuations
Energy and commodity price increases and raw material shortages are creating slowdowns.
Increased Safety Requirements
Huge undertaking to enhance employee safety and plant sanitization per new pandemic protocols.
Internal Factors Possibly at Play
These are the common factors at many companies, regardless of industry, that cut into profits. You might spot a few familiar ones.
Lack of True-Cost Visibility
Discounts. Commodity increases. Diverting inventory. Are you really keeping track of all the costs?
Lack of System IntegrationYou can’t get accurate data for all sides of your business if your systems don’t work together.
Slow & Manual Customer Quotes
A lack of alignment and tedious manual processes impact how quickly and accurately your sales team can quote.
Rebates A Mystery to Sales
A sales team who doesn’t understand the rebates your company offers could lead to lost revenue.
Reduced Loss and Better Margins?
Yes, Even Now
Before you jump to discounting your prices, consider this. A recent McKinsey study found a 1% increase in price (if demand stays consistent) increases operating profit by an average of 8.7%. The opposite also holds true. So what can you do instead?
Start with data. Get a clear understanding of where money is leaking and exactly how much revenue is gained from every transaction.
Gather intelligence. Avoid the hype and rely instead on what your customers are saying.
Don’t rush to drop prices. Pricing software can help you find weaknesses and opportunities.
Test for full visibility. Testing different market strategies shows you exactly how any small change will impact your bottom line.
Launch your strategy. Choose the best test strategy for your overall goals and circumstances.