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Facing the Facts: Foodservice Industry Spending Down 28.4% in 2020*

COVID-19 has shaken up the food industry. But your focus on increasing efficiency and productivity is a good move. A cloud-based digital pricing solution can help by automating lower-value tasks, delivering key insights and helping to reduce risk. Especially right now, when you're seeing an increase in retail demand and a slowdown in foodservice. With this overall decline, your first instinct may be to cut prices. But, is this the only way to overcome the pandemic? Before we answer that, let’s look at the margin leaks that may be impacting your bottom line.

*According to the International Foodservice Manufacturers Assn. August, 2020 report.

A Foodservice Industry State of the Union

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 Fluctuations
    Exchange 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 Integration
    You 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.

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Podcasts: Dig Deeper with These Recommendations

Want to learn more about pricing’s effect on your bottom line and what to do during times of crisis? Listen to a few of our favorite pricing podcasts.

Pricing Strategies for Uncertain Times

Harvard Business Review's conversation with pricing expert Rafi Mohammed.

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Novus CPQ Series

This series is an oldie but a goodie. Learn directly from top pricing execs and professionals.

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Impact Pricing Series

Learn how to sell value rather than price with tips and tricks from pricing experts.

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The Professional Pricing Society

From rebates to negotiation skills to successful pricing transformations, learn from the best.

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