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Facing the Facts: Foodservices Industrial Spending Down 28.4% in 2020*

We’re not going to hit you over the head with it – we all know COVID-19 has had and will continue to have a dramatic effect on food processors. The entire food industry has been shaken up. We’re seeing an increase in retail demand (with everyone cooking at home) and a slowdown in food processing (particularly in restaurants and hospitality). With demand down, your first instinct may be to cut costs. But, is this the only way to overcome the pandemic? Before we help answer that, let’s look at some of the factors that may be eating away at your bottom line.

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

A Foodservice Industry State of the Union

External Factors Gobbling Up Profit

Record cattle prices, strained supply chains, increased demands from China – these are all factors that are typically out of your control. Here are a few more factors that are likely impacting your margins right now.

  • Currency Fluctuations
    Exchange rate fluctuations and a decline in export and import activity are having an effect.
  • Commodity & Energy Fluctuations

    Energy and commodity price fluctuations and raw material shortages are creating slowdowns.

  • Increased Safety Requirements

    Huge undertaking and cost to accommodate new food safety and sanitization measures.

  • Labor Disruptions

    Increased employee illness may be causing inefficiencies in production.

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 Awareness

    Free shipping. Discounts. Commodity increases. Are you really keeping track of all the costs?

  • Rebates A Mystery to Sales

    A sales team who doesn’t understand the rebates your company offers could lead to lost revenue.

  • Cumbersome Manual Data Entry
    Are you still entering pricing data manually? This process is time consuming and labor intensive.
  • Slow & Inaccurate Customer Quotes

    Does your sales team have access to fast, accurate quotes? See manual data entry above.

Minimizing Loss and Improving 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.

What Your Foodservice Operators Want from You Right Now

One of the best ways to help your customers is to understand their mindset. Here are a few ways food operators are looking to respond and modify their business models post-pandemic.

  • Greater supply chain transparency and tracking to understand their supply chain and sourcing risks. This is a move many operators have already taken and will continue.
  • Increased focus on disaster planning, including contingency planning and risk mitigation.
  • Increased domestic and local sourcing to reduce the risk and dependency on foreign suppliers.
  • More partially cooked, ready-to-heat food solutions that lower labor requirements.
  • Stronger long-term relationships with suppliers to reduce risk and avoid costly changes.

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.

Listen Now

Novus CPQ Series

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

Listen Now

Impact Pricing Series

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

Listen Now

The Professional Pricing Society

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

Listen Now

Soundtrack: Your Rich Tunes Playlist

Love it or hate it, money is what makes business go round. This rich tunes playlist is just what you need for a little inspiration.

Presentation: Making Us Sizzle, Again

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Ready to Explore A New Pricing Strategy?

Carolina Alvarez

Business Development Representative, Food & Beverage Book A Free Session

Ryan Fritz

Senior Account Executive, Food & Beverage Book a free session

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