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

COVID-19 has shaken up the food industry. But Saputo's focus on both driving greater insights and developing new product innovations to meet evolving consumer needs are good moves to offset foodservice sales losses. A cloud-based digital pricing solution can help by driving 36% revenue growth with value-based pricing. This increase in retail demand (with everyone cooking at home) and slowdown in foodservices will continue as long as government-imposed restrictions are in flux. Your first instinct may be to cut prices, but this isn't the only way to overcome the pandemic. First, let's look at the margin leaks 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 Melting Away Profit

Unstable demands, strained supply chains and higher operating costs – these are all factors that are typically out of your control. Here are a few more factors that may be impacting margins right now.

  • Changing Consumer Demands

    Repurposing or diverting inventory to serve your retail segment creates new overhead costs.

  • Volume Declines

    Lower sales volumes can affect production efficiencies and the absorption of fixed costs.

  • Increased Safety Requirements

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

  •  Labor Disruptions

    Increased employee illness and plant closures may be causing production inefficiencies.

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?

  • Rebates A Mystery to Sales

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

  • Lack of System Integration
    You can’t get accurate data for all sides of your business if your systems don’t work together.
  • Slow & Inaccurate Customer Quotes

    A lack of goal alignment between departments can impact how fast your sales team can quote.

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 packaged, ready-to-eat 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: Keeping Business Strong

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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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