Facing the Facts: Foodservice Industry Forecasts 4.9% Growth in 2022*
COVID-19 continues to shake up the food industry. But Smithfield Foods' focus on overcoming supply chain disruptions and volatility in pork pricing 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
A Foodservice Industry State of the Union
External Factors Gobbling Up Profit
Unstable supply and demand, strained supply chains, increased safety measures – these are all factors that are out of your control. Here’s a breakdown of factors likely impacting your margins right now.
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Increased Safety Requirements
Huge undertaking and cost to enhance safety and sanitization measures in meatpacking facilities.
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Labor & Operation Disruptions
Increased employee illness and/or suspended operations due to outbreaks greatly impacts profits.
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Environmental R&D
The continued need to explore more sustainable methods is an expensive but vital cost.
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Commodity & Energy Fluctuations
Energy and commodity price fluctuations and raw material shortages are creating slowdowns.
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.
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Lack of True-Cost Visibility
Commodity increases. Currency fluctuations. Are you really keeping track of all the costs?
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Rebates A Mystery to Sales
A sales team who doesn’t understand the rebates your company offers could lead to lost revenue.
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Lack of System Integration
You can’t get accurate data for all sides of your business if your systems don’t work together.
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I nconsistent Contract Quotes
A lack of goal alignment with no standardized pricing process leads to inconsistencies in quoting.
Minimizing Loss and Improving Margins by 2-10%.
Yes, Even Now
Here’s a hint: it starts with pricing. Gartner Research found companies that implement a price optimization software to find and fix sources of margin leak increased their margins by 2-10% and saw a lifetime value increase of 20%. Here’s how to gain control and stop leakage:
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.
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: Turn Up the Sizzle
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