This blog sets out 6 top tips for manufacturers and producers to guide you through the things to consider to keep your business on track and build your resilience to market pressures and environmental impacts outside of your control.
You may have benefited from the initial surge to buy local and your stockists kept their doors open to serve the many consumers who didn’t want to venture into the supermarkets. Or your sales may have dried up overnight because your product category was not deemed ‘essential’. People do not have time to peruse the shelves in shops at the moment, so unless they know your product is there and they want it, the chances are it won’t be picked up.
I’ve written blogs before about how to become a Food and Drink success story and laying the right foundation for your business to be able to grow. A lot of this information will still be relevant but it feels like businesses need a little more insight into HOW to actually achieve this as we are start to figure out what the landscape will look like in the future and how we live with the ongoing impact of COVID-19.
Costings will always feature in my blogs! Whatever the situation there is no excuse for not knowing the cost of your products and how much money it makes you (contribution). Have a costing for EVERY product you produce with ingredient, packaging, labour and distribution costs included. You can even go one step further and create a contribution analysis with all the products listed in one place. Knowing how much each product makes you allows you to make informed decisions about your product range. Putting these into a contribution analysis helps to highlight the potential dogs and cash cows within your range and the overall impact a change in volume will have on certain products. Your costings and contribution analysis should be reviewed continually and not just popped in a drawer, never to be seen again. The food and drink industry is dynamic and market price fluctuations are a constant battle so reviewing your costings will give you insight into this and help identify if what was working before may not be working now. Remember this is only showing contribution and NOT profit. This is contributing to the indirect costs of your business, which leaves you with your profit.
SALES – DIRECT COSTS = CONTRIBUTION
2. Improving Profit
So, you’ve worked out how much each product costs to make and it’s maybe not as much as your thought! Whilst price increases are common in the food and drink industry there is only so much your customers and consumers are prepared to pay for your products, you have to find new ways of creating savings that won’t impact on product quality. The best way to do this is to walk the entire process, from start to finish, making sure all key people are involved, 2 heads are better than 1 and all that. Look at every aspect, from each raw material to how they are handled. Identify the high volume\high spend raw materials as a small change here can give you greater savings. The phrase ‘cash is king’ gets thrown around a lot but it is true. Having money in the bank gives you more resources to weather the storm.
3. Review your range
Reducing complexity in your production facilities will make you more efficient. Now is the time to be a little selfish and ruthless and not overthink too much about the consumers who may or may not want to buy a particular product. You’re obviously not going to drop your most popular lines but a smaller range doesn’t necessarily lead to a reduction in volume. Having a carefully thought out range will see loyal consumers switching into remaining products and can improve your bottom line. There a number of factors to consider when conducting your range review that will be bespoke to your business, but think about the products that add to prep and production complexity, the ones with unique or hard to source ingredients and of course your margins.
4. Get to grips with your numbers
Take the time to review your numbers across all metrics (sales volume & value, market share, contribution etc). Look at how you were performing before COVID-19, the initial impact and how things have changed for you as we slowly get into the swing of a ‘new normal’. Understand new trends and patterns in your sales and what is influencing them. Were there key milestones that helped or hindered you? You can then start to build a better picture of what the future holds, enabling you to forecast and budget more effectively and plan for any further disruption with a little more foresight. Creating meaningful forecasts and budgets will not only help you know your numbers but will also help you understand what’s coming up, how could it impact production and ensure you can keep up with demand.
5. Processes & Procedures
Now is a great time to take stock and review what is actually going on in your business. Having processes and procedures in place makes for better working practices and allows everyone in the business to know what is expected. You can utilise check sheets to ensure all aspects of a launch are completed correctly or documenting the quality expectations of the products. Not having the correct processes in place can be costly if mistakes are made. This may not seem like a significant cost at the time, but they do add up and the mistakes will only get bigger as you grow.
Understanding the impact COVID-19 has had on your category will give you insight into what you should be doing next. Are there new markets to tap into if your existing sales pipeline has been harder hit? Look at how your current capabilities can be adapted to provide a more relevant or necessary product at the current time. Think about how the alcohol producers have switched to making hand sanitiser. This was obviously a short-term solution to short term problem, but you get the idea. With fewer people in the shops and more people looking for online solutions, is there a way your product can be made letterbox friendly? Or you could offer subscriptions to stop people having to think about buying your product each week or month and it just turns up. This isn’t about changing your entire production facility but looking at your current processes and seeing how they can be adapted.
Each and every business is different and will be facing their own challenges so if you found this useful and want to find out how this can be related to your specific business, book a completely FREE 30 minute discovery call with me. Click HERE to book or give me a call.
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