Tag Archives: planning

Fewer Oreos, More Profit

It’s always good that Foodie Friday follows my shopping day, which is Thursday (gotta get that senior discount – Thursday only!). If you aren’t the primary shopper in your house and you haven’t been to a grocery store lately, you probably haven’t noticed that the shelves are less-full than usual. It’s not just the meat case (you’ve probably heard about the issues with meatpacking plants during the pandemic) or the toilet paper aisles that are on the empty side either. I’ve noticed lots of gaps.

It turns out that while it’s due to the current crisis, it might not be for the reasons you think. As CNN reported:

It’s also because major food companies — the ones that make our cookies, chips, and canned soups — have been paring down their product offerings. When stay-at-home orders went into effect this spring, Mondelez, General Mills, PepsiCo, J.M. Smucker, Campbell, Coca-Cola, and others saw a massive spike in demand for some products. To help meet that increase, they sped up production lines on their most popular items -— and that meant cutting back on more fringe offerings. That translates to fewer varieties of Jif peanut butter, Oreo cookies, and Frito-Lay chips at the store.

In other words, they reverted to the Pareto Principle and focused on the items that brought them the most revenue and profits and didn’t worry much about line extensions or the varieties that filled the shelves but not the corporate pockets, at least not as much as the main lines do.

Restaurants are doing much the same thing. Many places have trimmed their menus way back to focus on the most popular and profitable items. For example, Dave & Buster’s reduced its 40-item menu to 15 offerings and McDonald’s has cut salads, bagels, yogurt parfaits, and all-day breakfast during the crisis. IHOP used to have a 12-page menu. Now it’s giving guests a 2-page, disposable menu. This should improve economies of scale, simplify ordering supplies, make it easier on the staff, etc. 

Less can be more and the exercise that these businesses have conducted to deal with a crisis is something that your business might consider as well. What services are you providing that are less attractive or less profitable? Is your product line overextended? Is it better to focus on the more profitable sectors even if it costs you a few customers? Something to think about this weekend!

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Pivoting From Cocktails To Cleaning

Happy Foodie Friday! This week our food-themed screed takes us to the land of alcohol, a place that I have a feeling many of you have visited several times over the last few weeks as a scenic detour in your home confinement. Like many of you, part of my very limited activities over the last little bit has been the often quixotic search for hand sanitizer and toilet paper. The good news is that toilet paper seems to be much easier to find of late while sanitizer remains elusive.

There are many small distilleries near where I live which make everything from vodka to rum to moonshine (hey, it is the South!). Many of them have converted their processes over to produce hand sanitizer which is after all, alcohol-based. One place nearby is selling their sanitizer by the gallon at prices which are reasonable, thereby doing both their shareholders and our community a service. Why the shareholders? Because many of their customers, along with those of their competitors, happen to be restaurants and bars, which are closed except for carry-out. Booze sales are confined to beer and wine in the carry-out world for the most part. That’s our thinking point today.

These businesses have managed to pivot from making one in-demand product to another. This pandemic has caused many other businesses to rethink how they do things as well and to make some changes. For example, I represent a number of companies that run after-school programs. With no school (and no gatherings allowed), most of them have pivoted to providing those programs online. When things calm down, they’ll return to their old model but most indicate they’ll keep the new, online model as well since it seems to be working quite well.

Another example. Companies are cutting down on non-essential costs.  They are reallocating their budget from physical in-person processes such as travel, conventions, etc. into digital or virtual tactics. If your primary sales channel is trade shows, are you ready to pivot to some other model since consumers might be wary of large gatherings such as home shows and business buyers may not be allowed to travel to whatever conventions remain?

Has online commerce been an afterthought for your business? My guess is that many brick and mortar firms are rethinking how they approach digital. Yes, all retail sales have dropped. Consumers are restricting their purchasing to essentials, understandably. But it won’t be this way forever. As CNBC quoted one analyst,

“Major retailers who sell goods outside of apparel and furniture – two of the hardest-hit categories – will likely weather the downturn, along with many direct-to-consumer brands that were doing well before the pandemic. Instead of bulldozing the entire retail market, the pandemic is more likely to accelerate the decline of the “boring middle of retail,” such as Sears, J.C. Penney, Macy’s and Kohl’s.”

Those are companies that didn’t invest in the online space before and who can’t keep up with the big guys or the specialty online brands. They can’t pivot.

Being able to pivot is going to be critical as the new world emerges. Can you turn your booze into sanitizer without missing a beat or will you have to rip the whole business down and start over?

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We’re Trucked

Believe it or not, it’s Foodie Friday again (I know, you can’t keep track of what day it is). Obviously, we’re not dining out here and I’m pretty sure you’re not either. We are, however, bringing in for from some of our regular haunts in an effort to support them during this difficult time. In a couple of cases, the restaurants are moving closer to us by rolling out their food trucks into various places nearby.

Food trucks are one of the businesses I represent along with dozens of other food franchises. I can tell you that the cost to open and operate one of these beasts is significantly less than for almost any other type of food place. I haven’t pulled any of the Franchise Disclosure Documents to check out the operating and earnings claims for trucks vs. brick and mortar but I’m thinking that the trucks probably have better margins.

Margins in the restaurant industry are notoriously small. While you might expect your margin in any other type of business to be north of 25%, in the restaurant world they run 3–9%. Not much room for error and definitely no room for the type of catastrophic business environment in which they’re trying to operate. Having a truck to roll out, either in lieu of or in addition to operating the brick and mortar joint for takeout might just be a lifesaver.

I could spend the rest of today’s screed talking about why the margins are so bad and what can be done about it. The two-word solution is “charge more” but I’ll leave that for another post. What I want us to think about today is how we can “food truck” our businesses. How can we find some other way to operate, maybe even in a more efficient, consumer-friendly manner once we get to whatever the new “normal” will be?  How will you calm your customers’ frayed nerves? How does your business have to change to mirror the changes in society, media consumption, supply-chain and each of the other factors and constituencies that make up your enterprise?

I find I’m spending more time talking to people about businesses that can operate out of the home.  I also remind them that no matter what business they’re evaluating, the process will take time. 2 months for a non-retail business and maybe as long as 5 months if you’re outfitting a store/salon/restaurant etc. The time to be planning and beginning the process is now. Borrowed money is cheap, there will be a glut of real estate, and you want to be ready when the new normal eventuates.

So how are you food-trucking your business?

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