The last two years have been exceptionally challenging for businesses across the UK with the current economic climate creating a squeeze on everyone’s purse strings, and the hospitality sector is not exempt. Many businesses have been faced with supply chain challenges, increasing costs (food, energy, wages, inflation) as well as labour shortages, all of which are contributing to increasing food and beverage prices. Many operating within the sector are being pushed to breaking point as the cost of resources bears down on Gross Profit. Gross profit, in simple terms, can be defined as the difference in value between the selling price of a dish and the combined cost of all resources required for its production e.g. ingredients, materials and energy used to make that dish.
According to a recent ONS survey businesses in the food and beverage sector have been disproportionately affected by the recent rise in energy prices. In March 2022, 60% reported being affected by the rise in energy prices, compared with 38% across all sectors. The report also found that in March 2022, more than two-thirds of businesses in the food and beverage sector reported an increase in the prices of materials, goods, or services bought compared with half of businesses across all sectors.
Our stocktakers are finding the rising cost of inputs are pushing what were, until recently, healthy Gross Profits down at an alarming rate.
Underlying costs rising most include dairy products and oil, which in turn, are having a knock on effect into other product lines as well. By way of example, fish prices have reached high levels, with some chefs choosing to take fish completely off the menu. For businesses operating across the South West this is not an easy choice to make. Coupled with the rising cost of freight, transport and suppliers getting product to their venues, some in this sector may choose to retain higher selling prices simply in order to cover their overall cost base.
How to keep on top of Gross Profit Margins?
Now is the time to keep on top of the costs of products coming in and make sure that the kitchen is maximising the yield on a meal from its constituent ingredients. Tighter stock control and minimising wastage is particularly important.
If not already in place, we would strongly recommend that it’s time now to ask your chefs to keep track of wastage and use a wastage sheet in order to regularly value the real cost. This way they can gauge the financial losses to the business ensuring their awareness will result in stronger quality control on their stock.
In these times of ever increasing product costs, a successful hospitality operator relies on several factors to keep tight control over gross profit and margins. One of the most important of these factors is control over the efficient use and replenishment of stock. That’s where proper stock control management is key to success and a professional stocktaking service is invaluable. We recommend regular stocktakes are booked in. Use the valuable insights, advice and recommendations a good stocktaker can offer. Stocktakers have access and exposure to many businesses across the sector and can offer an invaluable source of help in cost management.
What to expect from a good stocktake report?
- Real-time analysis to identify where and when profit margins are not performing
- Cost prices from supplier invoices
- Selling prices based on price tariffs and wine lists
- Opening and closing stock figures
- Purchases and sales for each individual stock line
- Value of sales at cost and selling price
- Gross profit percentages achieved on each stock line
- Number of days stockholding
- Analysis assessing the yield from the stock
- Provision of a percentage total for the wastage in real terms
How can Everett King help?
Stock is a vulnerable asset and we understand the challenges the industry is facing and the increasing importance of maximising yields and securing decent Gross Profit margins. Why not contact us and book in for a comprehensive stocktaking service and let us work with you to improve your yields and profits.