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5 Hidden Costs to Your Food Business

By Cher Mereweather

Certain business costs are like moths in a closet – invisible until you look closely and find the gaping holes! In today’s competitive marketplace where margins are shrinking, don’t overlook these simple cost saving opportunities:

 

1. Diverting Food Waste

Diverting your food waste to the incinerator, or transforming it into animal feed, may seem like a cost-effective method to get rid of your food waste but the reality is that you’re throwing money away. The true cost of waste is not only the disposal cost, but the initial investment in raw materials and overhead. When you value food loss in those terms, it is on average 10x the original cost identified.  Diverting to animal feed or incinerating food waste may be a short term solution, but there is more value in recapturing the raw materials for their original purpose and turning the cost into new found revenue

2. Global Adjustment Charge

Are you driving down costs on all the line items of your electricity bill? Most businesses focus on the usage cost and forget about the Global Adjustment Charge.  The Global Adjustment (GA) charge is a line item on your bill that is calculated based on a facility's electricity demand at the top five demand peaks. In order to reduce these charges, you can predict when peak demand is most likely to occur and temporarily reduce your demand for that period. There is huge payback for this scheduling strategy - those that can reduce this level of demand by 1 megawatt can save more than $500K over the following year.

 

3. Misaligned Marketing

Is your marketing department delivering the returns you expect? Today’s customers want to know what your business stands for- 64% of consumers say their purchasing consideration is driven by a company’s ethical values and authenticity [1]. If your marketing message doesn’t include statements about your corporate values or purpose, you may be missing out.  For example, Maple Leaf Foods new purpose statement “Grow the Good in Food” creates a connection to its customers through the promotion of healthy eating- something its customers care about. Redefine your corporate purpose in order to connect with customers and win new business.

 

64% of consumers say their purchasing consideration is driven by a company’s ethical values and authenticity

 

4. High Employee Turnover

We all feel the emotional strain that firing and hiring takes, but there is also a huge financial strain on businesses with high turnover-  recruitment, training and loss of productivity. Turnover can cost a business up to 1/3 of the employee’s salary. What is your turnover rate and how much is it costing you? Mobilize your employees through shared purpose and improve employee engagement, drive performance and create a clear and strong purpose-led culture.  

 

5. Unclear Donation Strategy

What does a kid’s baseball league have to do with your meat business? More than you think! Supporting issues and events that matter to your community is a strategic form of giving that can strengthen your brand and reputation. So don’t just donate money to the local sports team, host the celebratory BBQ and serve your products at the end of the baseball season. By feeding a hungry group of kids and their parents you are supporting youth fitness, health & wellness- all while promoting your products.

All five of these costs become visible when you think differently about your operations, employees, and customers. Companies cannot continue operating “business as usual”, they need to adapt to changes in the marketplace in order to drive out costs and capture new revenue.

This article originally appeared in BlockTalk in February 2019.

Tags: Sustainability, Leadership, Strategy, Purpose, Case Study

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