Food and beverage manufacturing is one of the lowest margin industries in Canada today.
Even before COVID-19, the industry average was 3% to 6%.
To put that in perspective, a company doing $5M of revenue per year is only generating $150K to $300K of margin.
Today, when you factor in the increased costs of doing business through the pandemic (PPE, sanitization, reduced output), add the expected increase in produce and raw ingredients costs due to the economic fall-out from the pandemic, and top that all off with a sprinkling of new fees and penalties from retail - it is no wonder that so many food and beverage manufacturers are facing unprecedented financial challenges.
So, you’d think that if manufacturers were offered the opportunity to double their margins they would jump at it.
And yet, many Canadian food and beverage manufacturers lose an average of $230K straight off their bottom line in food loss and waste - each year.
That firm doing $5M in revenue can double its margin - just by preventing waste!
And it can do it this year, next year and the following year….
Most, if not all, of the cost of doing this can be recouped in less than 12 months, leveraging capital that is available today at unprecedentedly cheap rates.
Now I get it, when you’re struggling, it feels like finding new revenue streams or doubling down on your marketing will get you further ahead than focusing on waste.
And I’m not saying that you shouldn’t be driving sales.
But how much more product will you need to sell to double your bottom line?
And you’re unlikely to achieve it in less than 12 months.
Here are two uncomfortable truths.
Truth number one is that food loss and waste is not sexy. Most companies don’t even want to admit they have any, let alone actually find out how much and what it’s costing them.
“We divert all our waste away from landfill” is a refrain I hear far too often. As a result, there are lots of happy pigs across this country getting fat on waste from food and beverage facilities.
But how much is it costing you to feed those pigs? What is the impact on your bottom line? Too many firms still think it’s just the cost to dispose of the waste. Wrong. Your bottom line takes a hit from the wasted raw materials, from the wasted labour, from the wasted energy and water, not to mention what you could have sold the product for had it not ended up in a sow trough.
Do you want to have happy pigs or save your business?
Because truth number two is that a lot of food and beverage manufacturers aren’t going to make it through this pandemic.
A Harvard Business Review study from 2010 showed that on average, 17% of firms fail in a downturn. Who knows how big that figure will be this time, and in all likelihood it will be more than 17%.
How valuable could another $230K be to your bottom line right now? And what would it mean for your business and your people as you continue to ride out the impacts of the pandemic over the coming year or two?
At Provision, we spend a lot of time educating firms on the cost of their food loss & waste and in the last 18 months we have helped firms find over $11.4 m in savings that can go back to their bottom line.
And so we’ve rounded up the best free resources for you in the hope that it will encourage more firms to stop feeding animals and start boosting their bottom line.
Developed by Provision in association with our friends at Enviro-Stewards, The FLW Toolkit is an award-winning online tool that provides a step-by-step calculator for determining the economic, social and environmental cost of food loss and waste as it moves through processing and manufacturing.
This food waste prevention tool is free to Canadian food processors and manufacturers.
In 2019, I participated in the development of a practical guide entitled, “Why And How To Measure Food Loss And Waste” together with the Commission for Environmental Cooperation (CEC).
This guide provides a step-by-step plan to help companies and governments measure food loss and waste. It addresses how to establish a business case and looks at common barriers and obstacles.
The FLW Accounting and Reporting Standard gives companies a globally recognized standard for measurement and reporting of their food waste. It includes dozens of free resources including training videos on FLW quantification methods, case studies and best practices.
My team and I have over 35 years of experience helping manufacturers like yours face the truths of food waste. Use these resources or reach out and we will be happy to support you, so you can keep your margin from falling off the line.
Cher Mereweather, CEO of Provision Coalition Inc., is a Food Industry Sustainability Expert based in Canada
View the original Food in Canada Sustainable Change Column on Page 22 here