Ways to avoid reliance on supermarkets and combat margin squeeze
While the supermarket code of conduct secured this week is good news, the squeeze on profit margins exists beyond a code.
The squeeze on profit margins can really only be alleviated by food producers that reduce their reliance on supermarket chains to unlock growth and revenue potential, according to Tony Pititto, National Head of Food & Beverage, Grant Thornton Australia.
Pititto said Grant Thornton is pleased to see protection mechanisms secured for Australian food producers “but for many Australian food and beverage companies, unlocking growth potential and increasing margins comes down to reducing reliance on the major supermarket chains.
“The key to reducing reliance on supermarkets is to develop additional distribution and customer channels in Australia. There is just no denying that multiple channels to market will increase profit because different channels will attract a range of profit margins. Consider options like direct selling to restaurants and cafes, or on line sales direct to the consumer.
“Developing overseas markets is another way to increase revenue streams. Tap into new markets, there is a world of growth opportunity in overseas markets, especially in the Asia Pacific region in the wake of the new Free Trade Agreements. Overseas expansion requires careful planning and lots of research; products will most likely need modifying to suit the needs of the new market.
“Innovate your offering to increase your margins. We’re seeing a lot of dynamic food and beverage companies achieving growth by developing product IP and creating new products, both locally and for overseas markets. Businesses can’t demand a greater margin on products that are overflowing on supermarket shelves with a similar offering from competitors.
“We’re also seeing success with food and beverage companies that are investing in their brands. Building up customer loyalty, not only commands a premium that supermarket chains will need to adhere to, but it also opens up the business’ ability to attract capital for growth from either local or overseas sources looking for iconic brands to leverage in new and existing markets,” Pititto said.
Source : Food Magazine March 4th 2015
