If you operate in the food service industry, you’ll know that the last few years have been tough. Suppliers have been increasing their prices and customers have been tightening their budgets, leaving many businesses feeling the squeeze.
With external factors conspiring against them, food service companies are increasingly using revenue growth management to regain control in an uncertain industry. As margins tighten in the sector, firms must find ways to be more innovative and adaptable - a process that started during the pandemic - to wring as much value from this channel as possible.
This article explores the principles of revenue growth management for food service businesses and provides some easy-to-implement suggestions. Full-service restaurants, bars, pubs, fast food outlets, caterers, and other places that prepare, serve and sell food or drink to the general public are all concerned by this trend, and there’s something for everyone here.
Revenue growth management (RGM) is the process of implementing strategies throughout the business to drive sustainable income growth. You can use various techniques, from those focused on customer acquisition and retention to optimizing your pricing and using data analytics to supercharge your sales, promotions, and marketing.
Revenue growth management isn’t a new concept. It has been used extensively in the consumer packaged goods (CPG) industry, where it has helped companies sustain their profits despite ongoing challenges, such as record inflation and spiraling wages. However, in the food service industry, firms are just waking up to the significant opportunities it provides.
Revenue growth management is evolving in two complementary directions:
By combining these two approaches, you can create a strategy that empowers your teams to work together and serve up consistent and profitable growth.
The following framework highlights the specific areas and actions that food service companies can target to optimize their financial outcomes.
As a food producer, a critical measure of success is your ability to produce the maximum end product from your raw materials and ingredients. By increasing your output and reducing waste, you can optimize your revenues.
Easy, right? Unfortunately, optimizing yields is rarely straightforward. The production process, the quality of the raw ingredients, your equipment, and external factors such as employee skill and experience all play a part.
To create a yield management system that boosts revenue, you must consider each of those factors and develop strategies to improve them. You could invest in better equipment, introduce effective ways to retain your best workers, improve your production process, or implement new quality control measures.
Although you will have to invest time and money initially, making incremental improvements will help you boost yields, reduce costs, and increase revenue.
In our fast-changing world, food service market trends and customer demands shift daily, making it easy to lose track of your pricing. With so much information out there, food distributors may find it tough to analyze spreadsheets and collect swathes of relevant market information on their own. This is where machine learning technology can make a difference.
Price optimization software uses data and statistical algorithms to crunch the data and provide instantaneous pricing strategies for marketing and sales teams so you can stay ahead of industry changes.
For example, for a food distributor with a diverse product portfolio, it’s not always easy to determine which products are profitable and to price them accordingly. With price optimization software, you can eliminate unprofitable transactions and improve your margins to more sustainable levels.
For restaurants, hotels, and bars, menu optimization is a vital step in enhancing revenue growth. Here are some various ways to influence customer choices and increase overall sales:
Seasonality has a big impact on the food service sector and makes it challenging to stay ahead of the curve. Customer preferences, demand, and staffing requirements can change significantly throughout the year, which makes revenue growth an ongoing challenge.
To stay relevant, restaurants and other hospitality businesses must adapt their menus, shift their marketing, change their pricing, and create new promotions to appeal to customers throughout the year.
You can create seasonal menus that feature fresh produce, highlight specific seasonal promotions, and plan special events around holidays and local festivities. You can also take an analytical approach to your pricing. You can increase your prices when it’s busy to maximize your revenues and reduce them when it’s quiet to keep customers coming through the door.
Customers buying from food distributors want timely responses, quick quotes, and an easy-to-navigate buying process. By giving your customers the service they want, you can become their food service partner of choice and boost customer retention.
High levels of customer retention are key if revenue growth is your goal. A Harvard Business Review report suggests that increasing customer retention rates by just 5% leads to a 25-95% jump in profits.
Over the past few years, food delivery services, or aggregators, such as Uber Eats or Just Eat, have changed the market irrevocably and set the scene for large-scale growth. Morgan Stanley estimated the US food delivery market alone could swell to USD 210 billion in the long term. Embracing such services, by offering take-out menus and making it easy for aggregators to order and deliver your products, is a smart move for this channel.
AI tools can help you make quick work of the buying process, allowing you to give customers accurate and data-driven responses on demand. You can generate proposals, help them find the right products, and generate personalized responses quickly. That helps to shorten the sales cycle and boost your cash flow.
A robust revenue growth management strategy can help you realize several benefits alongside the upturn in your income:
Given the unrivaled challenges food service companies face, revenue growth management can be an effective way to regain control. By combining modern technology with an analytical mindset, you can refine your operations, target high-performing markets, and realign your offering with consumer demands to achieve sustained revenue growth.