Sharp pencil when ordering for ads builds profit margins - The Packer

Sharp pencil when ordering for ads builds profit margins

03/28/2014 09:15:00 AM
Armand Lobato

Armand Lobato, The Produce AisleArmand Lobato, The Produce AisleI was reaching for a pencil when Rusty Blade pulled himself out of my desk drawer. Rusty, as many regular readers know, is the imaginary, miniature produce manager who visits me on occasion.

Rusty: Hello Produce-aisle boy. You actually still use a pencil?

Me: Yup. I like ’em No. 2 and extra-sharp. Still need to figure my taxes. I want to take advantage of every deduction, get back every penny.

Rusty: Speaking of squeezing every cent out of something, I’ve noticed you’ve never talked about one simple trick to build gross profit margin in a produce operation.

Me: Let’s see. Fifty-two columns a year, going on eight years — tell me Rusty, what have I missed?

Rusty: I suspect you could scratch another decade or so and still have plenty of fresh ideas that can help produce departments. My suggestion is to build profit using that pencil in day-to-day ordering.

Me: Such as?

Rusty: Bear with me here. Take advertised special items. All those items that are listed “in the ad” every week. Well, you coach produce managers to order close, only order what you need until the next delivery, yadda, yadda, yadda. Right?

Me: I think I know where you’re going with this.

Rusty: So, some of those ad items — and I stress only some, the ‘hardy’ things like citrus, apples, potatoes — can boost a produce department’s gross profit margin and the resulting dollars that a store can actually put into the bank.

Me: You mean pad your inventory.

Rusty: In a way, yes. This can be done on two levels. Suppose you have 5-pound bag spuds on ad, OK? Most chains have the ad-lid, or discounted ad price built into the product a few days before the ad breaks. So, if a produce manager builds that big potato display ahead of time, on say, Monday…

Me: Ah, right, then he pushes the bag spuds at the regular-price retail for two days, before the ad breaks.

Rusty: That builds higher gross profit by taking advantage of the lower, landed-cost on the ad item. Correct-a-mundo!

Me: And the second method?

Rusty: A simple one, and maybe the stronger side to build extra profit. Bring in a few extra pallets of spuds at the tail end of the ad.

Assuming the product is good quality and can be safely stored, the produce manager can sell lower-priced product after the ad expires. The key is to promote sales. Keep the prominent display up, taking care to rotate faithfully and keep it well-signed.

Me: Of course, the sign after the ad will be regular price.

Rusty: With a higher, gross profit margin than normal. One simple idea. Something any produce manager can do using a sharpened pencil.

Armand Lobato works for the Idaho Potato Commission. His 30 years of experience in the produce business span a range of foodservice and retail positions.

armandlobato@comcast.net

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