Four ways to reduce food and drink product costs and boost revenue
10 June 2022
Birsen McArdle, Value Optimisation Lead
In recent months, manufacturing and raw material costs have risen sharply. This has resulted in higher retail prices
and food and beverages contributing significantly to inflation. With more and more shoppers seeking lower-priced alternatives, what levers
can manufacturers pull to minimise costs and boost their revenue?
There are many areas businesses could look at to improve revenue without compromising product safety, quality and
consumer experience. Here are our top four solutions:
1. Recipe reformulation
Formulas might have been used for several years without being reviewed and there is a risk that some of the
ingredients are unnecessary. With the recent sharp rise in ingredients costs and their lower availability, reformulation represents a cost
saving opportunity not only in terms of formula cost but also in terms of raw materials inventory and buying power.
The process assesses the purpose of each ingredient, its cost, the quantity used and the value it brings to the
finished product. In doing so, it is possible to reduce the use of costly ingredients, replace them with more innovative solutions or remove
them completely, often without any changes to the consumer experience.
2. Product portfolio rationalisation
Businesses have historically introduced products within a category with different formulations, formats or pack
sizes, to offer consumers greater choice and manage product price points. Over time, these additional stock-keeping units (SKUs) have led to
manufacturing challenges through different setups in the manufacturing process, smaller production runs, an increased number of raw materials,
as well as supplementary administration. These added complexities increase costs and lower overall profitability.
Evaluating the existing product portfolio, by identifying low-performing product variants, non-value added features,
and/or variation between formulations, with the aim of reducing complexity, increasing efficiency and lowering the total cost of ownership,
helps decide which products to keep, alter or improve and which ones to discontinue. A comprehensive review like this will improve cash
flow, leverage purchasing scale and boost gross margins.
3. Improve shelf-life
The shelf-life of food depends on a variety of factors such as the food composition, degree of processing, packaging
and storage conditions. There are benefits to businesses and manufacturers as well as to the consumer in increasing product shelf-life. With
better quality and fresher products, fewer items are rejected and profit margins are improved. Longer shelf-life also means the possibility
of longer shipments and expanding the geographical area that businesses are able to serve.
The solutions that a business chooses to extend shelf-life will depend on the individual product characteristics and
how it is sold. Food manufacturers need to consider food spoilage risks during all phases of the production and distribution process. Many
different techniques can be used to increase the shelf-life of a food product and assess its quality, including the addition of food
preservatives, applying various processing and packaging technologies and more.
The cost of packaging materials and the conversion complexity associated with them are often overlooked in product
cost. With consumer attitudes towards carbon footprint and the environmental impact of the products they consume rapidly evolving, value can
be unlocked through material selection, usage, format and conversion efficiency. Selecting the right packaging material can also optimise
shelf-life and reduce the cost associated with product spoilage.
When looking at alternative packaging materials, it is vital to understand the performance of the material along with
consumer need, the impact of shelf-life, sourcing constraints, product interactions, conversion efficiency, supply chain performance and
How can we help?
Modifying an existing product can never be taken lightly. Decisions should be rooted in full consideration of quality
and safety implications. As such, rigorous food safety assessments need to be conducted on any product which has undergone modifications,
such as reformulation. Assessments include challenge tests, chemical analysis, survival analysis and modelling to predict microbial activity
and determine shelf-life.
Sounds interesting but not sure where to start? Need help to optimise the cost of your products? Would you like to
find out some more about our cost optimisation solutions?
Contact us today for an initial free consultation through your issues and
pinch points and let us see how we can help.
How can we help you?
If you’d like to find out more about cost optimisation, contact our support team to find
out how we can help.
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