Is Your Bottom-Line Feeling “Marginalized” from Compression and Leakage?

Manufacturers in the Food and Beverage industry are facing a double-edged sword: margin compression and margin leakage, exacerbated by the ongoing energy crisis and unique operational costs.

Margin Compression: The Squeeze on Profits

Margin compression occurs when procurement costs or manufacturing expenses rise without a corresponding increase in revenue. Key drivers include:

1. Strict temperature regulations – Higher energy costs to maintain compliance.
2. Extreme reliance on plastics – Volatile raw material prices impacting packaging costs.
3. High food integrity demands – Increased QA and safety measures adding to production expenses.

Margin Leakage: The Silent Profit Drain

Margin leakage happens when revenue is diluted due to inefficiencies in sales and fulfillment processes, including:

1. Gross Sales to Net Sales dilution – Off-invoice adjustments like rebates, trade promotions, and discounts.
2. Rising Cost-to-Serve – Hidden expenses from freight, returns, and extended payment terms.

The Root Causes of Shrinking Margins

Margin Compression Drivers:

✔ Increased competition – Pressure to keep prices low while costs rise.
✔ Internal production inefficiencies – Waste, downtime, and poor resource allocation.
✔ Macroeconomic factors – The energy crisis, inflation, and supply chain disruptions.
✔ Rising SG&A costs – Higher overhead without proportional price adjustments.

Margin Leakage Culprits:

• Manual processes – Error-prone and slow workflows.
• Over-reliance on spreadsheets – Lack of automation leads to inaccuracies.
• Outdated customer data – Misaligned pricing and contract terms.
• Unclear policies – Inconsistent enforcement of fees and penalties.
• Underbilling & pricing errors – Bad data and unapproved deductions eating into profits.

The Fight for Profitability Starts Now

Ignoring these challenges will only deepen the impact on your bottom line. The solution? Expert guidance and tailored strategies to plug leaks and defend margins.