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Boosting Profitability in Your FMCG (or Nearly Any) Business: A Case Study

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Boosting Profitability in Your FMCG (or Nearly Any) Business A Case Study
As a fast-moving consumer goods (FMCG) business owner, you’re always looking for ways to increase your profitability. While there’s no magic formula for instant success, the strategic incremental changes shown in the case study below, can seem like magic! In this blog post, we’ll walk you through a case study that demonstrates the power of small improvements and how they can compound to create a significant boost in your bottom line. Griffith University

The Scenario

Let’s consider a fictitious FMCG business (an example might be a Bottle Shop) with the following weekly statistics:

Metric

Value

Total customers

700

Average total sale per customer

$30

Average items per sale

2.5

Average customer visits per week

1.5

Cost of goods sold (COGS)

75% of retail price

Based on these figures, the business has:

  • Weekly takings: $31,500
  • Weekly gross profit: $7,875
  • Annualised revenue: $1,638,000
  • Annualised gross profit: $409,500

Implementing Small Changes for Big Results

Now, let’s see what happens when we increase each relevant metric by just 5-10%:

  • Increase prices by 5%
  • Increase total customers by 10% (from 700 to 770)
  • Increase average total sale by 10% (from $30 to $34.65)
  • Increase average items per sale by 10% (from 2.5 to 2.75)
  • Increase average customer visits per week by 10% (from 1.5 to 1.65)

With these changes:

  • Total customer visits per week increase from 1,050 to 1,271
  • Weekly revenue jumps from $31,500 to $44,044
  • Weekly gross profit rises from $7,875 to $11,011

That’s a remarkable 39% increase in both revenue and gross profit!

FMCG Business Scenario at the Grocery

The Power of Compounding

What’s particularly striking about this example is that none of the individual metrics were increased by anything close to 39%. Most were increased by just 10%, and one by only 5%. Yet, when combined, these small improvements led to a substantial increase in profitability.

Annualised, the gross profit has increased from $409,500 to $572,573. Assuming no significant increases in fixed costs like staff, lease, and insurance, this could translate to a similar increase in net profit or EBIT (Earnings Before Interest and Taxes).

Real-World Application

Of course, this case study makes some assumptions, and the specific strategies for achieving these improvements will vary depending on your business. For example:

  • Increasing prices may involve strategic decisions about which product lines to adjust and by how much.
  • Attracting new customers and encouraging repeat visits may require targeted marketing, improved customer service, or loyalty programs.
  • Increasing the average sale value may involve upselling, cross-selling, or product bundling techniques.

However, the key takeaway remains: by focusing on incremental improvements across multiple areas of your business, you can achieve significant gains in profitability.

Expense Reduction

In addition to these growth strategies, expense reduction can further boost your bottom line. While cutting costs alone won’t grow your business, it can certainly improve your net profit. Look for areas where you can reduce waste, negotiate better deals with suppliers, or streamline processes to improve efficiency.

Maximise Your FMCG Profits With Small But Targeted Strategies

Improving profitability in your FMCG business doesn’t always require drastic changes. As this case study demonstrates, small, targeted improvements across key metrics can compound to create a significant impact. By strategically increasing prices, attracting new customers, encouraging repeat visits, increasing average sale values, and reducing expenses, you can dramatically boost your profitability and set your business up for long-term success.

Our Gold Coast-Based Accounting Firm KeyPoint Accountants is committed to helping companies like yours thrive. With our expertise and personalised approach, we can guide you in implementing these proven strategies and optimising your financial performance. Contact us today at 07-5585-0600 or info@keypointaccountants.com.au to learn more about how we can support your business’s growth and profitability.

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Picture of Chris Dobbie

Chris Dobbie

Chris Dobbie is the Principal of KeyPoint Accounting & Advisors, based on the Gold Coast, Queensland, Australia. Chris is a leading Certified Practicing Accountant (CPA) holding a Bachelor of Commerce (B. Com.), Accounting from Griffith University. Chris has over 22 years of professional accounting and taxation experience. Having stepped his way through this family business to now be Managing Partner, Chris, along with his expert team, look after a diverse client base ranging from medium sized businesses to national/multinational businesses. Chris is truly passionate about improving and growing his company's clients businesses, their lives and lifestyle, with a focus on innovative strategic approaches, and strong communication with clients. View Chris's LinkedIn profile.

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