Maintain your profit margins. Post Budget thoughts for the Licensed Trade
With brewery new year price increases and recent Budget changes that also increased prices, now is a good time for those in the licensed trade to make sure that their profit margins are in good order.
I have found that most clients have waited for the outcome of the latest Budget before looking to increase prices. This is not surprising as most prefer to do just one price increase rather than two in quick succession.
However, it is important that you reflect the increased costs in your pricing so that your bottom line isn’t impacted.
Don’t forget changing food prices
It’s also important that owners of pubs, bars, restaurants etc don’t forget to review their food profit margins. As we have already seen this year, weather events are having quite an impact on the availability and pricing of food imported from Europe, particularly fruit and vegetables.
As a result, do keep an eye on your food GP%.
Calculating your Profit Margins
There is a simple GP% calculator that can be found on ILTSA (Institute of Licensed Trade Stock Auditors) website to help you.
Budget 2017
Here are my thoughts and observations on the March 2017 Budget:
- The budget increase is going to mean about 10p on a pint. This is in addition to the 10p you may have been expecting to add because of the brewery increases.
- Wine prices increased at the end of last year & have gone up again in the budget. Wine increases look like they will be in the region of 20p-50p per bottle.
- Spirits, look like they need to be increased by 5p, but I would envisage that this will actually end up being a 10p increase.
What will customers make of price increases?
Of course no one is delighted by price increases, but while there may be some customers who show dissatisfaction, most will accept these increases in today’s economic climate.
Many still find that customers try and compare pub prices with supermarket prices. We can only continue to educate the public on the fact that prices are not just a reflection of the beverage but also for the environment in which they consume them.
Checking those invoice prices
Are you checking the prices on your invoices?
When stock arrives it is easy just to check that correct products have been delivered but I have found that many do not also ensure the prices are correct.
If you have regular stocktakes, then your stocktaker will help you pick up if you have been overcharged as they will have industry knowledge of prices.
However, it is good practice to check all the prices on the invoice as the stock is delivered as it could save you money.
Single bottle or a case?
One of the common pricing errors that people miss is where they have been charged for a case rather than a single item.
Contract prices
For those that have contract prices on products, be particularly careful when you order something different. Make sure the price is checked because this type of error can easily slip through and be costly.
Use an expert
When it comes to maintaining profit margins and stock control, a professional and experienced stocktaker is worth every penny of their fee.
From establishing what your GP% is to identifying and fixing issues a good stocktaker will help your business run more efficiently and profitable.
Find out more about our stocktaking services including:
Or give us a call on 07917 176 005