Tips for minimising erosion of margin while keeping competitive?

Question

Is there any tips where we can minimise the erosion of margin of a product from increased ingredients costs whilst keeping competitive?

This question was asked as part of our pricing webinar during the food and drink feature for 2016. You can catch up with this webinar at:

http://opentoexport.com/webinars/food-and-drink-2016-setting-the-right-international-price-for-export/

Answer

A few obvious choices:
1. Use cheaper ingredients
2. Reformulate to use less of the ingredients
3. Reduce the size of the product
4. Bring out a larger size at a slightly higher price – but better consumer value for money – to maintain cash margin (even if % margin suffers)
5. Examine more cost effective marketing (e.g. more digital marketing?)
6. make sure your production is working on a 3 shift system (if feasible)

Hope this helps

Nigel Bath

Answer

Hi CK

Besides the good points made by Nigel, i would also look at the cost of your packaging.
If you are exporting to a distirbutor you may be able to provide more bulk packaging eg 24 in a carton rather than 4.
Gilio Moscardini
http://www.exportadvisory.com/

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