Did you know the average U.S. and Canadian grocer spends about twice as much on energy and maintenance as it earns in profit?
These data, from a study by the Food Marketing Institute (or FMI) in 2010, show that the average grocer can increase net profit by 20% or more by cutting energy and maintenance costs just 10%. Energy and maintenance costs are a grocer’s highest general and administrative (SG&A) costs after salaries and benefits.
They offer cost-conscious grocery managers one of their biggest opportunities to save money. In this competitive, low-margin business, what grocer can afford to ignore the big financial opportunities available through energy and maintenance management?
A U.S. grocer saves millions of dollars a year by setting a high standard for energy efficiency
Fresh & Easy, a 200-store U.S. grocery chain, uses 32% less energy per square foot than the U.S. industry average. If the average U.S. supermarket pays about $5.60 per square foot for energy, this grocery pays about $3.80 per square foot.
This company pays about $3.96 million less for energy than an average supermarket occupying the same amount of retail space. You can always find a company or two that are freakishly good at something. But whatever they’re good at may not work for your organization.
Grocers of all sizes boost profit through energy savings
So, consider another example. Another U.S. grocer – this one with just 22 stores -- is reducing energy cost by another 10%. This is on top of the savings they achieved by doing most of the easy and obvious things progressive grocers have done for years to cut refrigeration, lighting and HVAC costs. They’re one of many who keep exploring – and finding – plenty of new ways to reduce their energy costs even further.
Facilities maintenance offers additional ways for grocers to save
Tesco, a leading European grocer, with thousands of stores saves the equivalent of about $1.58 million a year by automating maintenance processes.
Another big European grocer with thousands of stores has installed metering and monitoring devices to signal when problems arise in their refrigerated cases. This grocer recently started saving millions of dollars a year by using a technology that dramatically reduces false alarms and unnecessary service calls.
Build profit without compromising service
A U.S. grocer with about 100 stores has reduced maintenance costs by hundreds of thousands of dollars a year, while at the same time improving the quality of their maintenance and repair services. They use a technology that reduces maintenance costs by managing relationships with internal and external service providers.
Your company makes so little money on every dollar of revenue you generate. With competition so tough, how can you afford to ignore the profit-building opportunities that others have been pursuing for years?
Some executives aren’t interested in the details of maintenance and energy management. But surely they all can get excited about ways to trim general and administrative (SG&A) expenses by a point or more...or to increase net profit by 20% or more.
For more information, please read the additional topics on best practices and related goals.