You may be losing €2 million every year in the HoReCa channel. We know how to fix it

The on-trade channel can be a great source of value, especially if you’re a vendor. You can launch and develop brands, test innovations, target specific customer segments and, importantly, achieve very attractive economics.

However, the channel typically requires the deployment of significant resources such as field personnel, promotional activities, assets placement and activation, direct investments and support of individual outlet operators. These resources can account for more than 20% of channel revenue and it is here where significant and hidden inefficiencies occur. They eat away at vendors' profits and make them ultimately less successful. 

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FREE ON-TRADE DATA: Access European HoReCa big data tool used by Coca Cola, Pepsi, Heineken, Unilever, Asahi & more

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The 2 hidden costs eating at your on-trade profits

Through our research and long-term cooperation with clients we have identified two types of hidden on-trade costs that are significant and typically not accounted for:

• The hidden costs of “knowing the channel”
• The hidden inefficiencies of commercial budget allocation

Both of these occur as a by-product of insufficient channel knowledge and can result in more than 5 million € of extra costs per annum for large vendors! Fortunately, based on our client's experience, they can be substantially reduced. So let's look at them in detail.

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‍How much do you really spend to know the on-trade channel?

Did you realise that it takes about 1 day per week of a field person's capacity just to keep up with 1,000 outlets or points of sale in his/her district? And that it assumes (very conservatively) that he/she only spends just 30 minutes per year checking up on each outlet, including entering the data into an internal CRM? 

And if the outlet portfolio is larger or more data needs to be gathered, this task can easily eat up 40-50% of his/her capacity! This can represent incremental costs of more than 2 million € per annum for vendors with large sales forces.

However, despite being very costly, keeping up with market evolution is critical. According to our research, more than 70% of outlets will register a change in at least one critical indicator like opening/closure, business potential or revenue growth within 12 months. If you miss these changes, it can damage your relationships with the outlet, diminish your success rate in acquisition / retention or lead to missing out on new market opportunities.

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Are you wasting your commercial budget? 

Similarly, commercial budget inefficiencies can generate a surprising amount of waste. The challenge is to allocate commercial resources efficiently in a channel marked by extreme heterogeneity and differences among outlets. Not an easy task.

For example, based on our research, outlets in Hot Zones generate 2,2x more revenue potential and 3,5x more consumer engagement than the market average. "Ideal profile" outlets (i.e. outlets with attributes that best promote the performance of a given brand) generate more than 4x more revenue potential than average. Or, considering the future potential, "Opportunity” outlets grow 3x faster than the rest of the market.

With so many differences and varying ROIs between outlets, it is no wonder that allocating commercial budgets efficiently towards the highest ROI outlets is a challenging task. And as a result, part of the budget becomes wasted. In fact, if 20% of your budget goes towards “average” outlets, i.e. not focused on high ROI opportunities, you are likely wasting more than 8% of this budget.

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How can you get rid of hidden on-trade costs?

SharpGrid is on a mission to help companies be as efficient as possible in the on-trade channel. Outlet Census (now with free demo available) and Market Meter are 2 BI tools designed specifically to eliminate the majority of costs of knowing the market and help you allocate your budget in an efficient and fact-based manner. Read more about our on-trade research philosophy and approach of Performance Cells and how global leaders like Heineken or Unilever successfully reduced these hidden costs thanks to our products.

Companies face these issues and often do not even know about it. If you think that this might be your case too, give us a call and we will help you estimate the hidden costs (money that can be saved) and a potential upside for your company, using models based on years-long expertise with dozens of different clients.

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SharpGrid is a data & tech company reinventing market research in the on-trade channel. The on-trade channel consists of POSs (points of sale) like restaurants or bars where food & beverage is bought and consumed, and is often also called HoReCa, on-premise, food service, out-of-home, gastro or immediate consumption (IC) channel, hospitality or on-licence.