Easy Seven Figure Profit Improvements: Formula vs. Spot Buying and How to Decide

Last week, we spoke with a meat buyer of a large regional grocery chain. As we were wrapping up he asked, “How can I squeeze more margin out of these unpredictable markets?”

Now, this is a big, complicated question.

Depending on the type of business you run, the answers may vary. But for most retailers, it’s relatively straightforward.

Here’s an example:

• Your protein volume is locked up in formula pricing.
• If your buyers don’t have the tools they need to quickly and accurately assess different buying strategies, they simply stick to formula buys.
• Additionally, the spot market—no matter how thinly traded—sets the base for those formulas. That puts the buyer even farther behind the opportunity curve, and there ends up being a huge amount of cash left on the table.

The opportunity lies in putting new tools to work in order to compete for volume effectively.

Now, it would be crazy for any retailer to shift all of their volume from formula to the spot due to the nature of supply and demand – you might not be able to secure the volume you need or alternatively that volume might be far more expensive than you are willing to pay.

But what if you strategically moved a portion of your volume from formula to the spot? Under certain situations, moving just 5% of your annual volume could result in seven figure profit improvements.

This conversation has been a common theme for many in the industry this year, so our team has put together a helpful case study.

Click the button below to read the full case study.