THE CHALLENGES F & B COMPANIES FACE WITH AN EVER-CHANGING BUSINESS ENVIRONMENT

by Timothy Chan

 

Many players enter and leave the F & B scene every year. Only the strong will survive. Recently, we have seen many F & B companies face declining sales during this COVID 19 pandemic. Some will be harder hit than the rest. Prior to this Pandemic, many were already facing problems. Competition has been very keen in this sector for a long time with companies facing rising cost pressures and labour shortages. However, there are many other reasons that will lead to declining sales and lower profits. 

 

I always believe in continuous innovation. Consumers are always spoilt for choices. We are good today doesn’t mean we will be good forever. Sadly, many older companies that are run by the older generation are still stuck in their past glory. They are reluctant to make the changes. We are moving into a technology age and eventually moving towards a cashless economy. Changes are unavoidable. 

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Continuous Innovation    --- >      Sustainability    --->     Profitability 

 

Changing for the better is good. However, many do not know how to change. They do it by trial and error which can turn out to be a very costly exercise. Understanding the market, consumer needs and consumer habits are crucial. Once you have done your research, you will see results. Having a good top line is not sufficient. We need to be profitable too. 

 

Understanding your company’s financial numbers are extremely important. I have seen many companies failed because their financials were not up to-date or they only do it once a year. Timely financials give the company a clear picture of their current performance. It allows quick changes if needed. Many things can affect the sales and profitability of a company. They can be people, processes, costings, branding, marketing, raw material and many other factors. They can be either internal problems, external problems or a mixture of both. Therefore, each area needs to be looked into thoroughly.

 

F & B is one of the industries that gives very low margins. In order to do well in this industry, volume is critical. 

 

Each F & B model has its own set of problems and advantages. During this COVID 19 pandemic, the hardest hit players would be those offering dine in options. The dine in operators would be paying rental for space that they will not be using. Would this mode of operations be still viable post COVID 19? Consumers will be mindful about social distancing and would not like to go to a restaurant that is in a tightly laid seating format. Meaning tables has to be spread out more. This will lead to a lower per square foot sales. Per square foot sales is a very important space utilization efficiency indicator for F & B companies. F & B operators should start planning for the future. They should come out with a new or modified business model to adapt to the new business environment. As mentioned earlier, F & B businesses have low margins. Business cost will definitely increase post COVID 19 due to the extra safety measures companies have to take. Therefore, it is crucial to start planning now.

                                                                                                                      

 

  (15th May 2020)