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Thursday, June 02, 2011

The Profitable Butcher - Part 3

With the recent rapid increase in meat prices, operators are discussing the merits of smaller portions.  If they serve an 8 ounce steak, they may be considering a 7.5 ounce portion.  For operations with large portions, the change may be from 16 ounces to 15 ounces.

A change from 8 to 7.5 ounces is a 6.25% reduction.  Everyone is familiar with the coffee cans at the local market.  It is rare to find a one pound can.  Actual weights are often less than one pound.  Sometimes, the size of the can stays the same but the net weight changes.

Would your customers notice their serving is only 93.75% as big as last time?

They may not notice a small change in the serving and they may not care.  If you notice the plates coming from the dining room have uneaten meat or fish, your current portion size may be too large.  Consider a slight drop in size.  The profit potential is significant.

Take a look at the big picture.  If you use 800 pounds per week at $6 per pound, a drop from 8 to 7.5 ounces will save $300 (around $15,000 per year).

This strategy should not be combined with an immediate and significant price increase.  Raising the price and decreasing the portion size doubles the risk of your customers objecting to your strategy. 

[For my loyal readers, the bakery I wrote about when flour prices went through the roof is now under new management.  They made the changes too obvious.

The size of the loaves decreased by 20% for the same price which was perceptible.  They eventually raised the cost per loaf by 15%.  Traffic suffered and they never regained their gross margin.]

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