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Managing Margins and Costs
Clubs cannot afford to just absorb cost increases and put off price adjustments without regular monitoring of GP margins and profitability performance reviews.
Club operations are subject to a range of ever changing costs affecting food, beverage and energy costs to name a few. Minor cost increases, without regular review can mean that your GP margins are eroded and slip away in an almost unnoticed way.
CCV recommends regular whole-of-offer reviews to ensure margins are not eroded ‘silently’ through input cost increases. Here are some suggestions to consider:
- The bi-annual price adjustments from CUB provide an excellent prompt to review costs overall – perhaps schedule a general price review around indicative dates of February and August each year.
- Include all costs – including energy, labour, rent and unit costs of all product line items.
- When reviewing pricing, don’t look at just one item – survey across the board. If you increase just the price of draught beer for example you may be failing to account for very significant cost increases in other product lines that are popular.
- Members may react, but by reviewing and raising prices across a variety of stock items, you may reduce the chances of specific resistance to individual products and lines.
- Pricing reviews should not be undertaken in isolation – it is absolutely necessary to consider your competitive situation. It is good practice to be aware of what other venues are promoting and be informed concerning product pricing and trends.
- If you allow prices to creep up until profits are severely eroded to the point where large price increases are necessary, you may be faced with far greater resistance than would have been the case had you managed more frequent, smaller increases.