Annual Production Budget In Beverage Industry – Study And Analysis

Key information to monitor over the next few weeks

Discuss about the Annual Production Budget in Beverage Industry.

Food and beverage industry runs on some basic strategies, which are common with most of the reputed restaurants across the globe. Strategy making is required while designing the menu for the customers. This affects the profit margin. It is indeed necessary to be flexible with the designing of menu. If one menu is not working the way it was implemented for. Then it is wise enough to switch over to another kind of menu style. The implemented strategy requires a monitoring of sales over the few coming weeks to check the feasibility of the strategy (Hou et al. 2015). This study is also focused on an authentic Italian restaurant, which is based in Australia. The study revolves around a given case study, which shows that the restaurant is on a reducing graph in terms of overall sales. The owner of the restaurant Francesco Del Piero is worried of the sales because of which the owner has intended to switch over to “all you can eat buffet concept from the previously used A La Carte style of menu. The study checks the viability of the selected menu in terms of overall sales with the help of relevant evidences on it.

The switch over strategy of Francesco’s looks a potential option to increase the sales and control the average expending on the food and the drinks items. The hotel in the case study had initially used the a la carte menu style, which means that customers can select their choice of dishes from list of numerous kinds of dishes. Additionally, in such menu style, the price for every item differs to one another. Additionally, there will be a distinguishing wait time for the preparation of each food that is being ordered (Gormley, Rawal and Little 2012). Despite the facts that it is a traditional style of offering food to the customers, the strategy has seemed to have not worked for the Bellini Italian Restaurant. A decreasing trend for sales has been observed. Additionally, the average weekly spending on the foods is also proving to be costlier, which is different to the traditional style of pricing (AbuKhalifeh and Som 2012). The owner of the company has shown some resistance by switching over to a different strategy for menu. The strategy is “all you can eat” in buffet style. In the buffet system, customers are encouraged to have different items in a sequential form. Definitely all the items are priced differently and it is little reliable than the a la carte style of menu (Liu et al. 2012).

Difference in contribution margins (buffet vs. a la carte)

The chosen strategy by the owner of the selected restaurant looks effective because of the various following reasons:

• The strategy will help to reduce the average spending on the foods and drinks because the selected strategy will help in increasing the unit sales. This is so because the format of menu is something that customers will think of package rather than few selected items. An increasing unit sale will help in reducing the average spending because customers are buying in package such as the complete breakfast or lunch. This is less possible with the a la carte style because customer can also select only one item. This is clear that the volume of unit sales will increase. The company might be able to bring back the average spending within a standard range such as 28 to 35 percent of the gross income (Asaolu, Agorzie and Unam 2012).
• The strategy will help to increase the unit of items sold. This means that there will be an increase in overall sales. It has already been mentioned above that the strategy will help in reducing the average spending on the foods and drinks. On the other hand, an increase in sales will result in enhanced profit margin, which is what Francesco is looking for. The switching over to another strategy is just to get the average profit, which other reputed companies make (Rezende and Silva 2014).

The implemented strategy needs to validate the hopes of Francesco. The owner wants to implement the strategy in order to reduce the average spending on foods and drinks. Additionally, the owner also wants to enhance the profit margin to a standard level as it is evident from the business performance of reputed food & beverage companies across the globe (Guimarães, Klabjan and Almada-Lobo 2012). The expected increase in sales can only be felt if the visitation of customers have enhanced. Additionally, if they have changed perception for the offered foods and drinks then it means that they like the changed menu style. This is for all such reasons it is necessary that a continuous monitoring on the visitation numbers is necessary. This is also necessary to avoid from an unexpected loss (Wu, Huang and Chou 2014). This can happen as customers might not think the way the owner of the restaurant think. This is also necessary because flexibility is utterly required in the food and beverage business. Moreover, this will help in changing of decisions if it is required at any time after implementing the “all you can eat” buffet style. Flexibility indeed is a key factor in the food and beverage business (Ivkov et al. 2016).

It is also necessary to monitor the daily behavior of food preparation and the amount of wastes if it occurs. The monitoring of food production along with the wastages is immensely required as this will supply some important information. Moreover, the information supplied is very essential to attain success with the implemented strategy. The management should have clear information on the wastages as this will educate on the trend for the flow of foods. Avoiding wastages is utterly required to earn maximize benefits and save on the average spending. A clear idea of the wastages on a daily basis will guide to a more measurable approach for producing the foods (Mirabella, Castellani and Sala 2014).

Cross checking the average spending on food manufacturing and the amount of wastages on a daily basis will provide the following benefits (Betz et al. 2015):

• Reduction in food wastages
• Consequent reduction in average spending on food manufacturing
• Enhancement in the profit margin as the cost of production will be reduced; however, the rate of benefits will remain the same. Moreover, sales figure does not depend on the wastages.

This is another very important look out for the few coming weeks. The switching over to a buffet style menu will require a quick analysis of the responses that it will generate after its implementation. The analysis will help in measure the changes after the implementation of the strategy. The changes can be either positive or negative as well. However, it is indeed required to measure the changes occurred in order to judge the viability of the changed strategy (Yang 2012). There are advantages and disadvantages of both the menu style; however, the real lookout is not to discuss the advantages but it is rather focused on attaining the presumed advantages. Following are the benefits of cross checking the differences in business behavior with the help of the both the kinds of menu style (Auchincloss et al. 2013):

• Quick analysis of average spending on foods and simultaneous benefits will be observed
• The calculated benefits will help in analyzing the percentage of spending in the overall profit
• This will further help in analyze the differences the changed strategy has brought if there is any

Recommended ways to investigate the problem and to improve the overall profitability

Overall sale volume and the gross profit will also help in analyze the effectiveness of the implemented strategy. The earlier menu style and the resultant gross profit are already known. Calculating the overall effect of after implementing the strategy will tell the resultant changes. Moreover, this will help in analyze the effects that the changed menu style has brought. If the changes are positive then this is good to move with the implemented strategies. On the other hand, if the changes are not positive then there is a requirement to quickly fix the issue or jump to some better strategy. Apart from the overall effects, this is also necessary to consider few cautious moves to prevent any unexpected loss. This can be done by measuring the wastages of foods on a daily basis and the costs incurred in producing the foods (Dopson and Hayes 2015).

The investigation could have been done in some other ways as well. Stock maintenance is a key to understand the behavior of average spending on foods & drinks and the resultant sales. Stock maintenance not only observes the inflow and outflow of goods but it also observes the wastages amount. Moreover, this is very necessary to measure the effectiveness of any menu style. Additionally, flexibility is also required in designing the menu to avoid the loss of customer base. A responsive nature will indeed make them feel served.

Table D’hote (Deals) service will have indeed produced a much better results. The mentioned service is all about offering fixed menu to the customers on a fixed price. Moreover, it could have been much wiser to run a la carte with the table d’hote (deals) service. This would have categorized the different set of customers based on the two kinds of menu style. A la carte is for those who belong to a decent income group. On the other hand, table d’hote (deals) service is for those who belong to a lower income group. Moreover, the combination of the two strategies will have attracted the both kinds of customers, which will only result in an increased sale.

Conclusion

The strategy selected by Francesco Del Piero in the Bellini Italian Restaurant is a potential option; however, this could have been much better. The combination of two menu styles such as “A La Carte” and “Table D’hote (Deals)” could have produced a much better result. The combination of strategies will have attracted customers of different types such as belonging to both the descent and low income group. This will have resulted in an increased customer visitation and consequently, this will also resulted in an increased volume of sales. Moreover, the purpose of Francesco Del Piero could have effectively been attained if the owner had considered the combination of both the strategies.

References

AbuKhalifeh, A.N. and Som, A.P.M., 2012. Service quality management in hotel industry: a conceptual framework for food and beverage departments. International Journal of Business and Management, 7(14), p.135.

Asaolu, T.O., Agorzie, C.J. and Unam, J.M., 2012. materials management: an effective tool for optimizing profitability in the Nigerian food and beverage manufacturing industry. Journal of Emerging Trends in Economics and Management Sciences, 3(1), p.25.

Auchincloss, A.H., Mallya, G.G., Leonberg, B.L., Ricchezza, A., Glanz, K. and Schwarz, D.F., 2013. Customer responses to mandatory menu labeling at full-service restaurants. American journal of preventive medicine, 45(6), pp.710-719.

Betz, A., Buchli, J., Göbel, C. and Müller, C., 2015. Food waste in the Swiss food service industry–Magnitude and potential for reduction. Waste Management, 35, pp.218-226.

Dopson, L.R. and Hayes, D.K., 2015. Food and beverage cost control. John Wiley & Sons.

Gormley, F.J., Rawal, N. and Little, C.L., 2012. Choose your menu wisely: cuisine-associated food-poisoning risks in restaurants in England and Wales. Epidemiology & Infection, 140(6), pp.997-1007.

Guimarães, L., Klabjan, D. and Almada-Lobo, B., 2012. Annual production budget in the beverage industry. Engineering Applications of Artificial Intelligence, 25(2), pp.229-241.

Hou, C.I., Huang, H.C., Tsai, Y.H. and Lo, C.Y., 2015. Research On Decision Making Regarding High-Business-Strategy Café Menu Selection. International Journal of Computer Science & Information Technology, 7(2), p.89.

Ivkov, M., Blesic, I., Simat, K., Demirovic, D., Bozic, S. and Stefanovic, V., 2016. INNOVATIONS IN THE RESTAURANT INDUSTRY-AN EXPLORATORY STUDY 1. Ekonomika Poljoprivrede, 63(4), p.1169.

Liu, P.J., Roberto, C.A., Liu, L.J. and Brownell, K.D., 2012. A test of different menu labeling presentations. Appetite, 59(3), pp.770-777.

Mirabella, N., Castellani, V. and Sala, S., 2014. Current options for the valorization of food manufacturing waste: a review. Journal of Cleaner Production, 65, pp.28-41.

Rezende, D.C.D. and Silva, M.A.R., 2014. Eating-out and experiential consumption: a typology of experience providers. British Food Journal, 116(1), pp.91-103.

Wu, P.H., Huang, C.Y. and Chou, C.K., 2014. Service expectation, perceived service quality, and customer satisfaction in food and beverage industry. International Journal of Organizational Innovation (Online), 7(1), p.171.

Yang, S.S., 2012. Eye movements on restaurant menus: A revisitation on gaze motion and consumer scanpaths. International Journal of Hospitality Management, 31(3), pp.1021-1029.