In September 2012 to extend our brand from just burgers my company launched a new line of meatloaves (They we SO good, I still miss them!).
From a product design perspective, it seemed like a great idea.
- It was delicious.
- It was a big line in America and the UK follows US trends.
- It was sold with a skewer so it could be cooked in under 18 minutes (the UK average meal prep time in 2012).
- It was a cheaper option to a roast so customers could make a saving on a meal.
- It had no competition so we could set a price with a good margin.
- It was vac packed and had a 11 day self-life to get more stores and fit cheaper distribution routes.
- It could be manufactured in half the time as our burgers and charged at double the price.
- It could be tempered if needed.
- It's packaging was tall and bold so it took up the less cm’s of shelf space but stood out.
- It fitted into our production process so increased profit on the other burger lines.
It was a hit in Waitrose and after 3 months of trials we went up to 180 stores and other supermarkets were keen. However, to make the product more profitable we needed to replace the skewers from ones made in the UK (40p each) to ones made in China (8p each) as this would then increase the product delivered margin to 44%. The only catch, we needed to order 100,000 at a time, so we took the risk and ordered them in December 2012 with a 2-month lead time.
In February 2012 (with our skewers still at sea) the horse meat scandal happened and suddenly a product called ‘Meatloaf’ on the shelves seemed allot less appealing, our buyer’s enthusiasm (quite rightly) waned, and we were stuck with cash tied up in the 100,000 skewers.
You can’t predict a horse meat scandal, but you can question when you increase your risk to save margin. We should have researched the need for the skewers more or tried alternatives but instead we chased the cost cutting as the solution.
Eventually we did sell all the skewers over 5 years but, there are two great lessons...
1. Margin is not just about cutting costs, it is about so much more. It is also why ERP’s are vital but they should not be seen as your margin control, they can’t tell you what potential margin you did not make they can just report on what you did.
2. Skewers can be used for so much! When the 100,000 skewers arrived in the UK for a line, we were no longer extending our amazing family (knowing how huge a hit this was to us) tried to find other ways to use the skewers. We would get sent photos of then being used as tent pegs, gate pins, note holders and today (11 years on!) an art project!
