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Supermercados Grande Implements Plans To Enhance Cost-Efficiency

Initiatives include reducing shrinkage and overstock; creates in-house ad agency


July 3, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Local supermarket chain Supermercados Grande has been busy implementing strategies to reduce overhead costs and improve cost-efficiency. Among them are reducing shrinkage and overstock in key departments, better managing the stores’ shelf space, and creating an in-house advertising agency, said Executive Vice President Enrique Rodriguez.

Grande’s efforts to reduce shrinkage—the amount of merchandise that isn’t sold within a certain time and must be discarded—have already boosted efficiency margins by 40%. Company executives told CARIBBEAN BUSINESS they hope to reach 75% by year’s end. They also expect next quarter’s sales to exceed those of the year-ago quarter.

"We used guidelines from the Food Marketing Institute to determine the acceptable shrinkage rate on the U.S. mainland and sought to meet those standards," said Rodriguez. "The average shrinkage rate nationwide is 1.5% to 2% of total costs. We expect to reduce our shrinkage to match that average next year. We are already halfway there." Rodriguez explained that shrinkage primarily occurs with perishable food, such as in the dairy, vegetables, and meat departments. "The items in these departments have short shelf lives and will go to waste if we overstock," he said. "We analyze our data to see which items sell the most in each store and plan our product layouts accordingly. This way we place in the stores only the number of items we know will sell, which keeps us from having to discard unsold items. In the process we save money."

Grande has also focused on better managing shelf space in the supermarkets. "We give the premium shelf space to the products we know will sell the most," said Rodriguez. He added that the strategy, which applies to all departments, helps to improve cash flow since the merchandise has a faster turnover.

Rodriguez said Grande has also created an in-house advertising and marketing agency. "This way we get more exposure for less money," he said. "It also means that our corporate image will be enhanced and promoted by people who know the company inside and out. This will definitely improve our efficiency and give us a competitive advantage."

Supermercados Grande is the fourth-largest supermarket chain in Puerto Rico, with $360 million in gross sales for 2001, according to the 2003 CARIBBEAN BUSINESS "Book of Lists."

This Caribbean Business article appears courtesy of Casiano Communications.
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