Recipe Improvement & Cost Savings Example

I was asked to look at ways to improve the profitability of a range of low cost "commodity" confections that a company produced. I started looking at the cost of a caramel centre in one of this range (Product A) and was surprised to find that its cost was double that of the caramel in their prime #1 brand (Product B).

That just didn't make sense, so I investigated further.

There were some extra process costs for making caramel A but they did not account for the huge difference in their costs. When I looked at the ingredient costs of the two recipes, I found a significant difference, attributable to the use of expensive Sweetened Condensed Milk (SCM) in A, which was not used in B.

However, as the volume of Product A was small, the savings to replace the SCM in the recipe were also small.

But the SCM was also used in other much larger volume products and when I looked at the opportunity to replace SCM completely across the site, the potential savings were huge.

There would be a one off implementation cost to change the recipes, processes, product ingredient labels  (where necessary) and to carry out product sensory testing, but that had a very short payback.

As there would be no need for the bulk SCM tanks any more, they could be used as extra storage for an existing ingredient, which could now be received in larger tankers, reducing freight costs significantly.

They made the change and from a little idea, by me asking the right questions, on-going big savings were found, in places they hadn't envisaged.