How Your Refrigeration Assets Can Improve Your Bottom Line
“Grocery retailers are in business to turn a profit - and it’s a tough industry to make it happen. From 2009 to 2019, profit margins for grocery retail averaged just 1.3%.”
Your refrigeration assets can positively impact the bottom line
Grocery retailers are in business to turn a profit - and it’s a tough industry to make it happen. Competitive pressures and operating expenses create challenging conditions for supermarkets. In fact, grocers made the list of the 15 least profitable industries in the US in 2020. From 2009 to 2019, profit margins for grocery retail as a whole averaged just 1.3%!
Because top-line revenue is directly related to bottom line profitability, the slightest advantages in merchandising, selection, and pricing are often critical. However, there is another way to impact profitability that generally receives less attention.
Taking a hard look at expenses is one key mechanism for improving profitability. In an industry with 1.3% profit margins, reducing store expenses by $25,000 has the same effect as selling over $1.9 million dollars of additional groceries. That’s like giving the average supermarket an extra 3-4 weeks of sales!
A look at expenses
For almost all grocery retailers, refrigeration maintenance and energy use are two of the biggest operating expenses. Refrigeration can represent 40 - 60% of a store’s total energy consumption. Unexpected problems can mean emergency maintenance, and labor costs add up. Truck rolls are not only costly, they’re also an operational headache for store personnel. Additionally, the average store leaks 25% of its refrigerant charge per year, which can lead to big fines and expensive fixes. We’ve outlined all of the hidden costs of refrigeration outages in a previous blog post.
Product inventory, which represents the lion’s share of operating expenses, can spoil when problems with refrigeration systems occur. With a laundry list of potential problems as long as the unread refrigeration alarm email inbox, what’s facilities management able to do?
One of the biggest opportunities to reduce expenses is lowering the rate of spoilage. As noted, product inventory makes up about 75% of expenses in a typical store. Avoiding refrigeration outages is critical.
Catch problems before they happen
Real-time data from Axiom Cloud’s Customer Web Portal
Axiom’s Facilities Analyzer app enables grocers to improve their refrigeration management by helping them avoid refrigeration outages to begin with. Using the latest in artificial intelligence, the app predicts failures before they occur. Going further, the software diagnoses the root cause of each issue, like the exact case causing compressor floodback, to ensure that issues are corrected efficiently the first time around. By predicting outages and identifying their root causes, Facilities Analyzer helps stores save real money on emergency truck rolls, the overtime wages that come with them, and food spoilage.
Across Axiom Cloud’s installed base, we’ve estimated stores with Facilities Analyzer experience 11% lower costs by avoiding these reactive maintenance events. At a higher level, store management gets full visibility into both historical and real-time data and operations at every site. A single, convenient web portal lets managers see all their stores' refrigeration performance at once, which helps identify trends and make informed decisions.
An on-site refrigeration tech, minus the labor cost
Virtual Technician, Axiom’s app that supercharges your refrigeration techs, goes a step further and autonomously fixes many common issues with supermarket refrigeration systems. As with Facilities Analyzer, the right personnel will receive a timely, contextual notification if additional support is required. The app also validates any fixes, which removes the guesswork out of repair efficacy. In addition, continuous commissioning actions and recommendations ensure that your refrigeration system is operating as efficiently as possible.
Virtual Technician also comes with the ability to batch low and medium urgency work orders for technicians. This reduces total truck rolls, and increases operational efficiency significantly. Resolving issues on the first pass means lower costs.
Identify refrigerant leaks before they become a problem
Refrigerant leaks are costly for several reasons: refrigerant itself costs money; fines from leaking refrigerant are substantial; retrofits can require capital expenditure. Virtual Technician comes built in with the ability to continuously calculate your total charge and identify refrigerant leaks early, without new PPM sensors. This means fewer manual checks for your techs and lower costs for your store.
“In many states, utility providers have incentives for commercial electricity users to reduce demand, especially at peak times. This is good for the power grid and the utility, but can hurt large customers like supermarkets if they are inflexible with their energy consumption.”
Get paid by your utility
In many states, utility providers have incentives for commercial electricity users to reduce demand, especially at peak times (you can learn more in a previous blog post). This is good for the power grid and the utility, but can hurt large customers like supermarkets if they are inflexible with their energy consumption. Demand response programs allow ratepayers to earn real revenue by lowering electrical loads after receiving a signal.
Virtual Battery takes the frozen inventory of a grocery store and turns it into something like a giant lithium-ion battery. By using historical and real-time store refrigeration data, combined with building power, weather forecasts, and other data points, Virtual Battery creates a weekly forecast of your refrigeration system and building loads.
Using this data, the app decides when to “charge” the battery by lowering the temperature of frozen cases. When energy or demand rates are high, compressors are then individually modulated to load-shed at the right time, thereby “discharging” the stored thermal energy. There is no compromise to food safety or quality, as no case ever goes above its standard temperature setpoint.
What this means in practice is lower utility bills, decreased greenhouse gas emissions, intelligent adaptation to electricity rates, and actual checks from your utility, where available.
A three-pronged approach to efficiency
So what does this all mean for grocery managers? Using one, two, or all three of Axiom’s intelligent apps for refrigeration can have a serious impact on the bottom line. Avoiding an average of one truck roll per store per month across a 50 store fleet, at $500 per truck roll, saves $25,000 in operating costs. $25,000 in costs saved is equivalent to selling $1.9 million in additional groceries!
When you factor in other hidden costs like store personnel time, avoided fines, lower operating costs from overall efficiency, and increased customer loyalty, it's possible to see how being more strategic with your refrigeration assets can yield outsized impact across your portfolio of stores.
Turner is a Lead Sales Engineer at Axiom Cloud.
Axiom Cloud’s mission is to use software and automation to transform how the world’s cooling systems are powered, operated, and maintained, in order to generate significant climate and financial impact. Axiom’s team of refrigeration experts, data scientists, energy nerds, and software developers solves retail grocery’s biggest energy and maintenance challenges by layering intelligence onto their existing refrigeration systems. If you’re interested in learning more about our mission or our apps for commercial refrigeration, please contact us today.