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Meat Packer

Are Independent Butchers Still Successful?

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Posted (edited)

I own a meat wholesaler that cuts and prepares meat for retail. I've always wanted to own a retail butchery (non-halaal) but with all major shops in malls having their own butcheries is it still worth it to open one? Retail is where a lot of profit margin is compared to wholesale. I feel that butchers in major retailers are way too expensive and it shouldn't be a problem to undercut them.

Edited by Meat Packer

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Posted (edited)
On 6/12/2020 at 2:02 PM, Meat Packer said:

I own a meat wholesaler that cuts and prepares meat for retail. I've always wanted to own a retail butchery (non-halaal) but with all major shops in malls having their own butcheries is it still worth it to open one? Retail is where a lot of profit margin is compared to wholesale. I feel that butchers in major retailers are way too expensive and it shouldn't be a problem to undercut them.

They still work in areas (outside of malls) where rent is cheap as well as in densely populated areas (outside of malls), even when there are malls in the area. 
For example, if you are familiar with Cape Town's northern suburbs, it still works in Parow (outside of malls) but it didn't work in N1 City, even the one in the strip mall opposite of the N1 City mall didn't last.

Malls pose various challenges for independent butcheries: floor space is expensive and gets more expensive the smaller size you let. This creates two challenges: if you compete on price, you won't survive as your margins will be too thin (some people will still buy from bigger retailers butcheries out of convenience), if you increase your margins to stay in business then you are too close to what major retailers butcheries charge and have little to no advantage.
Major retailers get around the halaal issue simply by keeping the meat in separate fridges (I assume if they do processing, they process one type there and bring the other pre-packed). In most big malls you will usually have the following tenants: Checkers + PicknPay, or Shoprite + Fruit & Veg City all have their own butcheries.   

Ranch Meat attempted the independent butchery in mall model, they had butcheries in N1 City mall and Canal Walk now they operating from a big space in an industrial area where they sell wholesale to other retailers, to the food service industry as well as to the public through a retail store on the premises. While I see they have recently opened a retail outlet in Somerset West I think the former strategy is probably the safer option: have your processing facilities where you sell wholesale from and add a shop if you like, like what manufacturers do with "factory shops".  

ranchmeat.thumb.jpg.d7f8904ef847abaad54172e9bdf17738.jpg

In certain industries it is very tempting to move up the supply chain from wholesale to retail but retail is a different game, due to the challenging macro trading environment in SA (high costs, plenty of competition) which all eats into your profits you might be better off moving down the value chain, now I am not saying buy a farm and rear the animals, but I would personally opt for adding an abattoir to a wholesale operation rather than go retail. A smaller sized abattoir is an option, here is a interesting mobile abattoir model to give you an idea. @Claude embed PDF please.

If you don't want to slaughter animals, expanding processing capacity and ability (more meats, cuts and packaging) might be a better option than to turn a space into a retail store and hire shop assistants and cashiers. I think an investment in tangible assets such as  processing equipment is better than an expensive retail strategy that will burn through cash with no guarantee on things like branding, shopfitting, POS systems and other shop equipment.

Edited by Mesa Verde

Not "if", but "how".

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37 minutes ago, Mesa Verde said:

A smaller sized abattoir is an option, here is a interesting mobile abattoir model to give you an idea. @Claude embed PDF please.

Mobile abattoirs

   

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Thank you @Mesa Verde for the detailed reply.

I have been thinking deeply about it, the reason I wanted to open a retail butchery was not only to find another "client" to wholesale my meat to (and make profits on wholesale and retail side) but also something that I can sell down the line for my retirement.

Do you think having control of wholesale and retail is still not a big enough advantage to successfully pull it off in a mall setting? I am ideally looking for a location that will bring a lot of feet coming through the door and move a lot of meat on a daily basis.

The abattoir information is very interesting and something I had thought of before but passed due to high cost of setup, but I did some research and went on the mobile abattoir website (mobileabattoirs.co.za), it seems it was invented for use out in the veld, I have to look into it further and look at the possibility of a more compact abattoir something in-between a full abattoir and a mobile one that can share premises with the wholesale packing operation. 

Thanks again for the help, it is much appreciated.

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On 6/16/2020 at 5:42 PM, Meat Packer said:

I have been thinking deeply about it, the reason I wanted to open a retail butchery was not only to find another "client" to wholesale my meat to (and make profits on wholesale and retail side) but also something that I can sell down the line for my retirement.

Do you think having control of wholesale and retail is still not a big enough advantage to successfully pull it off in a mall setting? I am ideally looking for a location that will bring a lot of feet coming through the door and move a lot of meat on a daily basis.

The abattoir information is very interesting and something I had thought of before but passed due to high cost of setup, but I did some research and went on the mobile abattoir website (mobileabattoirs.co.za), it seems it was invented for use out in the veld, I have to look into it further and look at the possibility of a more compact abattoir something in-between a full abattoir and a mobile one that can share premises with the wholesale packing operation. 

Mall space is crazy expensive in SA, so a lot of margin ends up in the hands of landlords, then you have staff and other operating expenses, also remember that Ranch Meat tried exactly what you are trying, they are also a wholesaler that added a mall retailer, I don't know why they abandoned that plan but I assume it has to do with the expenses of operating in a mall. But I agree with you our meats are way too expensive in general. Fresh fruit and vegetables face the same problem - the market price compared to retail price is very far apart. There is a dearth of dedicated non-halaal butcheries outside of major retailers. 

You have to be very cautious with mall retail, you are dealing with a situation in which a substantial amount of money evaporates every month in operating expenses. Systems need to be in place to unsure everything runs smoothly, dot the i's and cross the t's, you need attention to detail, everything needs to be monitored closely, there is little margin for error, your supply and sales needs to be optimised to the max. Most independent bakeries have also left malls for this very reason - expenses are just too high.

Another option is to look for space in a residential area, outside of a mall but sufficient foot traffic is not guaranteed to make it sustainable. You will however have the advantage that the premises can be used for wholesale packing operations as well, as unlike malls the space will be cheaper and larger. Mall retail means you won't have any space to do much else but retail as the space is so expensive.

I also think, should you decide to cash out one day, a meat processing facility can be sold as a standalone entity and will even demand a higher premium than a retail outlet and is a safer bet than retail (the equipment will also still be quite valuable). But at the end of the day that is ultimately your choice. If I were to do retail in your case it would be absolutely be attached to my wholesale facility which will cut down the need for separate rent and transporting the meat, ultimately giving you better control.

As for abattoirs, here is an interesting page I found: Standard design for small-scale modular slaughterhouses (small abattoir and meat market) for you to look into. While at face value retail may appear simple, I think it requires more thought as it can end up being an expensive exercise with little to show for your efforts. 


Not "if", but "how".

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