[Case Study] How Choice Market uses xtraCHEF to Control COGS

John Enny More Posts
John Enny
7 days ago
[Case Study] How Choice Market uses xtraCHEF to Control COGS

Choice Market is a new kind of convenience store that strives to make great food accessible to all by combining fast and friendly service, high quality fresh foods from local vendors, grocery necessities, and delivery on demand.

First opened in Downtown Denver in 2017, Choice is expanding rapidly through a combination of their innovative format as well as an emphasis on using technology to improve customer convenience and operate their business efficiently. They rely on xtraCHEF to minimize manual touch points in their AP process and to control COGS (cost-of-goods-sold).

“Our goal is to optimize our customers’ time and maximize their choices,” says Mike Fogarty, Founder and CEO of Choice Markets. “As we continue to add products and vendors to give our customers more options, it requires us to closely monitor those SKUs to keep us on track for our profitability targets.”

OCR & AI for the Win (FTW)

As a new format of convenience store, Choice offers a hybrid model of both packaged goods and prepared foods. As a result, they purchase thousands of products from hundreds of vendors to both stock the shelves of the store as well as the shelves of their kitchen. Monitoring the price fluctuations of all of these SKUs in order to closely manage their cost-of-goods-sold (COGS) was a challenge.

They needed a tool that would give them line-item level visibility into their purchases without having to spend hours of their team’s time processing that data by hand. Given his background in supply chain management for Fortune 500 companies, Mike knew that Optical Character Recognition (OCR) technology could help tackle this challenge.

“I was quite familiar with the capabilities of OCR, artificial intelligence (AI) and machine learning (ML) technologies and how they can be applied to cost reduction, sourcing, and supplier management,” says Mike. “When I discovered xtraCHEF and their focus of applying these technologies to address the unique challenges of the foodservice industry, it was an easy decision to work with them,” says Mike.

With xtraCHEF, Choice is able to simply scan their invoices and upload to xtraCHEF. Through a combination of xtraCHEF’s industry leading OCR technology backed by teams of quality control operators, xtraCHEF’s AP Management solution digitizes, itemizes and categorizes each line-item from Choice’s invoices within 24 hours.

Choice stores their invoices in xtraCHEF’s cloud-based document management system making it simple to search for and access invoices.

choice market uses xtraCHEF to control cogs

Keeping a Close Watch on Prices to Control COGS

Mike and his management team have a very specific COGS target that they track diligently as a key performance indicator (KPI) of their business. To do so, they use xtraCHEF’s reports and dashboards to track the prices of all of their products.

“For us, xtraCHEF is an essential tool to help us keep on track toward our goals,” said Mike. “As our product mix and the prices of those products constantly change, xtraCHEF’s powerful price tracking feature and reports allow us to recognize how those changes impact our profitability.”

Using xtraCHEF’s analytics features, they’re able to easily track their purchases by vendor and drill down to unit price paid on the invoice. They use xtraCHEF’s Close Watch feature to target price fluctuation thresholds for key products.

“We regularly run reports to see which items are fluctuating beyond a certain percentage threshold to determine if we need to change the price of the items on our shelves,” says Mike. “There’s no way that we would be able to have the visibility that we have today without using xtraCHEF.”

xtraCHEF - Case Study - Numbers - Choice Control COGS

Using Data in Vendor Discussions

Choice Market is able to leverage the data that xtraCHEF accurately extracts from their invoices to inform negotiations with their vendors. This allows them to choose quality products at a price that is sustainable for their business model.

“We use the data that we get from xtraCHEF to inform our conversations with our varied vendors,” says Mike. “Since implementing xtraCHEF, we had a scenario with a broadline distributor that really wanted our business and promised to lock in pricing of a priority product for 6 months. xtraCHEF alerted us to the fact that – despite our contract – prices were all over the place. We were able to bring that data to their attention and easily resolve what would otherwise go unnoticed.”

By negotiating for contracted pricing and using xtraCHEF’s Close Watch feature to keep their vendors honest, Choice was able to save more than 10% of the gross margin on that priority product alone. That one scenario resulted in hundreds of dollars in savings – more than 3x return on their investment (ROI) in xtraCHEF – on a single product in a single month.

“While we value the automation and related time savings that initially attracted us to xtraCHEF, the true power of their platform is the speed, accuracy and accessibility of the data that operators like Choice can use to maintain margins.”

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