Increasing energy costs risk business viability

Below is an extract from MGA’s 2019 National Wage Review, articulating the impact of significant electricity cost prices risking sustainable gross margins and inevitably, employment levels in stores. MGA will be advocating for a minimum wage increase that will not compromise members business viability.

“Over the past 3 years MGA supermarket, liquor and hardware members have experienced unprecedented debilitating energy cost price increases affecting the viability of their businesses. Electricity costs have become the second largest cost to do business after wages, with rental and leasing costs being relegated to third.

By way of background, MGA members enter into electricity contracts for a fixed term based upon a tender process and choosing the most cost-effective electricity usage contract option. Over the past 3 years members electricity contracts have expired and new contracts have been sought by MGA members by way of tender.

Once favorable electricity contracts providing affordable costs per kilowatt consumed have now become the most significant and debilitating cost to do business owing to the significant electricity cost increases across the nation.

Gross margins in grocery, retail and hardware are razor thin. Prices cannot be increased to absorb the unsustainable electricity price increases owing to the challenges of competition from large and multi-national retailers such as Coles, Woolworths, Bunnings and Aldi. MGA members are high users of electricity as they must operate their “energy hungry” cool rooms, refrigerators, freezers, lighting, heating and ventilation and point of sale systems to open their businesses to consumers every day. Despite the best efforts of MGA members to embrace energy saving behaviours in their stores, investing in new and more efficient equipment and installing solar energy solutions, energy costs continue to challenge the profitability and viability of MGA’s members.”

MGA has dealt with member cases where rapidly rising electricity costs have caused members “bill shock”, and in some cases, energy retailers threatening to stop electricity supply.

As MGA members know the only real and last variable lever to pull, to cut costs of doing business, is to reduce staff levels. This is an initiative no small business owner wants to go through and will always seek alternative methods to reduce costs wherever possible.

It is extremely important members receive the correct advice along with immediate solutions as to “how” to reduce electricity kilowatt consumption and how to reduce kilowatt costs.

MGA’s energy partner is Aussie NRG, owned and operated by Max Haas, his family and his dedicated team. Members are encouraged to contact Max for assistance.

Max has assisted many members to reduce their electricity bills by providing energy saving suggestions and solutions at store level and analysing all parts of an electricity bill to ensure all billing segments are correct and the best price.

Contact Max Haas at Aussie NRG 1300 440 224 contactus@aussienrg.com