Profitability of delivery routes in HORECA distribution

The route with the highest turnover could be losing you money (without you knowing)

There is one question that almost no HORECA wholesaler asks honestly:

Do I really know how much money each of my routes makes or loses?

Most answer quickly: "Yes, of course. That route sells a lot".
But selling a lot does not mean making money.

And that is where the problem begins.

At many distributors, routes are analysed by turnover. As if volume were a guarantee of profitability. It is not. Especially in coastal areas, where seasonality masks the reality for several months of the year.

The only serious way to measure a route is to calculate its real net margin. Every month.

What does route profitability really mean?

It is not the commercial margin.
It is not growth.
It is not the number of customers.

The formula is this:

Real net turnover
– real cost of goods
– direct route costs
– allocated indirect costs
= real net margin

If this calculation does not exist, the company is making decisions blindly.

the first common mistake: using gross turnover

Profitability is calculated using real net turnover minus:

– discounts
– rebates (volume rebates)
– credit notes
– returns

the second mistake: forgetting what it costs to serve

A route does not just cost fuel.

It costs:

– the driver's salary
– social security contributions
– maintenance
– vehicle leasing or depreciation
– insurance
– tolls
– subsistence allowances

And it also uses up overheads:

– warehouse
– picking
– transport / warehouse manager
– administration
– sales structure
– financial cost of stock
– shrinkage

If these costs are not allocated, profitability is an accounting fiction.

Seasonality distorts everything

For coastal distributors (the most typical case in Spain) it is even more critical.

In summer:

• • • turnover soars
    • frequency increases
    • urgent orders multiply
    • fuel consumption rises

In winter:

• • • density falls
    • many of the kilometres remain
    • average order value drops
    • cost per order soars

A route can look excellent in August and be loss-making six months of the year. That is why analysing one good month is not enough. You need to look at:

• • • monthly profitability
    • annual average
    • difference between high and low season

The indicators that separate those who make money from those who just survive

If a wholesaler wants to control its real profitability, it needs to start measuring:

• • • euros invoiced per kilometre
    • euros invoiced per stop
    • average gross margin per order
    • logistics cost per order
    • number of orders per customer per month

When the average gross margin per order is lower than the logistics cost per order, every delivery takes money away.

And this happens more often than you might think.

The real levers for making a route profitable

It is not just about selling more. It is about selling better.

1. 1. Increase density
      More turnover per kilometre.
      More concentrated customers.
      Drop scattered customers who eat up time and resources.
   2. Raise the average order value
      Set minimum order quantities.
      Cut down on micro-orders.
      Group purchases together.
   3. Adjust frequencies
      Many distributors deliver too often.
      Cutting one delivery a week can change the profitability of the whole route.
   4. Segment your terms
      Not all customers can have the same frequency or the same terms.
   5. Adapt your structure to seasonality
      On the coast, you cannot have the same structure in January as in August.

Final thoughts

In the new HORECA environment, the winner is not the wholesaler with the highest turnover.
It is the one who knows exactly which routes generate net margin and which destroy it.

Because an unprofitable route is not fixed by selling more.
It is fixed by measuring better and making uncomfortable decisions.

And that is where the difference between surviving and building a solid business begins.