MIS770: Annual Performance Review of FOODplus Supermarkets

This report reviews the performance of FOODplus supermarkets using data from 150 stores across eight Australian states. The average gross profit per supermarket is $1.027 million, with a bonus eligibility threshold of $3.135 million. Supermarkets open on Sundays show higher average gross profits. Strip-based supermarkets have the highest online store adoption rate. Most supermarkets generate medium waste. Advertising expenses significantly influence sales. Online store revenue per supermarket is estimated between $0.30 million and $0.42 million. The proportion of supermarkets complying with low wastage is estimated between 9.57% and 21.10%. Price increases comply with ACCC regulations. Less than 70% of supermarkets open on Sundays. The sample data shows misrepresentation of specified states and the sample size may be insufficient for precise high wastage store proportion estimation.

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EXECUTIVE SUMMARY
The aim of this report is to review the performance of FOODplus supermarkets taking into
consideration the selected data for 150 FOODplus supermarkets from eight states in
Australia. In relation to gross profit annually, the average amount per supermarket is $ 1.027
million. The gross profit variable shows high dispersion as there are certain supermarkets
with very low value of gross profit ($ 0.02 million) and others which exceed $ 3 million. The
range of annual gross profits for which the supermarket manager can expect bonus is atleast
$3.135 million. Despite the presence of supermarkets in the sample with very low and very
high gross profit, these are not outliers in the context of statistical analysis. Further, statistical
analysis indicates that FOODplus supermarkets that are operational on Sunday on average
have a higher gross profit thereby making a case for opening supermarket on Sunday. The
leadership claim in terms of online store is not supported by sample data as strip based
supermarkets have the highest online store adoption rate. In terms of waste generation, a
majority (i.e. over 50%) of the supermarkets included in the same tend to generate medium
waste while a significant proportion generates high wastage.
With regards to sales variation, two factors emerge influential namely the advertising related
expenses and number of staff but the former is more significant than the latter with regards to
explanation changes in sales. The revenue from online store per supermarket for all the
supermarkets with online presence is estimated to lie between $ 0.30 million and $ 0.42
million. Further the estimation of FOODplus supermarket proportion complying with low
wastage category would lie in the interval 9.57% and 21.10%. Based on the sample data of
150 FOODplus supermarkets, it has been seen that the increase in prices at FOODplus over
one year does not exceed $ 6.85 on an average and thereby the company is compliant with
ACCC. Also, it is estimated that less than 70% of all FOODplus supermarkets open on
Sunday. The sample data does highlight misrepresentation of specified states in terms of
supermarkets. Besides, the sample size of 150 supermarkets would be found insufficient if
high wastage store proportion requires estimation within 6% error.

Title: FOODplus Supermarket: An Annual Performance Review (2017-2018)
Introduction
A leading supermarket chain in Australia is FOODplus which opened shop 27years ago and
has made rapid strides since then and has 750 stores in Australia currently. The company’s
general manager (Paul Anderson) has retrieved the data for 150 supermarkets using the
annual survey. This data has been used to conduct statistical analysis with the central
objective of addressing key queries that the general manager has raised in the memorandum
addressed to Emma Thomas, a business analyst. The given report aims to present the
findings of the statistical analysis in relevance to the performance of the FOODplus
supermarkets and also estimate key performance parameters for the population of 750 stores
that this company operates in Australia.
Discussion & Conclusion
The analysis of key aspects of performance of FOODplus supermarkets is presented below.
(1) A relevant summary of gross profit of FOODplus supermarkets is indicated as follows.
(a) Taking into consideration the data from the annual survey, it is apparent that $ 1.027
million is the average gross profit per store generated in 2017-2018. The comparable median
value for this variable is lower at $ 0.972 million which may be the result of presence of
certain supermarkets in the sample data which boast very high gross profit. The dispersion
with regards to gross profit variable is quite high which is adequately captured by the high
range of gross profits visible for the sample supermarkets. Other measures of dispersion also
support the above conclusion and the presence of very high gross profit values is confirmed
from the skew present in the data.
b) As per the company policy, the bonuses are restricted to only the 45 stores that tend to
have the highest gross profit during the year. Taking thee above payout policy of bonuses, it
is apparent that bonus eligibility would imply that gross profit would have atleast 99.94
percentile. For the sample data of 150 supermarkets provided, the corresponding gross profit
comes out as $3.135 million and hence bonuses would not be extended to managers of
supermarkets having annual gross profit lower than the stated value.
c) An “unusual” value in statistical terms would indicate towards any value which is very
large or very small owing to which the associated probability of their respective happening is
very less. For the gross profit data presented for the sample, despite some supermarkets
having very high and very low gross profit value, but these are not termed as unusual or
outlier as derived from statistical analysis.
(2) (a) In order to decide if the supermarkets should be working on Sunday, the impact of the
same on the gross profit would be imperative to understand. As a result, two groups of
supermarkets have been identified with one group constituting of only those that are working

on Sunday and the other being closed on Sunday. The comparison of average gross profit for
these two groups highlights that higher gross profits are realised on average for supermarkets
that remain open on Sunday. This provides compelling evidence to conclude that the
FOODplus supermarkets should remain working on Sunday.
(b) In order to highlight if FOODplus supermarkets based in mall tend to have the highest
adoption rate of online stores or not, a comparison of the online store adoption rate ought to
be performed across the three type of locations i.e. country, strip and mall. In the sample data,
it has been found that 67.74% of mall based supermarkets have presence in the form of online
stores. For country based and strip based supermarkets, the corresponding rate of adoption
has been found as 60.42% and 77.50% respectively. Clearly the above computations clearly
refute the claim of leadership about mall based FOODplus supermarkets in terms of online
store opening.
(c) The wastage category breakdown needs to be estimated for the sample 150 FOODplus
supermarkets. Based on this, it comes to light that more than half of the supermarkets
included in the sample tend to generate medium level wastage. About one third of the sample
supermarkets tend to generate high level wastage while about 15.3% of the supermarkets in
the sample data provided generate low level wastage. These statistics clearly highlight that
measures need to be taken by the company to improve waste management. The maximum
contribution of supermarkets with regards to high waste category is from Queensland
followed by Southern Australia and Victoria. It is apparent considering the sample that
majority of the high wastage category supermarkets hail from the three states mentioned
above.
(3) Four variables have been given and the aim to highlight the variable that offers the best
explanation to the change in sales considering the annual survey data provided. Considering
the analysis performed, it has come to light that advertisement expenses offer explanation to
70.6% of the changes in sales. This does not surprise as literature offers support to sales being
positive influenced by higher spend on advertising. The staff count is capable of explaining
54.17% of the sales variation as highlighted by the analysis of the sample data. The two other
variables in the form of car spaces count and trading hours count have been found to be not
significant. Hence, it may be appropriate to conclude that from the given variable choice, the
one that has been found the most significant in terms of accounting for variation of sales is
spend on advertisement.
(4) (a) The aim is to draw an estimation of per store online sale for the 750 FOODplus
supermarkets considering the sample data. This interval has been estimated as ($ 0.3 million,
$ 0.42 million) which implies that there is 95% chance that for a FOODplus supermarket
identified at random, the sales generated from online channel would fall in the above interval.
As this is quite small in comparison to the total sales, hence this is indicative of immense
growth scope in this segment.
(b) The proportion of FOODplus supermarkets falling under low wastage category has been
determined considering the sample data provided. The estimate in this regards suggests that
only 9.57% to 21.1% of all the FOODplus supermarkets would fall within the low wastage

category. Clearly, this value needs to be improved going forward which provides immense
scope of initiatives in waste management at supermarkets. For all the FOODplus
supermarkets located in NSW, the low wastage category proportion would fall in the interval
marked by the limits 5.90% and 29.99%. For all the FOODplus supermarkets located in
Victoria, the low wastage category proportion would fall in the interval marked by the limits
3.18% and 29.08%. It is evident that the intervals overlap which implies that low waste
category supermarkets proportion do not differ for the two cities and the overall company.
(5)(a) With regards to ACCC requirement of food price increase not be exceed inflation
estimates, using the data from annual survey, test has been performed with regards to the
price increase in the defined food basket over 2017-2018. To comply with the ACCC, it is
imperative that average annual price increase should not be greater than $ 6.85 for FOODplus
supermarkets. Using appropriate statistical analysis of the sample data, it may be correct to
conclude that the increase in price of pre-defined food basket has not exceeded $ 6.85 and
therefore the company does not violate the requirements of ACCC.
(b) The objective is to conduct statistical test on the annual survey data provided for 150
FOODplus supermarkets to estimate if the proportion of all FOODplus supermarkets in
Australia working on Sunday is greater than 70% or not. The test leads to the conclusion that
FOODplus supermarkets in Australia working on Sunday do not exceed 70% which is a
cause of concern for the company since the long term sustainability of the company requires
that 70% of the supermarkets must be working on Sunday. The company thereby needs to
take prompt action in order to rectify the situation at hand so that there is no adverse impact
on future profitability or growth of company.
(6)(a)(i) For drawing reliable conclusion, a minimum requirement is that the sample should
be a faithful representation of the concerned population of interest. In the context of the given
sample data, the key consideration would be that the sample data should have supermarkets
from all the states in almost similar ratio. For the given sample data, as there are
supermarkets from eight states in total, thus, 12.5% of the sample size should ideally come
from each of the eight states represented. However, analysis of the state representation
highlights that the division across states is far from perfect. An example of overrepresentation
is Queensland which has 18% contribution to the 150 supermarkets and hence exceeds
12.5%. An example of underrepresentation would be states such as Tasmania and Western
Australia which have 3% and 11% contribution respectively to the 150 supermarkets and thus
is lower than 12.5%. As a result, it may be concluded that assertion in the context of sample
data representation of selected states is correct.
(ii) In the sample data, the oldest supermarket present has an age of 24 years which may seem
in violation of the fact that the company started 27 years ago. However, this apparent
anomaly can be explained by considering the growth path of such businesses where the
expansion of supermarkets is gradual. Since the company currently has 750 supermarkets, it
is highly likely that during the first three years of inception, the company would not
established only a handful of stores. It is quite possible that none of these stores are included

in the sample data as besides these stores, a large number of stores have been set later from
which 150 selections have been made.
(b) Statistical analysis with regards to determination of minimum sample size highlights that
sample size of 150 supermarkets currently available would suffice for gross profit
determination within $ 120,000 as the least sample size which is required is 148. But the
sample size of 150 supermarkets currently available would not suffice for proportion of high
wastage store estimation for FOODplus supermarkets within 6% as the least sample size
which is required is 227. Therefore, the survey in the future should consider the sample size
requirements to obtain reliable results.