Consulting & MBA
A National Supermarket Chain Experienced a 20% Profit Margin Collapse: How Would You Diagnose It?
Case Round 1 · 0 years of experience
Arjun Mehta
Verified McKinsey & Company
Engagement Manager at McKinsey & Company
The question
Our client is a premier national grocery chain with 450 stores operating across India and Southeast Asia. Over the past 18 months, their top-line revenues have grown by 4%, but operating profit margins have plummeted by 20% (from 8% to 6.4%). The CEO has engaged McKinsey to identify the root cause and present a concrete 12-month turnaround strategy.
A way to think about it
Key Diagnostic Framework: In a retail margin squeeze with rising revenue, the culprit is rarely pricing—it is usually supply chain shrinkage, channel mix shift (high-margin in-store vs low-margin online delivery), or SKU cost inflation.
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