As suppliers and retailers adjust to a new business environment we have to start to look to the future. Most experts indicate we will be facing spread of the coronavirus for months to come. That means many of the changes to food shopping and consumption will continue in the future. We have already experienced huge increases in online shopping for food, a massive shift from food service to retail and for those going to the store, the focus is on getting in and out, not shopping for impulse items or something interesting. One big question is how do we forecast sales in this new reality?
If you are a producer or a processor you need to think of the future. I appreciate there are huge challenges day to day right now. Keeping employees coming to work and motivated is one of them. If you want to learn more about this topic join us for our Recipe for Success Wednesday April 8 at 2pm Atlantic (1pm Eastern). Tanya Chapman will be our guest to share some great insights to keep your team working and safe. There are other challenges like communicating with customers, logistics and getting packaging.
If you missed the first part of the SKUFood Recipe for Success series this week, you can watch the video here:
All that being said, we do need to look to the future as well. Forecasting your sales will require some work. Usually our first step in a sales forecast is to look at history. Unfortunately for most that history is no longer a great predictor of the future. It is something we can use but not in isolation.
Here are some other factors to consider when you are building your forecasts:
1. Shift from food service to retail
Overall in Canada the split between retail and food service was 70/30. Obviously some categories would be higher or lower but that is the average. From what we can learn the split right now is approximately 90/10. Institutions and health care continue to operate but most restaurants have closed or are offering take out only. If you serviced retail before and 20% of the market has shifted from food service that is a 28.5% increase (20/70).
2. Impact of hoarding
Consumers are in a mindset they have never been in before. When they see empty shelves they panic and buy whatever they can. Depending on the perishability of your product this behaviour will impact consumption and future demand. If your product is perishable you can assume it would last for them as long as it usually does and then they will need more. If it is a canned good you will have to assume they will need less in the future, after you factor in the shift from food service to retail.
3. Google mobility data
Google released mobility data to help with understanding the response to public health orders. Overall in Canada trips to grocery and pharmacy are -35%. The breakdown from province to province is as follows:
The food industry in Canada is supplied through regional distribution networks. You should focus on the region you service to understand the impact. Overall trips are down 35% which means the average order is way up. People will focus on the needs and shop with a list. Impulse buys will be down. If you want to review the other data you can find it at this link:
4. Online shopping is likely over 10% of total
Prior to the restrictions on movement and physical distancing online shopping for food was +/- 2% in Canada. It is now 5-6 times greater. Online orders are created by figuring out what they want to eat and often created using their own order history, which consumers can access or from a list AI creates for them. Impulse buying is very low and with lead times close to 1 week the store cannot inform you about out of stocks so there are no substitutions. If you are the #2 brand in a category and would get the sale if #1 is out of stock they do not substitute.
5. Consumer confidence is very low
It has been reported over 2,000,000 Canadians lost their job in March. People will be spending less and trading down within categories. According to McKinsey 59% of American consumers will be very careful as to how they spend their money given the condition of the economy (https://www.mckinsey.com). Unfortunately they do not survey Canadian consumers.
6. Changes to the shopping basket
Consumers will be looking for items that will last longer and they have to cook again. Similar to many of these factors they are item specific, but overall there is a significant shift to canned goods, pasta and flour continues to be scarce in our stores. Stores are imposing limits to try their best to prevent hoarding.
7. Some imported categories will be impacted
Food supply chains are complicated. Italy has been severely impacted in recent weeks so some products that are produced there like olive oil with be a challenge in the coming weeks. Consumers will shift to substitutes if product is not available or prices increase.
8. Talk to your customers
Retailers are trying to figure it out just like you are. They do not know more about the future but they might have some insights. Priorities for them have shifted, in stock is very important right now. If it will help get stock for them they might share some information to help you make better decisions.
You can use the following table to create a forecast for your sales. Perhaps there are other factors unique to your products, which you can add. For SKUFood members, watch for more tools to help you with your business during these challenging times. You can find them in the members only area of SKUFood after you login.
An educated guess is better than a guess. Share what you have done with your customers so they know you are trying to figure it out. Nobody really knows how all of this will impact sales but you do know some factors and they need to be considered. If you have any more insights into forecasting sales I am always interested to learn.
This is Easter week and usually in retail food it is one of the busiest weeks of the year. In the past the Thursday before Easter was usually the biggest single food shopping day of the year. Almost everyone will be home this year so there will be more gatherings but overall smaller. I have been limiting my trips to the store to once per week for our family groceries and we are trying to forecast our meals two weeks out to use online shopping as well. I did see this item at the cash as I was waiting 2M from the nearest person so I took a photo of it. Given our past conversations about Oreos and their branding strategy I had to add it to the newsletter this week. For those of you celebrating, Happy Easter and for everyone, thank you for keeping the food industry working to supply food to your customers and consumers.
We also have to keep looking to the future and some of the other trends in the industry. I am excited to be part of the Go To Market webinar series with Perennia. Thursday April 9th we will be talking about how to select a distributor and/or a broker. These are great sessions packed with lots of information to help your food and beverage business.
KSKUfood was created to be an online community where food producers and processors can find information, strategies and make their food business better. This includes our SKUfood Success Maps, Recipe for Success Archive, cooler talks and many more resources.
I am always interested in what you are doing to react to the challenges we face. There are so many heart warming stories to share so please let me know and if you are ok with me sharing your stories and initiatives. I would like to dedicate the space next week to some of the great things happening with suppliers. We have to face reality but it is also nice to hear the good news that comes with challenges. Send me your stories at peter@skufood.com or give me a call at (902) 489-2900.