Sales people should be better than a crystal ball
Happy Thanksgiving
Before we dive into the fun of forecasting, we wanted to say Happy Thanksgiving to all of the Canadian people in the SKUFood community. Working in food brings a special meaning to Thanksgiving. With climate change and challenges to growing, it brings more focus to our food industry. When I was at CHFA I heard the GDP of the food industry is now the largest sector in Ontario. We should be proud to be a part of this industry that supplies food to people across the country.
Forecasting/demand planning is a key role for sales people
You have heard us say many times that getting the right amount of inventory produced and into the stores, at the right time, is one key element of success for a food or beverage business. Easy for us to say-challenging for you to execute.
Your sales people play a key role in how much inventory should be produced and when it needs to be ready to go. They should understand the market and anticipate what your customers will require, before they even know they need it.
Forecasting volume accurately is art and science
It is a challenge to determine how much product the market will require. Your sales people do have some facts that they should be able to access to help with the forecast. They also should have a feel for the market and customers. This combination of facts and feel is the science and the art.
The science
You need accurate data in your business. They need facts to work with. It is a good place to begin.
It starts with sales history. Seasonality impacts the sales of many food items. Often you will need a full year of volume before they can use the history to predict the future. The best sales history is by customer and by item in your business. Often there are different dynamics going on with each of these, so it pays to focus on both. Use the history, with adjustments for recent trends to begin the process.
If you do not have sales history, you will have to resort to forecasting sales by point of distribution until you build the history. This method involves looking at the number of stores/locations where your product is for sale and forecasting the units per store/location per week or per month.
We mentioned recent trends. Every category is different so you should decide what recent looks like for your business. You should also factor in the overall trends for the segments of the market you are listed in. This week NielsenIQ shared some numbers at the Food and Beverage Atlantic Conference about the growth of club and discount, at the expense of conventional stores. You should factor this type of information into sales forecasting. If you are only available in conventional stores, and they are down 2% (which is a lot of dollars), your volume could be down just because there are less people shopping in these stores. Your sales people should be trying to find any of this information they can.
Another fact you have that should be a consideration in forecasting sales is service level. If you had some issues where product did not get into the market on time you might have missed some sales. Assuming you have the issue fixed, your sales people should account for this in forecasting.
There is a lot going on that impacts sales. Some of it is within your control and some of it might be your competition or your customers. Your sales people should be keeping notes throughout the year that become very useful when forecasting the future. If your competition over invested in the summer this could have impacted your volume. Accurate notes, kept throughout the year are very helpful.
Industry trends, consumer trends and customer sales are often available through trade publications, FCC and industry associations. If you are selling through the large, publicly traded retailers they report their sales every quarter. Costco reports them every month. You should definitely factor these into your forecasts because it will be a number your customer is using. All of these numbers can be helpful when trying to forecast what will happen with sales.
The art
Now the fun begins, and this is where your sales people should add value to the process. Facts are important and accurate data is the foundation for good sales forecasting. Market knowledge, category expertise and customer relationships are something your sales people should have. They need to develop this knowledge over periods of time and ChatGPT will not help you much here. Your sales people need to be out in the market, talking to people in stores, at the office and in the industry.
They should be collecting information all the time that will be relevant when it comes time to build a sales forecast. A packaging supplier telling them your competition doubled their order or people in stores sharing that your competition has been having service level problems are all important and should be considered in sales forecasts.
An accurate sales forecast/demand plan is a business win
Your sales people should not be doing this in isolation. Every department in your business should be involved. If you plan an aggressive consumer marketing push in Q2 then your sales forecast should reflect some return on that investment. If your production people say if the volume could increase 10%, they could lower the cost of production then perhaps you need to invest something in trade spend to deliver the 10% increase.
Every part of the business should have a chance to have input on sales forecasting. Ultimately, your sales people need to deliver the numbers, but everyone should be motivated to achieve these forecasts. Sales people become disengaged when the production part of the business wants to produce 15,000 when the sales people are convinced the maximum is 12,500.
Accuracy should win over exceeding the forecast
This is a fine line. Most people are motivated by exceeding expectations. The challenge becomes when the actual exceeds the forecast, and the business has to either scramble to get product produced or disappoint customers. When I was at Loblaw we worked hard to get better at the seasonal ups and downs in different departments. Floral was one department where we would have huge swings in sales, week to week. Valentines’ week was 10X an average week. The first couple of years we did not forecast accurately, and we were scrambling and seemed very busy. Working so hard to ‘make it happen’. As we improved our forecasting and got prepared properly it did not seem like we were that busy but sales did much better. When you are prepared and have everything in place to deliver a strong sales number, you have done the work in advance and have the people in place. It seems less of a rush, but we definitely served customers in the store better and maximized the opportunity. We only exceeded sales by a bit but it was a much better experience for everyone from the store to the office.
Talk to your customers
We are big fans of initiating the conversation with your customers and that starts with you providing a number or forecast. There is nothing worse than a supplier coming into a retailer expecting them to have all the answers. It is your business so take the initiative. No doubt they will have some perspective on where sales are going and probably help you make your forecast more accurate. When your sales people have thought through what the numbers will be your customers will respect you for doing the work and understanding your business with them.
If you are delivering direct to stores (DSD) you really need accurate forecasts. You are responsible for keeping that shelf full. You need to know what is required before you go to the store.
If you are delivering to the warehouse do not just accept every purchase order you receive. Check the orders relative to your forecasts. If they are not aligned something is happening. Buyers are an entry level position in most large retailers. They change often and they are depending on ‘the system’ to predict the volume they need. If you are concerned it is too much or not enough, try to talk to them and determine why. There could be a very good reason like you are in the ad and they did not tell you, so they require 2X a regular week. On the flip side, if they want too much the last thing you want is inventory sitting there not moving. Your sales people should have a good relationship where they can have these conversations.
You can’t always predict everything, but an accurate sales forecast should ensure your business maximizes the opportunities you have. It will also ensure you have the best chance at getting all of the inventory into the market when and where it is needed.
Peter
SKUFood Recipes for Success Podcast
Raised by murder mystery dinner theatre owners, Joshua brings a unique blend of creativity, strategy, and storytelling to the world of food and beverage. In 2014, he and his friends left behind their engineering careers to launch Good Robot Brewing, a quirky brewpub in the North End of Halifax that has since grown into three award-winning hospitality venues and a wholesale brand recognized across Canada.
Most recently, Joshua and his partners opened The Beverage Factory, a $6.5M co-manufacturing facility producing everything from wine to energy drinks for dozens of Atlantic Canadian companies.
In this conversation, Joshua shares his insights on building businesses that balance community, creativity, and scale. From the leap of faith that started it all to the complexities of launching a large-scale production facility, this episode offers valuable lessons for entrepreneurs who want to grow while staying true to their roots.
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If you would like to be a guest send us a note. We are always working on the upcoming episodes.
Regional items are important
This week we were at the Food and Beverage Atlantic conference in Moncton. So many valuable insights from the stage and the chance to connect with people from the entire eco system in Atlantic Canada. I had the opportunity to do a fire side chat with Lionel Duguay from Loblaw. We were talking about the Loblaw Small Supplier Program and some of the opportunities for suppliers in the region. Lionel was a produce manager when I was at Loblaw and he has moved through different roles in the organization to be a district manager which is great to see.
When we were talking, he mentioned green tomato chow. An item people in Atlantic Canada enjoy, especially with fish cakes. There just happened to be a N.S. business in the audience who had started to produce this product. They have launched in Sobeys local program and now it sounds like there might be an opportunity with Loblaw. Regional items can be a great ‘foot in the door’ for regional suppliers. Prove your abilities and then look for other items that would allow you to grow. By coincidence CBC did a story about Station Food Hub and their green tomato chow.
Where is Peter speaking?
With the focus on Canadian food and beverage we wanted to share a program we have developed with Alain Bosse, the Kilted Chef. We partner to share insights about Canadian food and beverage at conferences and events. We talk about where products come from, share insights about some hidden gems and of course Chef Alain has great tips for using the products at home. This is designed to be entertaining and engaging. Not just for food industry audiences, it works for everyone.
I do have travel coming up to Toronto, Saskatoon, and Fredericton so if you want to connect or have an event in any of these locations give me a call or send me an email.