F&B sector is increasingly numbers driven. The unavoidable outcome of increasing scale is complexity and while popular wisdom tells us that greater scale equals more revenue, it doesn’t necessarily mean increased profits. Upon closer examination, it becomes clear that only those companies that are able to master the complexities of their business while sustaining continuous growth can truly ‘scale up’.
As New Zealand continues it’s rising prominence as a food bowl to Asia we are seeing exporters significantly increase production capacity, add more staff from the factory floor to the front desk and, invariably, increase the time in which they spend peering at spreadsheets as their business become increasingly numbers driven.
Enter the sales forecast; a vital tool to assess new business opportunities, manage stock levels and balance expenditure. The trouble is, most of the time predicting an accurate sales forecast is somewhat akin to crystal ball gazing.
And yet, so much is dependent on getting it right. The task is, of course, is much easier when you have some sales history to reference. It’s possible to see patterns in the data like the impact of weather, festive season buoyancy and spikes in sales from marketing activities.
However, exporters breaking into new markets, where their brand is an unknown, must rely on a different set of tools. This is where in-market distribution partners come to the fore. Nothing compares to the insights that can be gained from local expertise.
Even big data from global market intelligence specialists needs contextualising with the unique perspectives of industry experts such as distributors, retailers and chefs. I’ve seen importers and distributors spontaneously burst into laughter after reading market reports from internationally renowned firms, which they felt was so far from reality that they couldn’t keep the mirth from their face.
The trouble with big data is that it is often not specific enough to provide a clear picture of the particular category of interest. For example, when a global pasta brand was investigating the size of their category in Thailand and their rank within it, they discovered that the data available was completely skewed because it included everything from noodles to gnocchi.
In my experience, a good distributor will have no problems drawing from their experience in order to provide a sales forecast for a new product line or brand, but no matter what country they are in or how confident they are of their numbers, they are always careful to stipulate that the forecast is their best-guess only and that a more accurate forecast will not be available until they have at least six months of sales history to reference.
For exporters, this ambiguity can be a challenge, particularly for those that must manage supply constraints or the rigours of corporate shareholders. One way to mitigate the uncertainty is to know how a distributor operates and the variables that will have an impact on sales. For example, when a distributor provides a sales forecast for a new product line it’s usually based on average monthly sales over a 12-month period.
Factoring in the length of time it might take to reach maximum distribution means an adjustment can be made for a period of lower sales at the start before full distribution is reached. Ultimately, a sales forecast is a very important tool provided it takes into account the multiple variables at play which influence actual sales.
Understanding local market conditions as well as robust, two-way communication with distribution partners will pay dividends when it comes to arriving at a forecast that is as close to reality as possible.