There are few industries that will weather whatever economic storm hits us. On the whole, the food and beverage market is one of those stalwarts, but that’s not to say that every F&B play will be a home run.
While we’re not about to see consumers stop buying groceries altogether, the economic strains facing people today mean that F&B businesses rarely enjoy a steady revenue stream. As customer habits evolve, it’s important to be able to build accurate forecasts to determine demand.
What is demand forecasting?
Demand forecasting is a simple concept that tasks you with looking toward the future and predicting the demand for your products. It uses previously recorded quantitative and qualitative data to estimate how the business will perform in the coming months.
Done right, demand forecasting helps businesses to make decisions about their product offering, inventory, staff levels, and marketing efforts. Without demand forecasting, you may open yourself up to entirely avoidable risks.
What can demand forecasting help a retailer do?
Demand forecasting is crucial for successful businesses. It helps you plan various strategies in advance to help weather any potential storms that are coming up. This can include seasonal spikes and times of reduced spending due to economic factors.
Better inventory management
Effective inventory management is extremely important to any business. Order too much, and you’re left discounting products to shift them. Order too little, and you risk running out of stock too early, causing your customers to look elsewhere to get the products they love.
Through accurate demand forecasting, retailers can better prepare their supply chains and inventory to handle whatever is thrown at them.
Reduce risk
Given the ever-evolving nature of the food and beverage market, there will be times when you need to introduce a new product into the mix.
Introducing a new product can be a risky move, but forecasting can help. Before you even put an order in, you can use demand forecasting to identify if the new product is actually something your customers want.
Better staffing decisions
Employee wages are one of the biggest costs for any business. Unlike office workers who use the traditional 9 to 5 workday, retailers have to manage various shift patterns and staffing levels. This is most notable around the holiday season when retailers often have double the staff they would normally employ in order to meet demand. 
Forecasting demand helps businesses to anticipate times of increased staffing needs. This allows businesses to avoid overspending on staffing costs when demand is low and ensure they have enough staff on hand when things get hectic.
Improve marketing efforts
Marketing is your main weapon against times of low demand. Limited-time discounts and loyalty programs can bring customers back into stores no matter what economic challenges they might face. Not many consumers can resist a product they love at a great price!
Demand forecasting can offer marketing teams more time to plan their strategies. It eliminates the need for last-minute scrambles to come up with something cool and effective. They can carefully plan strategies to address customer needs right when the business needs the sales the most.
Maintain positive cash flow
Finally, one of the most impactful effects of a demand forecast is that it helps businesses to budget accurately. Almost every benefit of forecasting — from staffing costs to inventory management — boils down to maintaining positive cash flow.
By using demand forecasting to anticipate fluctuations, you can shift your budget and adapt your strategies as needed to ensure tough times don’t result in disaster.
Demand challenges for grocery stores
While demand forecasting is a simple concept, it’s not quite so simple in practice. There has been a huge shift in the way consumers buy their groceries. Nearly half of shoppers are placing grocery orders online more often than they did before the pandemic. This shift is something we have seen previously with non-grocery retailers, but it’s not the only challenge food and beverage retailers are facing.
Perishable goods
Perishable goods make up the core of any grocery store’s sales. Fruit, veg, dairy, and meat products all have incredibly short shelf lives, which poses a huge inventory management challenge.
Retailers are constantly trying to find the perfect balance between meeting demand and avoiding overstock. Unlike non-grocery retailers, overstock can’t be negated through heavy discounting. Once fresh products hit their expiration date, they need to be thrown away. And when you throw away product, you throw away money.
Multiple target audiences
Non-grocery retailers have the advantage of a specific target audience. They can research trends and habits of that audience to help build marketing strategies around their interests.
Grocery retailers unfortunately don’t have that advantage. There’s no specific target audience for pasta — everyone likes pasta! And there are so many products available in a supermarket that it doesn’t make sense to focus on one specific target audience. This makes it difficult for grocery retailers to roll out targeted campaigns to help bring in more customers.
Supply chain issues
As we have learned over the past couple of years, the supply chain is a complex system that isn’t immune to problems. From freighters stuck in canals to conflicts in Europe, retailers across the globe are feeling the pinch from a supply chain desperately trying to regain its former strength. Given the current unpredictable nature of the global supply chain, it’s now much harder to meet demand, even with forecasting.
4 grocery forecasting techniques
There are a number of frameworks food and beverage retailers can use to forecast demand. Here are a few of our faves.
External macro-level demand forecasting
This technique tasks retailers with looking at external factors beyond their control that may impact their goals. This includes many of the issues we have mentioned already, including supply chain issues, the economy, competition, new trends, and changes to customer habits.
By taking into account what’s happening outside of your store, you can gain a better understanding of societal trends and better prepare yourself to face challenges.
Short-term and long-term demand forecasting
Short-term forecasting looks at the year ahead to help prepare retailers for seasonal peaks caused by upcoming promotional periods like Black Friday. Short-term forecasting is also incredibly helpful for businesses using just-in-time purchasing.
Long-term demand forecasting looks further towards the future, between 1 and 4 years ahead. This helps you to plan inventory on a seasonal basis and improve your marketing efforts, store expansions, and new launches.
With both short-term and long-term demand forecasting, you need to use historical sales data to plan around macro sales trends.
AI & automated replenishment
Most major superstores have adopted an AI-powered automated approach to inventory management and I, for one, welcome our new AI overlords.
AI has been incredibly useful when it comes to demand forecasting, as we have more data than ever to guide our forecasting. This gives retailers a great advantage when using the just-in-time model, as reordering can be automated to happen only when stock levels are low.
This kind of tech-powered inventory management helps businesses to create more accurate forecasts, as they no longer need to guess what products will be popular.
The fresh and ambient approach
Splitting your inventory between fresh and ambient isn’t just a way to make sure food is stored correctly. Treating the two categories as separate entities can help improve forecasting efforts.
To achieve this, you need to adapt your purchasing habits to reflect the nature of the product. So for fresh products with short shelf lives, order little and often to ensure you’re not overstocking products that will quickly go to waste. For ambient products, you can afford to order bulk stock to help combat future shortages as the shelf life is much longer.
Buffalo Market and direct store delivery
Buffalo Market has a trick up our sleeves to help food and beverage retailers forecast and adapt to demand with ease: direct store delivery. Get the goods you need, when you need them.
Click here to learn more about direct store delivery, or get in touch with us today to get started!
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