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Forecasting supply and demand during a global pandemic 😳

Firstly I know it's not officially a pandemic yet...but it certainly looks to be heading that way. As the spread of Coronavirus or COVID 19 around the world continues to accelerate, there have been several reports of consumer panic buying and stockpiling e.g. consumers fighting over toilet paper in Australia, and hand sanitiser has pretty much sold out in most UK outlets.

My first role managing the grocery multiples, was as a national account executive responsible for forecasting major promotions, for a global brewer in one of their largest UK accounts. This role gave me a fascinating insight into the importance of forecasting, not only in account management, but in the entire FMCG industry. I quickly learned an important lesson; you never get a forecast 'right', you just have to use the information you have available, to get it as close to 'right' as possible. Call it too high, and you're sat on mountains of stock tying up valuable cash. Call it too low and you run out of stock , meaning empty shelves and angry customers.

An account manager / supply analyst, usually has to make a forecast call based on a product's distribution, quality of feature, length of activity, base rate of sale, promo rate of sale, key events etc. Then throw in unknown variables such as the weather / competitor activity, and you can quickly see why predicting an accurate forecast is so difficult.

Coming back to COVID 19, there have of course been modern day pandemics before (Spanish flu, HIV / AIDS, The 2009 H1N1 virus etc), but with the current spread of Coronavirus, it feels like we are entering uncharted territory. The combination of COVID 19 spreading globally faster than anyone initially predicted, with the sensational reporting going on in the press and social media, creates a perfect storm for consumer panic. And when consumers panic they look to protect their livelihoods, and inevitably this is going to lead to 'panic buying' and stockpiling of certain products.

Now there are obviously going to be demand upticks for certain products e.g. hand sanitiser, tissues etc, but take a seemingly innocuous product category like beer / cider. Shares in many pub groups have declined in recent days, as the markets anticipate less people going out. Does that then mean alcohol demand will stay flat and subsequently demand for the off trade (supermarkets) will increase? If so by how much? I was asked the question today and intuitively thought 20-25% would be enough to cover any increase in off-trade demand. Am I right? I have no idea, but that's my best guess based on what I currently know. How is the demand for canned goods going to react? What about frozen food or baby products?

Every single FMCG category should be now asking themselves the same question; how is my category going to react to panic buying, in a market where holidays are being cancelled and large group events are soon likely to be banned? Throw into the scenario possible supply ramifications, depending upon where your products come from around the globe.

Retailers have already started to react by bolstering stocks where possible. To mitigate the risk of their employees contracting COVID 19, both retailers and suppliers have started to take certain measures e.g. Tesco have banned all but essential customer meetings. Aldi and several other retailers have stopped employees shaking hands. Certain suppliers from the recent publican awards in London pulled their team from attending. Expect many more similar measures.

The spread of COVID 19 really is a fascinating dilemma for the global FMCG industry, and one which is truly going to impact all suppliers and all retailers over the coming months. The only thing I am certain about, is that everyone in the industry should be taking it very seriously and bracing themselves for a disruptive year ahead.

Empty supermarket shelves

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