1. Industry
Send to a Friend via Email

Your suggestion is on its way!

An email with a link to:

http://foodbeverage.about.com/od/GettingIntoProduction/fl/Have-a-Fod-Business-Learn-Sales-Forecasting-in-5-Easy-Steps.htm

was emailed to:

Thanks for sharing About.com with others!

Discuss in my forum

Have a Food Business? Learn Sales Forecasting in 5 Easy Steps

Most food entrepreneurs are confused about forecasting

By

Greens Salad Dressing  Trade Show Booth

Natural salad dressings made by someone just like you

Greens

Do you know how to create a sales forecast? The usual answer for most food entrepreneurs is… no!
 

In retail foods you need a forecast and the best type forecast is called a Buildup Sales Forecast… it is based on certain assumptions that you make on what is called “sales per point of distribution”. OK, this may seem complicated HOWEVER it is not mathematically difficult and just requires understanding how the grocery retailer buyer thinks. It also is based on the category your product resides, your competition and then ultimately the consumer… the person who buys the product at the supermarket.

Sales Forecasting in 5 Easy Steps

So before you start creating your retail buyer pitch deck you need to open up Excel, the simplest and effective forecasting tools around. In order to make it easy for you to try a Buildup Sales Forecast, I have a series of spreadsheets in this article. Let’s run through a simple set of example from one of my clients, Greens.  At Greens we like to say that “we are a natural salad dressing solution for your everyday needs that is produced by someone just like you that knows there is nothing better on a salad than a healthy delicious dressing.” 

Step 1 - The Sales Forecast Starts with the Selection of Your Target Grocery Store

Let’s say I recommend to Greens that The Fresh Market chain (located on the east coast) is an opportunity and the founder will develop a sales pitch for the brand to the Fresh Market retail buyer.. 

Step 2 - How many stores are in the supermarket or grocery store you want to forecast?

The Fresh Market has approximately 162 stores.

Step 3 - How many products (the number of SKU’s) do you sell into that grocery store?

So we have 4 items, 1000 Island, Simple Balsamic Vinaigrette, Greek Vinaigrette and Lemon Vinaigrette.

Step 4 - For each SKU, how many units per week do you think you will sell?

I like to start of really conservative on my client’s forecasts so I recommend that we estimate sales of 2 bottles of each of the four flavors per store per week. That is a total of 8 bottles for the week.

Step 5 - The Formula for Forecasting Sales

So the formula becomes 162 Stores X 4 Flavors x 2 bottles per store per week x 52 weeks = 67,392 Bottles per year. It is best to set up a simple Excel Spreadsheet like this one here:

Sales Forecast Entire Chain

 

Jan -Dec

Stores

162

Flavors

4

Movement/Store

2

Weeks/Year

52

Total Units Annual

67392

How Do You Forecast When You Don’t Get On the Shelf at All Stores

Now the above forecast assumes Greens obtains distribution in all 162 stores. However most retail buyers will not give a small food business an entire chain of stores at once. Because a new brand is an unknown for the supermarket there is a great deal of risk the buyer takes when putting a new brand on the shelf.

The more likely scenario is you will get a group of stores to test your product in for a period of time, somewhere between three to six months. If the test goes well the retail buyer may roll out Greens in either of 2 ways:

  • The buyer may roll out the salad dressings into the entire chain of 162 stores
  • The buyer may roll out groups of stores over a period of time to make sure you can actually deliver quantities larger than your test stores. Remember the buyer wants to reduce the risk

So for each scenario above, once again it is best to set up a simple spreadsheet to calculate your forecasted sales as you can from the following examples:

Example 1 Test Stores and Full Chain Rollout

A Sales Forecast for an Entire Grocery Chaing
 

Jan - Mar

Apr - Dec

 

Stores

12

162

 

Flavors

4

4

 

Movement/Store

2

2

 

Weeks/Year

13

39

Total Units Annual

 

1248

50544

51792

 

Example 2 Test Stores Qtr 1, Partial Rollout Qtr 2 & 3 and Full Chain Rollout Qtr 4

How to Create a Sales Forecast for a Partial Grocery Chain Rollout
 

Jan - Mar

Apr - Jun

Jul - Sep

Oct - Dec

 

Stores

12

24

50

162

 

Flavors

4

4

4

4

 

Movement/Store

2

2

2

2

 

Weeks/Year

13

13

13

13

Total Units Annual

 

1248

2496

5200

16848

25792

 

More Tools For Creating a Retail Buyer Pitch

You need more than great taste and know the deal breakers to getting on the shelf and no having a sales forecast can be a deal breaker. So try out these spreadsheets first and read Keys to Success - Retail Sales Pitch Elements and also check out the 5 Step Sales Forecast Slide Deck... and go get that appointment to get on the shelf!

You may also find these articles helpful... 3 Tips on Calculating Food Costs  and Better Food Manufacturing Business Management.
 

©2014 About.com. All rights reserved.