Supply Chain Blog

FMCG: Why do Chocolate Producers struggle at Christmas & Easter?

Posted by Dave Jordan on Wed, Jan 08, 2014

Post Christmas I have been taking a look at International Key Account retailers and seeing how they are coping in the current economic squeeze. One question came to me after seeing well over 20 outlets of various retailers. What do they all do with all that chocolate and other confectionery?

Planning Chocolate Sale The same scene is present after Easter too. Shelf after shelf and gondola after gondola of seasonal chocolate in all sorts of formats, shapes and sizes. Not simple packaging either and it must cost a fortune to pack a 15cm tall ‘chokky’ Santa into a multi-coloured coffret. To be fair it is not just one manufacturer who has suffered a forecasting blip, every single major name chocolate producer appears unable to get it right. For all of them Christmas must be a peak period and one that can make or break the year end results and with no time left to remedy any sales deficit. Similarly, the timing can also place an un-provisioned hole in Q1 numbers.

Of course, nobody wants to disappoint consumers and run out of stock at those peak periods but how can they afford the apparent over-stocking? If the goods are on consignment or “sale or return" then I can perhaps understand why retailers let displays hang around for several weeks. Even then I doubt the retailers would relish wasting sales space on Easter themed chocolate into June and beyond.

Considering the power retailers have over producers I do not understand why stock is allowed to gather dust on shelves. Certainly, for many foodstuffs the listing contracts will contain clauses to withdraw stocks but usually only when the sell-by date approaches or off-take is ridiculouly low.

What is the destiny of chocolate Santas and bunny rabbits after the sell-by date arrives? You cannot do much with it, can you? You cannot send it to a sink market in another country and with the vast majority of edibles you cannot recycle the stuff into fresh production as you could with washing powder, for example. If you have to write-off stock you have to pay to have it destroyed professionally and you frequently have to pay VAT on the value as if it was a sale.

Whatever the destiny of all that yummy chocolatey goodness, it is indicative of a lack of rigour in forecast and/or sales expectations. Diverting some investment from stock that does not sell to taking a long, hard look at your Sales & Operational Planning (S&OP) process could offer a very rapid pay-back for the companies willing to break the chocolate mould.

 

 

Tagss: FMCG, Christmas, Dave Jordan, Supply Chain, S&OP, Forecasting & Demand Planning