A diet beckons?

Have you been brave enough to step on the bathroom scales yet or are you trying to ignore the inevitable weight gain? You may well have overindulged in chocolate during the holidays but do you still crave more? Get yourself and a large blue IKEA bag down to your local supermarket as chocolate is likely to be very heavily discounted. If you are planning in the medium term horizon, Valentines Day and Easter are not far away so why not save a little cash and stock up now - sell/use/eat by dates and household working capital constraints permitting, of course!

Debt by Chocolate?

Post Christmas, I have taken a look at FMCG retailers to see how they are coping in the continuing economic squeeze. One question came to mind after seeing well over 20 outlets. What do they do with all that chocolate and other residual Christmasy confectionery? The same scenario is also present after Easter and to a lesser extent, Valentine's Day.

Shelf after shelf, gondola after gondola of seasonal chocolate in all sorts of formats, shapes and sizes and not in simple packaging, either. How much time and cost is required to pack and transport a 15cm tall chocolate Santa or Easter Bunny into a multi-coloured coffret? To be fair, it is not just one manufacturer which has suffered a forecasting and inventory blip, as every major retail chain and chocolate producer appear unable to get it even close to right. For many of those FMCG operations, Christmas must be a critical peak period and one that defines the year-end results yet with no time left to remedy any sales deficit or excess costs. Similarly, the timing can also place an un-provisioned hole in Q1 numbers even before you have taken down the decorations.

Of course, nobody wants to disappoint consumers and run out of stock at those peak periods but how can they collectively 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 weeks. Even then, I doubt retailers would relish wasting valuable sales space on slow or non-moving goods.

Considering the power retailers have over FMCG producers, why is stock allowed to gather dust on shelves? For many edible lines, listing contracts will contain clauses to withdraw stocks but usually only when the sell-by date approaches or off-take is ridiculously low and below plans.

Going loco getting rid of cocoa?

What is the destiny of those chocolate Santas, bunny rabbits and gift packs after the sell-by date approaches? You cannot really send it to a sink market in another country or region as Christmas tends to be around the same dates every year. With the vast majority of foodstuffs you cannot recycle unwanted stock into fresh production as you might with washing powder, for example. Also, you have to keep it stored properly before writing-off stock and having it destroyed professionally. Frequently, you still have to pay VAT on the stock value as if it was a sale. A real lose-lose!

Charitable donations are always good for the books and corporate image if within use by dates but can you really find enough charities willing and able to take on so much confectionery without any of it creeping back into the market under a damaging, grey cloak?

The sweetener?

Whatever the destiny of all that yummy chocolatey goodness, it is indicative of a lack of rigour in forecasting and/or sales expectations. Diverting some investment from stock that does not sell into taking a long, hard look at your Sales & Operational Planning (S&OP) process could offer a very rapid pay-back for those companies willing to break the chocolate loss mould. I am not suggesting peak-period forecasting FMCG confectionery is an easy task but I feel it can be better than we currently experience.

These chocolatey peak periods come around every year so you need to fully understand what is really happening in those pinch points and why you continue to miss your sales and operational targets. Get this right and you suddenly have a significant and sweet advantage over competition.

Help I need somebody!

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