Forecasting your sales and production is critical to running a successful craft beverage company. With consistent and accurate forecasting, you’ll have a clear picture of what to expect in the future — enabling you to plan ahead and have ample production for your target market.
Efficiently forecasting with the help of inventory management software can help with many facets of craft beverage production, from production planning to sales analysis. With accurate tracking and analysis, you can successfully forecast for the upcoming year and make sound business decisions based on projected data. We’ve outlined a few ways forecasting can benefit a craft beverage company and how to do it effectively and efficiently.
Why Forecasting Is Important for the Craft Beverage Industry
Your craft business will experience a multitude of benefits from forecasting, including:
- Inventory Control – When you run out of a product that is in high demand, you are losing out on major revenue. Proper forecasting encourages you to effectively manage your raw materials and finished goods inventory and creates awareness when you’re running low on either one. Consistently utilizing a forecasting model can better prepare you and help limit stockouts. On average, craft businesses spend $250-$500 a month on expedited shipping charges to replace out-of-stock items, so planning ahead can help save money and keep sales on track.
- Production Scheduling – There’s nothing more inefficient than trying to start production of a new batch and realizing you’re out of one or more ingredients. Without proper forecasting, you may have to delay your production process while you wait for an ingredient to arrive, which affects your yield and ability to make future sales.
- Financial Planning – As a business, you’re constantly monitoring your bottom line. Forecasting allows you to anticipate sales throughout the year and predict your revenue and profit. Having a clear understanding of the target metrics you’re expected to hit based on sales makes it possible for you to pivot and increase your production goals as desired.
- Supply Chain Management – By predicting product demand, you can manage your production and supply chain more efficiently. Without forecasting, there isn’t a method to the madness, which can leave you out of stock and undersupplied to complete scheduled batches and fulfill customer orders.
- Product Freshness – If you order too much of a product or ingredient, you could be left with beverages that become out of date or ingredients that expire before you can use them. Inaccurate predictions can cause you to throw money down the drain. But with proper forecasting, you will have a more accurate idea of how much stock you need for a particular ingredient and how much of each of your products to make, limiting the amount of inventory that sits in storage untouched.
- Effective Staffing – Using your forecasting model, you can better plan for your staffing needs throughout the year. In months of high demand, you can increase your staff’s hours or bring on seasonal staff. Knowing when slower months are coming, you can plan to have the right size team that won’t cut into your profits. With this method, you can hire more proactively based on your staffing needs.
- Peak Week Preparation – Are there certain times of the year that your craft business brings in more customers? Whether you see a spike in sales around the holidays or over the summer, you need to be prepared. If a large chunk of your annual sales come from these peak periods, accurate forecasting allows you to maximize sales during these key weeks.
Beyond providing ample benefits that set the stage for your annual financial forecast, your sales forecast helps you to set goals for your company. Whether you want to grow your number of customers, up the average spend per customer, or increase your production volume, your sales forecast will help you better understand the current state of your craft beverage business and what you need to do to hit those targets.
How to Accurately Forecast Your Distribution & Sales
Managing a craft beverage company leaves you with little free time, which is why forecasting can fall to the wayside. But gone are the days where forecasting was a manual and time-consuming process — with the right inventory management tool, you can create efficient and accurate forecasts that better predict sales and distribution needs. Here’s how to accurately forecast for your craft brewery, cidery, or winery.
Review Historical Sales Data
To properly plan your production schedule, you need to forecast your expected annual sales. To do this, start with a review of historical sales data for the past year. However, you may need to extend that timeframe by a year or two to include data before COVID-19. You can also review your inventory management reports to better understand which products are the most popular or sell at the highest margin. Knowing which products perform the best enables you to plan next year’s purchasing and production schedule accordingly.
Using this information, you will need to adjust for any changes to your business in the coming year. Do you have any new suppliers that need to be factored in? Are you rolling out any new products? Will you be growing your team? Are you trying to increase your production capacity? Any adjustments need to be factored into your forecast so you can create an up-to-date production schedule based on what you expect to make and sell over the coming months.
Determine the Required Raw Materials & Packaging
Once you’ve put together your sales forecast, you can determine what raw materials and packaging you will need to fulfill the batches. To prevent selling out of your most desired products, you need to have the necessary inventory to create each batch. Using inventory management software, you can track your ingredients and materials and set targets for when you will need to reorder inventory.
Without tracking your ingredients and packaging materials, you risk running out and having a major setback in production or paying extra to expedite the materials — negatively impacting your bottom line. With your software solution, you should also be able to track the price of raw materials over time to better understand how the price impacts your margins. Monitoring your sales trends and production capacity in real time helps you make more informed choices for your craft business and stay on top of how your inventory is being impacted by seasonality and unexpected surges in sales.
Sales forecasting might seem daunting at first, but it’s not a difficult task to manage when done correctly. You know your business inside out and you know your customers. Take the time to forecast your sales and you’ll be better equipped to successfully serve your target market this year.