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Unbelievable Times

 

Just a few months ago, we were ringing in 2020 with no idea of the craziness that would ensue a few months later…

Shelley explains that she’s never experienced anything like this. “I live down in the South. And for us, the biggest event we get is when the weather channel predicts snow! With that, the grocery stores are depleted of bread and the milk.”

Once the mandatory pandemic safety protocols were put into place… the shelves at the grocery store were bare.

CPG manufacturers are part of the front lines – essential workers – working hard to ensure that the products we use every day are made available.

Before the pandemic, it’s likely your production lines were already at capacity and this situation has put even more pressure on you to keep the shelves stocked and your retailer customers happy.

In March and April, your business most likely saw a surge of sales unlike ever before. The increase in shipments had absolutely nothing to do with promotional activities or increased distribution which are historically the major drivers of short term increased volumes.

The was simply driven by the public’s panic buying.

Price and promotional activities had no impact.

“I’ve been hearing that a lot of retailers have even been canceling any kind of promotional activities for the time being,” Shelley points out.

The bottom line: If it’s on the shelves it’s getting purchased.

 

How Panic Buying Impacts Your Business

 

It’ll be a challenge to understand the impact of all this on your business. As you receive syndicated data releases, you’re going to wonder… “How do we handle this?”.

“I always say that base volume is the greatest mystery for CPG manufacturers. It’s one of the most difficult areas for CPGs to gain mutual agreement on and feel comfortable that their numbers are accurate,” Shelley adds.

In a nutshell, base volume is the health of the business. Base volume is what would have been sold if there was no merchandising or promotional activity.

Drivers of base volume typically rely heavily on distribution and regular price but promotional activities, your competition, and consumer activities can factor into the mix.

Base volumes are derived from waiting and smoothing the sales and non-promoted stores for the weeks before and after each individual week.

Ask yourself:

  • Does your organization have a handle on what your baseline volumes are?
  • Are you looking at the true baseline versus what is considered incremental when you’re looking at your overall volume?

 

(video time: 5:40)

Blacksmith TPO Baseline

 

Syndicated and POS baselines are a standard reference for CPGs but syndicated data baselines can be unreliable.

Baseline inaccuracies can be caused by:

  • Inaccurate feeds from retailers (can take upwards of 13 weeks to correct)
  • Raising baselines during promotions
  • Data anomalies that show increased non-promoted volume being recorded during specific time periods
  • In-store demos with no price decline
  • Competitors out of stocks
  • Panic buying (pandemic)
  • Bad weather such as hurricanes and snowstorms

Inaccurate baselines can result in a negative impact on incremental volume and profit on post-event analysis.

All in all, syndicated data providers typically overstate baseline volumes.

Blacksmith’s model baselines provide really groundbreaking baseline anomaly correction from within the user interface allowing client the ability to make adjustments on the fly.

Whether it’s a competitor’s fulfillment issue, a retail partners promotional execution, or another unplanned activity (such as the pandemic), correcting anomalies that impact base integrity are quickly corrected with a few clicks.

Notice the three week period circled in blue (image below).

Volume increases. There’s no presence of any kind of promotional activities or changes in price. Volume went from approximately 3,200 total cases to almost 8,000 total cases over that period. Base volume increased 10% to 30%. Why? Was there a change in distribution?

baseline _ 3 week period

Or could a data anomaly have occurred – such as the pandemic – which cost products to fly off the shelves regardless of pricing and no promotional activity?

Notice how the increase in volume has now caused the baseline volume to reflect higher going forward.

You have a situation where you’re not accurately able to analyze your business and when promotional activities take place going forward, you’re going to have misleading information to what was truly incremental.

So how can manufacturers correct these problems that don’t involve complex and costly solutions?

Through the Blacksmith master calendar, approved users can course correct data anomalies so that they’re left with a more accurate assessment of their products.

From within the Blacksmith TPO solution, in the master calendar module, you can see all of the information pertaining to a historical period in time for a specific retailer and a product group.

We see that three week data anomaly (above) and that increase in base that now extends into the future.

To be able to get this baseline to  correct – taking into consideration this baseline anomalies here – is as easy as indicating to the system that you want to treat this block of weeks as an anomaly and simply click on the last week of that period.

(video time: 5:40)

Within just a few seconds, the system has indicated we’ve made a change. You see that the baselines have smoothed out and normalized as to what they would have been had we not had this surge in volume for this three week period.

Having the ability to correct situations such as this ensures that CPGs are presented with more specific results when they’re looking at the overall health of their business.

Blacksmith’s model baselines provide a smoother, defined base volume as well as, again that ability to correct those data anomalies that are going to wreak havoc with your baselines and your overall view of your business for easily. The next couple of months due to the situation that is going on.

Crack the code on baseline volumes and not be forced to have to rely simply on inaccurate indicated baseline.

 

Q&A

 

(video time: 15:10)

Question: Syndicated baselines are not necessarily as accurate as we’d like. Why’s that the case?

Answer: Definitely. That is that it is a source of contention for a lot of companies. When I was on the CPG side of things, the company I worked with at first we had our IRI data and then
several years later we switched to Nielsen and that was kind of our big eye opener into how different baselines can be across the different syndicated providers. And then knowing that a solution such Blacksmith TPO can provide a different look to baselines.

There are going to be issues that come up where data is just not recorded properly. Every time a product scans at the register, that’s what’s being captured and supplied through the syndicated data and your retailer POS feeds. Issues happen – retailers don’t get their sample data into the syndicated providers. It takes 13 to 15 weeks for syndicated data providers to be able to fix those issues if they even catch them.

Both syndicated data providers heavily factor baselines rising during promotions. They’re trying to depict the impact of a loyal purchase on a promotion versus a non-loyal purchaser.

I even heard recently that because of all the problems that are going on right now at retail with just being able to keep the store stocked and keeping fewer people in the stores that for syndicated data providers who send out surveyors to go into the stores to capture where there are displays – they’ve been notifying companies that they’re not able to send those individuals out into stores. So you in addition to seeing these big spikes in volume, you guys are probably going to start seeing actually no impact of no record of display activities going on.

So there’s going to be a lot of new things that are going to skew the data that you’re going to be seeing here soon.

 

(video time: 18:25)

Question:  How does Blacksmith’s baseline eliminate the concerns that might be rising up in syndicated baselines and maybe from other providers?

Answer: So of course it is a proprietary, statistical model but we are looking a broader picture of time. We’re not going in and just analyzing the last eight weeks or the last 12 weeks of the data coming in.

We are actually giving our users the ability to model their baselines over all types of timelines.

So within the tool, a user can select a baseline that’s based on a four week algorithm, all the way up to a 52 week algorithm. And those four week periods in between.

And that is really effective – especially for companies out there that have very seasonal products that are only available during certain times and therefore volumes spike and then come back down to either nonexistent or much lower volume.

So being able to go in and control on the fly exactly how you want to analyze your baselines from a time period is one area that sets Blacksmith apart.

 

(video time: 20:15)

Question: If CPGs send Blacksmith their data – they don’t have TPO – is this something could be supported by services with Blacksmith? Is this something Blacksmith provides as a a service?

Answer: Yes we do provide professional services that will allow your organization to gain the insights into their business without having to actually have the staff to go in and do it themselves.

When talking with CPG companies, I know that’s the biggest issue right now — the lack of resources and time.

Yes, definitely, we would love to talk with you further about how we can provide baseline services. Of course we would need access to your data sources but we can talk with you more in detail  bout what that would involve as well as exactly what your needs would be.

 

Click here for a 1:1 with Shelley »