Is the food industry set to struggle with demand this Christmas?

 

After being blindsided by the onset of Covid-19 in the spring, food businesses have adapted remarkably well to the new circumstances we find ourselves in. But Christmas is a time like no other for every part of the food industry - from producers through to retailers.

With a second round of lockdowns, Christmas will be fairly different for most people around the world this year. But how are these extra complications affecting food businesses in their quest to ensure things go as smoothly as possible - and will they be able to handle what could be an even higher level of consumer demand than usual?

What will demand be like?

Industry predictions have been to expect no dropoff in consumer demand this Christmas - and perhaps even a boost as people look to reward themselves after a trying year. This was being discussed as early as July.

This will likely take the shape of a fundamental rebalancing in the way people spend over the festive season. Public health concerns and continuing restrictions on foodservice outlets are likely to see demand for eating out well down on what is usual for this time of year, with consumers spending more with retailers as a result.

There has been some concern over what this will mean - both in terms of managing supply but also the desire to avoid the huge queues and crowded shops that are so typical of the lead-up to Christmas. For instance, the British Retail Consortium launched a campaign as early as October encouraging shoppers to start their preparations earlier. Of course, where food is involved, this won’t be possible for many items.

This is likely to be offset by a big shift towards online shopping - but this will pose additional challenges for retailers, with warehouse space and home-delivery networks coming under more strain.

Will the food industry cope?

What does all this mean for the rest of the food industry? Questions have been raised around the ability of suppliers, manufacturers and producers to keep up with the sheer volume of demand that Christmas brings in this most challenging of years. This worry has been heightened in the UK especially, as the Christmas period coincides with the last few days before the country leaves the EU single market.

However, on the whole, there is optimism that businesses are on track to deliver the amount that is required. The initial shock of the pandemic in February and March was the toughest challenge the industry has faced in decades, but it managed to cope well enough to keep shelves well-stocked. Many described the impact of the consumer rush to stock up as like Christmas without the preparation time. Crucially, businesses have had ample time to plan for the real thing - and will have factored in surges in demand that are likely to exceed what we’ve seen before.

Rather than the scale of demand, the biggest worry for the food industry ahead of Christmas has been uncertainty over the pattern of the demand - with so many unknown variables. As companies have been preparing over recent months, they’ve been unsure over:

  • The exact product lines a Covid Christmas will cause a demand boost or drop to.
  • The demand split between retail and foodservice.
  • How many families will spend Christmas together, and the demand implications of this.
  • The spending power of consumers given losses to income

These issues have become clearer in recent weeks, helping food businesses perfect the final touches to their strategy. But perhaps more useful has been greater collaboration between suppliers and retailers stretching back months in preparation for Christmas. While the major supermarkets also can’t be sure of exactly how the winter period will pan out, their historical sales data has no doubt been invaluable in helping food businesses set their production schedules.

Some of these insights have been shared publicly - for instance M&S say 28% of people expect to have smaller Christmas gatherings.

ERP gives food businesses an edge in Christmas preparations

When it comes to demand planning, all food businesses crave forecasts they can trust. And when uncertainty is rife, like it is for the upcoming Christmas season, having these insights is invaluable. Enterprise Resource Management solutions, among their various benefits, are designed to provide accurate forecasts that help businesses plan for the future.

It’s through technology like ERP that the food industry can truly harness a wealth of ‘big data’ - in ways that were previously impossible. Forecasting modules take account of industry conditions, historical precedent and confirmed and expected orders to create optimal production schedules. This helps businesses allocate resources, staff, storage space and time in a way that is efficient and works best for them.

Food businesses with integrated ERP systems will hold that ace card in this most unpredictable run-up to Christmas - but the technology will continue to be highly valuable as the industry experiences rapid change.

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