Do We Have to be Slaves to Supply?

What is the cost of NOT investing in demand generation?

The attached article from The Packer shows Chilean exports on mandarins expected to increase 7.3% in 2024. 60% of the Chilean export crop winds up in the US market. It seems like a good time to be thinking about balance between supply and demand. At a very high level, more supply could lead to a battle for which supplier gains share in a more competitive market. If there is a share battle, that may very well lead to a downward force on prices to secure distribution and sales at the shelf.

This is a challenge in agricultural-based business: once the acres are planted or the eggs are set (or whatever production commitment is made up-front), the finished product is coming and producers are in a sell it or smell it situation and may ultimately resort to using phrases like "best-loss-scenario."

Now, the right number to be considering is total available for domestic consumption, and I've not looked at that number. And of course, there are other issues, for example, timing of availability, fluctuation in demand, etc. But whatever you call it--waste, shrink, loss--a mismatch between supply and demand can lead to unwelcome economic realities.

Let's for a moment treat the demand as constant and the supply as increasing. The battle for suppliers is to increase their points of distribution to increase their share of realized demand. To the retailer, this is a net-zero plan. They're simply choosing between two suppliers to maintain their sales, and they are most likely to make that choice based on price.

The only winning scenario for retailers and suppliers alike is to increase demand. There are fundamentally two ways to do that: increase effectiveness at converting existing demand or to grow demand through increasing consumer awareness of the product and reasons to buy it.

In either case, what is needed is near real-time analysis to determine, not whether or not sales at an outlet are up or down versus prior year, but how well they are doing at converting demand. We can identify which stores are underperforming to demand and we can focus at the store level on where the biggest opportunities exist for converting existing demand. Extracting more sales from existing points of distribution is in the interests of both supplier and retailer and the supplier has a tremendous opportunity to partner with the retailer to look at these opportunities and convert existing demand.

The other scenario is to drive awareness and usage to increase demand through consumer communication. In today's digital world, there is an ability to target to the audience and the geography to place those messages directly where they will have the greatest impact. There's no need to use shotguns when there are precision weapons available that are both more efficient and more effective.

In both cases--converting existing demand or increasing demand--we need the capabilities to analyze, to strategize, and act with precision. Data acquisition, analysis, and consumer messaging are not a cost center. They are part of the necessary infrastructure to bring rationality and greater stability in profits to the agriculture industry. There's no pie-in-the-sky. Everything exists today to support a more rational approach to demand. The question is: how much does it cost the industry not to use it?

#produce #dataanalysis #citrus

https://www.thepacker.com/news/produce-crops/chilean-exports-lemons-and-mandarins-will-grow-2024-usda-report-says?mkt_tok=ODQzLVlHQi03OTMAAAGQT0i6x4hkC-8gHp2zuA8vFueKSYYzrbzGPEbOlW7211cznTcU1rs5TdumozK7RYJLofIp50amXFtSBBh1vydN3tnsARjvZXEdJqGq_GxVb3WJ7b4yIVw