Demand forecasting is complex, and when sales don’t match forecasted demand, beverage manufacturers can be left with pallets of unsold product.

No matter the reason, companies need a plan to manage excess inventory. Otherwise, slow-moving products can continue taking up valuable warehouse space as new inventory enters the supply chain.

There’s no sugarcoating it: a demand forecast miss can create real supply-chain challenges.

In this article, we’ll explore the operational costs of slow-moving inventory, what manufacturers should assess while products are still saleable, and what to do when excess inventory can no longer be sold through its intended channels.

 Why Beverage Forecasts Miss and Excess Inventory Builds Up

Demand is constantly changing. And while the goal is for forecasts to match exact demand, it’s just not realistic. Let’s take a look at some of the common reasons excess inventory builds up in the beverage industry:

• Overestimating demand for new products or SKUs
• Seasonal demand falling below expectations
• Promotions or campaigns underperforming
• Changes in consumer preferences
• Large orders being reduced or canceled
• Retailers changing assortment or shelf-space decisions
• Production minimums or long production runs creating more inventory than ultimately needed

Retail pullbacks and delistings also contribute to unsold beverage inventory, highlighting just how quickly changes in retail demand can leave manufacturers with excess product.

 

The Operational Cost of Holding Slow-Moving Beverage Inventory

When we think of products that aren’t sold, the first thought is the value of the lost beverages. However, there are additional operational costs of holding inventory that doesn’t sell.

Slow-moving inventory can contribute to:

• Warehouse and refrigerated-storage costs
• Pallet positions being occupied by products that are not generating revenue
• Additional handling and transportation costs
• Reduced warehouse flexibility for faster-moving SKUs

The American Productivity & Quality Center provides further insight into these costs, noting that “Inventory carrying costs include the capital tied up in inventory as well as storage, insurance, taxes, handling, administration, shrinkage, and obsolescence.”

For beverage manufacturers, time is also an important factor. The longer slow-moving inventory sits, the less remaining shelf life it has and the fewer commercially viable options manufacturers may have for selling or rerouting it.

What Manufacturers Should Assess While the Product Is Still Saleable

So, you have excess inventory and you’re not sure what to do with it. If it hasn’t expired and is still in good condition, it may still be saleable.

That said, there are various factors that you can evaluate to better understand how long it can stay on shelves and what options are still available.

This includes:

• Remaining shelf life: The very first thing you should evaluate is the expiration, best-by, or freshness dates and how much usable selling time remains. This helps you understand how much time you have to sell the product while also giving you a timeline for when other options may need to be considered.
• Inventory details: This includes the volume of beverages, lot numbers, and where the product is currently stored. This gives you a clearer picture of your current inventory landscape so you can make more informed decisions about how to handle it.
• Customer and channel requirements: Even if a product is technically still saleable, it may no longer meet a retailer’s minimum remaining-shelf-life requirements. Review the requirements of each potential sales channel to determine where the product can still be sold.
• Brand and contractual restrictions: Discounting, resale, or alternative distribution may not always be an option. Consider whether these approaches could create channel conflicts, violate existing agreements, or affect how your brand is positioned.

When Rerouting, Discounting or Redistribution May Still Be Possible

With a well-rounded understanding of the important details of your inventory, you may decide that the products are still safe for consumption and commercially viable. By evaluating your options, you can prevent products from being wasted, providing benefits to both your company and the environment.

The exact strategy will depend on the type of product, your contracts, and additional circumstances such as remaining shelf life and food-safety requirements. For regulated products, particularly alcoholic beverages, these options should also be evaluated against applicable licensing, distribution, tax, and contractual requirements.

That said, potential options include:

• Redirecting inventory: Your beverage products may perform better in a different market. This requires research into what demographics you’re trying to reach and whether a different geographic market has enough demand for the product.
• Offering discounts: Companies can consider discounts or promotions on products that are slow-moving. This can incentivize customers to buy more of them, therefore helping you move excess products out of inventory.
• Considering alternative sales channels: Companies can consider other places where their target audience shops, such as direct-to-consumer channels, online marketplaces, or other eligible retailers and distributors.
• Donating products: Companies can also consider donating eligible surplus products. In addition to giving back to their communities, this can help reduce waste and may provide tax benefits depending on the circumstances.

When Excess Inventory Becomes Unsaleable

As we all know, products can’t stay on the market forever. A company may decide to take a product off the market if it passes an applicable expiration or quality window, no longer meets company or customer standards, is no longer commercially viable to reroute, or is subject to regulatory or contractual restrictions.

When the commercial window closes, it’s time to start thinking about the next steps. This means shifting the mindset from sales to managing waste in a way that’s compliant with local regulations.

And as beverage manufacturers face increasing pressure to meet sustainability targets, waste management strategies must also consider the environmental implications of different approaches.

While many companies may have a waste strategy in place, full beverages have additional processing needs. The packaging and liquid contents may need to be separated so that each material can be routed to an appropriate processing or recovery facility.

Potential solutions include recycling packaging materials, anaerobic digestion, and composting, with each company needing to consider its unique product characteristics, requirements, and goals before determining the right strategy.

Final Thoughts

There are multiple reasons why a forecast may miss the mark. As manufacturers adapt to changing consumer demands, the goal is to reduce slow-moving inventory and prevent products from going to waste.

That said, companies must be prepared to handle products that become unsaleable. This means having a strategy in place in advance to reduce costly delays and ensure products are handled appropriately when they can no longer be sold.

As you evaluate your own strategy, ask yourself: Do you often struggle to match inventory with real market demand? Could you benefit from improved forecasting processes? And do you have a plan in place for products that ultimately need to be processed, recovered, or destroyed?

 

Author by-line

Peter Klaich is a leading expert within the agricultural recycling and animal health market arena, known for leading National Sales at Skip Shapiro Enterprises since June 2016. He focuses on advancing sustainable recycling solutions and waste management practices across the agricultural industry.