The dangers of over-budgeting the COVID-19 sales cycle | Produce News - TheProduceNews.com

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Are you ready to face the sales figures from last year's COVID-19 panic shopping period? Think you'll match those colossal March produce numbers?

It looks like corporate management is at it again by handing down some impractical and unattainable sales targets. This reminds me of a time when I first experienced this tactic in my earlier years as a produce director. I believe it's termed, "Live and learn."

We launched a theme called Produce Spectacular. It was a four-week promotion during the summer fruit season. Produce sales were a huge success, exceeding the previous year by a whopping 28 percent.

So, what happened when the same period cycled the next year? Management expected our produce sales to exceed that 28 percent.

Realizing our produce sales budget was to exceed the previous year's summer event, we planned another Produce Spectacular promotion. Our plans were developed, meetings held, merchandising strategies set, hefty product quantities ordered, and the stores were ready for action.

Produce sales vary from year-to-year, especially when a positive or negative development influences operations. Budgets can then become blurred and unrealistic if not adjusted. Take, for example, the trucking strike that hit while we planned our second Produce Spectacular.

The strike interrupted product arrivals and interfered with our big promotion. Without the required product, the event became seriously handicapped and doomed.

After discussing the crisis with management and cancelling the promotion, the VP of sales and marketing held our feet to the fire by still expecting to achieve the original budget. As expected, we never came close to the sales target.

Who is responsible for setting the sales targets for your produce operation? The CEO, president, VP, owner? Do you have a say in the process? Like me, probably not.

Now that the COVID-19 panic-shopping period has reached its annual cycle, did your management leaders make the necessary sales budget adjustments based on reality? I am hearing nightmare stories out in the trenches that corporate gurus are expecting produce directors to exceed last year's overwhelming pandemic shopping sales. Adapting to that type of inefficient budgeting is purely unrealistic and dangerous for the entire company.

Additionally, once the budget is established, it often gets "snowballed" into becoming a pie-in-the-sky goal.

Here's how it normally works.

The company CEO hands down a 6 percent sales budget increase to the president who cushions it to 8 percent before sending it to the division vice presidents. To play it safe, the divisional VP's tack on another 2 percent and passes it on to the next level of management who in turn adds another 2 percent to the store managers and produce managers. At the end of day, the whole process winds up at a 12 percent sales increase instead of the original 6 percent company target.

This snowballing scheme may or may not surprise you. It's not unheard of by management levels to "up the ante." However, welcome to the real world.

Meanwhile, the boots on the ground are forced to work harder in the trenches, sweating to attain padded pie-in-the-sky sales goals. Those irrational budgets only lower employee morale and usually fail to be achieved. Then the foolhardy question arises in the staff meeting — "What happened to the sales?"

On the other hand, there are a few company executives who wisely fine-tuned their projected financials to a more practical level. These executives realize that it's unrealistic to repeat the COVID-19 related sales increases versus last March, especially without a panic shopping replay in sight.

In order to lessen the pain, smart retailers made an all-out effort to boost sales and gross profit one week at a time, from mid-summer 2020 through March 2021. They banked a portion in the process and built up a safety measure accrual to help alleviate some of the strain of last March. Even though sales will obviously run behind, it won't be as devastating.

Here are some principles several companies followed to meet up with the prior year's exceptional sales cycle challenge:

• Remain positive — Never give up. Stay calm. Be a challenge-solver, not a problem-complainer.

• Reverse engineer it — Start backwards. Identify the exact period of the sales burst. Consider the general amount of increase and know what you're up against based on last year's week-by-week produce sales percentages.

• Develop an action plan — The earlier you prepare in advance, the more weeks and months you will have to build up those incremental sales and grosses.

• Establish a timeline — Focus on the future. Determine the calendar timetable it will take to accumulate the numbers estimated to reach your financial goal.

• Monitor progress — Hold regular meetings. If your goal is running behind, you may need to change a few strategies.

• Teamwork it — Don't forget about the squad members. Get the entire team involved, especially at the store level. Make the sales target visible to everyone. Provide them with an updated sales review.

Developing a sales and profit target is just the start. Senior management must first commit to support it. Afterward, you will need to actualize every plan of action and endure a consistency of work in order to achieve it. Regardless of all the obstacles, the successful companies always figure out ways to make it work.

Ron Pelger is the owner of RonProCon, a produce industry advisory firm. He is also a produce industry merchandising director and a freelance writer. He can be contacted at (775) 843-2394 or by e-mail at [email protected].

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