This is a guest blog post from Christopher Howard, senior channel manager at Workday Adaptive Planning. It is the second in a series on purpose-built models for Workday Adaptive Planning.
As you kick back this weekend and pour a couple fingers of your favorite all American adult beverage, consider both Workday Adaptive Planning and Revelwood have extensive experience helping beverage manufacturers meet your demand. While there are commonalities in many of the FP&A applications for the beverage industry, there are also some unique aspects to different segments of the industry. One particularly interesting area is whiskey distilling.
Whiskey holds a unique place in American history, manufacturing and innovation. In 1866 Jack Daniels became the first registered distillery in the United States. In 1964 Congress recognized whiskey as a “distinctive product of the U.S.A.” By law, American-made straight whiskey must be aged in a charred oak barrel for at least two years. Today, the volume of whiskey sales is second to only that of vodka. The whiskey market is driven by premiumization and emerging consumer trends toward brands with innovation and a diversification of their product ranges. It’s a highly competitive, growing market.
One of the trends in the market is moving toward smarter operations, decreasing production costs and increasing automation. This is particularly vital for the smaller whiskey manufacturers.
Let’s take a step back and think about the beverage industry in general. We’ll use a juice company as an example. The product ages in days. The goal is to get the product to the consumer as quickly as possible. As a result, the revenue generated by that product comes in relatively quickly and regularly.
The whiskey industry – and winemakers – face the opposite situation. Their most valuable products need aging. As I mentioned above, for whiskey it’s a minimum of two years. The actual costs for making whiskey are relatively light, but the costs for aging whiskey can be significant. It’s not just a matter of a delay in revenue, but also an outlay of money to store and care for the whiskey as it ages.
Whiskey makers face a complex situation. The market is growing, consumer demand is increasing. The way to meet that demand is to bottle younger whiskey or blended whiskey, that does not need to be aged. This approach meets the immediate market demand but depletes the amount of raw product that could be aged. That makes for a complicated problem: how much do you invest in immediate revenue – bottling raw whiskey – and how much do you invest in longer-term, higher-margin revenue of aged whiskey.
Imagine trying to plan and forecast for this scenario using Excel. It just doesn’t work.
Revelwood has the answer. It has created a purpose-built solution for Workday Adaptive Planning. Internally it’s called the “whiskey model.” The solution includes a dashboard that shows you how much raw product you need now, how much you currently have and how much you need to batch away to age.
But hold your glass a moment longer before we toast, the model doesn’t stop there. Almost all beverage manufacturers need to account for different unit or bottle sizes. They also need to account for, analyze and report on the cost of employees, storage space, physical bottles, the bottling process, and distribution channels. Revelwood’s “whiskey model” includes all that. It’s a comprehensive solution for the complexities of the beverage industry.
The U.S. whiskey, wine, beer and spirits markets are on an upswing. There’s a fair amount of M&A activity in these markets as well as smaller, niche players popping up regularly. The overall challenge they all face is how to scale their business while having an accurate view of cash flow. Funding growth requires cash for inventory and other aspects of the business. Revelwood’s “whiskey model” gives whiskey makers – and all beverage manufacturers – the insight and automation these businesses need to grow to meet market demands.
As Mark Twain once said, “Too much of anything is bad, but too much good whiskey is barely enough.” Cheers!
Read more guest posts from Christopher Howard:
Reusable Cash Flow Forecasting in the Solar Industry
FP&A Done Right: The Office of Finance’s Powerplay – Activity-Based Planning