Estimate the sales in volume of instant coffee in UK for the next 4 years

Riccardo asked on Sep 15, 2018 - 3 answers

Hey guys,

Do you know how to estimate the sales of instant coffee in UK for the next 4 years? I don't have any historical data, I just have the sales of the current year 47,000 tonnes. My approach would be to multiply the sales of the current year per (1+@*GDP pro capita growth rate) where @ is a a factor between -1 and +1 that indicates how much the sales of instant coffee is correlated to the GDP pro capita growth rate, I assume that is positive and around 0,5

Do you think my approach is correct?

3 answers

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Anonymous replied on Sep 17, 2018

Hi Riccardo,

I don't think that's a bad approach - is GDP change specifically provided? It is not what I would instinctively have gone for, but it does make sense.

I agree with Angelo's point about market trends, as I suspect this may impact the total volume more than GDP change. GDP change may show a correlation with spending, but doesn't shed light on what customers are buying. For example, could an increase in GDP mean that more people are going for ground coffee or specialty coffees? With the advent of coffee snobs and hipsters and the relatively low cost of coffee, I would imagine the trend for instant coffee purchase is on the decline, even with GDP growth.

You could also segment your data and make some assumptions about the factors e.g.

Private customer vs companies (e.g. firms providing free coffee for employees, cafes or restaurants using instant coffee)

Generally you'd segment if you thought there was a difference in purchasing habits, so whatever comes to mind is fine.

Hope that's helpful!

Kay

Elias
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replied on Sep 17, 2018
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It can't be said often enough: With market sizing, the old Confucius saying is gospel:

'The journey is the destination’

It is not key to come up with THE answer but a plausible and intelligent way to AN answer.

So: Yes, your approach would be a good starting point. Instead of GDP you might also use population growth. But then I would also go in the direction of modifying this initial assumption (instant coffee consumption is closely correlated to GDP or population) and discuss why that may or may not be the case (market trends towards ground or whole bean coffee, fewer coffee drinkers, fully automated coffee machines becoming cheaper...).

Again: The goal is an insightful discussion about why you are picking the assumptions you are making, much less whether they are true or not.

Angelo replied on Sep 16, 2018

Hi, I think that the correlation to GDP is a good point but it is not the only factor. Try to develop the problem by using more Marketing notions (customer segments, competition, trends for each factor etc.).