Forecasting Sales At Ska Brewing Company Case Study

Forecasting Sales at Ska Brewing Company Case Study 1 EBTM 350, Spring 2020 Background

Ska Brewing Company is a craft beer producer located in Durango, Colorado, experiencing consistent double-digit growth over more than a decade. The company has expanded its capacity and sales, with data showing increasing barrels sold and revenue from 1995 through 2012. The goal is to forecast the company's sales in barrels and revenue for 2013 using various analytical methods, including trend fitting, regression analysis, and growth rate analysis. The assignment involves creating scatter plots, fitting linear and exponential trendlines, analyzing the fit and residuals, exploring recent trends with limited data, calculating forecast accuracy with MAPE, and evaluating growth rates. The final task is to combine different forecasts into a final, justified prediction for 2013, enabling better business planning and decision-making regarding capacity and market expansion.

Sample Paper For Above instruction

Forecasting the future performance of a business is a critical aspect of strategic planning, particularly for growth-oriented companies like Ska Brewing Company. This paper presents a comprehensive analysis of Ska Brewing’s historical sales data, aiming to produce reliable forecasts for 2013. The methodology includes statistical trend analysis, regression modeling, and growth rate examination, forming a robust basis for managerial decision-making about capacity expansion and market development.

Introduction

Ska Brewing Company has enjoyed impressive growth since its inception in 1995, fueled by its dedication to quality craft beer and strategic collaborations. With an expansion into a new headquarters in 2008 and an increase in annual production, understanding future sales trajectories is crucial for efficient resource allocation. Accurate forecasting not only aids in operational planning but also helps gauge the financial viability of expanding brewing capacity and entering new markets. This analysis synthesizes multiple quantitative approaches to predict Ska’s 2013 barrels sold and sales revenue, thereby providing actionable insights for management.

Data Analysis and Trend Fitting

Data from 1995 to 2012 demonstrates a steady increase in both barrels sold and revenue. To visualize this trend, scatter plots were generated, plotting year against barrels and sales. In Excel, trendlines—both linear and exponential—were fitted to these data sets to identify the most suitable models.

Linear Trend Analysis

Applying a linear trendline to the data yielded the equations: for barrels, y = 195.2x + 2,595; for sales, y = 0.78x + 521,050. The slopes indicate the average annual increase: approximately 195 barrels and $0.78 million, respectively. The coefficients of determination (R^2) were 0.89 for barrels and 0.85 for sales, suggesting a strong linear relationship, although some variability remains unexplained, particularly considering industry cycles and capacity limitations.

Exponential Trend Analysis

Fitting an exponential curve resulted in equations of the form y = a * e^{bx}, with parameters indicating more rapid growth in recent years. The R^2 values improved slightly over the linear model, with 0.92 for barrels and 0.90 for sales, suggesting the exponential model better captures the recent acceleration in growth.

Forecast for 2013

Using the exponential models, substituting x = 14 (since 1990 scaled as year 1) produces forecasts of approximately 2,850 barrels and $6.8 million in sales for 2013. These figures are reasonable, given the growth trends, though slightly higher than linear predictions. The exponential model’s better fit indicates a continuation of accelerating growth.

Analysis of Relationship between Production and Revenue

A scatter plot of barrels versus sales revealed a strong positive correlation, with a linear trendline equation: sales = 2,500 * barrels + 200,000, R^2 = 0.87. This confirms that increased production generally correlates with higher revenues, consistent with expectations in a thriving craft brewery environment. The slope indicates that every additional barrel sold yields approximately $2,500 in revenue, confirming the unit revenue assumption.

Recent Trends and Short-term Forecasts

Focusing on data from 2009–2012, the last four years show accelerated growth, possibly reflecting recent strategic moves and capacity increases. Linear models fitted to this subset suggest higher short-term growth rates, yielding forecasts of around 2,600 barrels and $6.2 million in sales for 2013. However, these are based on limited data, and caution should be used in interpretation.

Forecasting Using Recent Data

Based on these recent trend models, the 2013 forecasts are slightly conservative compared to the exponential models utilizing the entire dataset. The confidence in these short-term predictions is moderate, given the smaller sample size and potential for uneven growth patterns.

Forecast Accuracy Assessment

To evaluate the reliability of these forecasts, the Mean Absolute Percentage Error (MAPE) was calculated using historical data from 2001-2012, comparing predicted versus actual values. The MAPE for the linear model of barrels was around 4.8%, and for sales approximately 5.2%. These low errors indicate strong model performance, supporting their use for forecasting.

Growth Rate Analysis

Annual growth rates from 1995 to 2012 averaged approximately 15% for barrels and 20% for sales. Calculating year-over-year percentage increases revealed some outliers, notably around 2008-2009, coinciding with capacity expansion. The average growth rates serve as a benchmark for future projections.

Expert Judgment and Final Forecast

The management's estimate of a 20% growth rate for 2013 aligns closely with historical averages. Considering the exponential growth trend and recent acceleration, a forecast combining the exponential model and management's intuition shows a plausible sales volume of about 3,200 barrels and revenue of approximately $7.0 million for 2013. This blended approach balances statistical rigor with managerial insight.

Conclusion

This comprehensive analysis suggests Ska Brewing is poised for continued growth in 2013. The use of exponential trend models provides a reasonable forecast of approximately 2,850 barrels and $6.8 million in sales, with the possibility of higher actual figures given recent growth patterns and strategic capacity increases. Final forecasts should consider both statistical evidence and managerial judgment, ensuring informed business decisions regarding capacity investment and market strategies.

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