Fausto Pucheta Fortin
Data Enthusiast | Data Practitioner
Analysis Report: Sales Growth Analysis and Inflation Argentina 2023
Analyzing the interplay of Consumer Price Index and the total sales in a retail grocery store in Resistencia, Chaco, Argentina during 2023.
Executive Summary
In 2023, Argentina's economic landscape faced unprecedented challenges, marked by unexpected primary election outcomes, increased uncertainty, and a looming recession exacerbated by soaring inflation. These factors significantly impacted the retail sector, including our grocery store, where rising inflation and shifts in consumer behavior presented ongoing challenges to maintaining sales growth. Despite a challenging environment, the overall sales growth had a positive
Analysis:
Our analysis focused on the interplay between the Consumer Price Index (CPI) and our store's total sales across three categories: general sales, Alcohol & Tobacco, and Food & Non-alcoholic Beverages.
Key Findings:
Total cumulative sales growth positively surpassed cumulative inflation by 12.9%
Cumulative sales growth in Tobacco and Alcoholic Beverages where also 75.3% higher than cumulative inflation
Cumulative sales growth of Food and Non-alcoholic Beverages suffered and cumulative inflation was 4.8% higher
Recommendations:
Looking ahead to 2024, we recommend:
Strategic pricing by implementing targeted promotions or discounts during slow months (April, May, and June) to mitigate the impact of price increases on consumer spending.
Seasonal planning by identifying and anticipate consumer demand with data insights to implement promotions or special offers during peak seasons.
Product diversification by expanding existing product lines to cater to evolving consumer needs.
Strengthened supplier relationships by maintaining open communication with suppliers about market conditions, potential cost adjustments, and exploring long-term agreements or partnerships that provide stability in pricing to sustain growth.
Emphasizing data-driven decision-making by regularly update and refine data collection processes to ensure accuracy and relevance in the context of inflation.
These strategic steps aim to position our grocery store competitively in the dynamic economic landscape of 2024, ensuring continued resilience and success.
Table of Contents
Introduction
The economic landscape of Argentina in 2023 witnessed unprecedented challenges, marked by the surprising outcome of primary elections, increased uncertainty, and the looming threat of recession with soaring inflation.
The aftermath of the primary elections, characterized by the unexpected success of Javier Milei and the subsequent economic measures, set the stage for a complex economic scenario. The Central Bank's intervention to stabilize international reserves and the government's decision to maintain a fixed exchange rate until October added layers of uncertainty. Projections of a 200% inflation rate in 2023 and a challenging socio-economic landscape further compounded the situation.
Amidst these challenges, the retail sector, particularly our grocery store, grappled with the impact of political and economic shifts. The escalation of Consumer Price Index (CPI) in Argentina, influenced by corrections in utilities and exchange rates, posed a considerable challenge to maintaining sales growth. The need for quick responses, such as price markup and targeted promotions, became evident to counteract the adverse effects of inflation on consumer behavior.
In this report we will examine the interplay between the Consumer Price Index (CPI) and the total sales of our grocery store throughout the 2023 period.
The analysis will be dissected into three layers:
General
Products of Alcohol & Tobacco
Food & Non-alcoholic Beverages
Based on the findings, the subsequent sections will provide direct and actionable recommendations.
Last but not least, the final section of this report will summarize the key insights, recommendations, and strategic steps outlined throughout the analysis. This concise and practical approach aims to provide a clear roadmap for our grocery store's future success in the dynamic economic landscape of 2024.
Data Source
Sales Data:
As the bookkeeper and analyst for our retail grocery store located in Resistencia, Chaco, Argentina, I designed and implemented a custom Excel CRM for efficient data entry and sales tracking. Additionally, I developed a Python pipeline for ETL (Extract, Transform, Load) procedures. The data presented in this analysis is derived from our database system, offering a proper view of sales performance throughout 2023.
CPI Data:
CPI data or "Índice de Precios al Consumidor" (as known in Argentina) is provided by the INDEC and measures the change in prices of goods and services representative of the consumption expenditure of households residing in the selected area compared to prices prevailing in the base year.
The National Institute of Statistics and Census (INDEC) is a decentralized public agency of a technical nature, within the orbit of the Ministry of Economy of the Nation, which exercises the superior direction of all official statistical activities carried out in the Argentine Republic.
After a revision of the methodological strategy, the INDEC began to disseminate the consumer price index for Greater Buenos Aires (CPI-GBA) as of June 2016. Since July 2017, the CPI expanded its coverage to the entire country, with data representative of the national total and the six statistical regions (Greater Buenos Aires, Pampeana, Northeast, Northwest, Cuyo and Patagonia).
You can find more in this link: https://www.indec.gob.ar/indec/web/Nivel4-Tema-3-5-31
Key Findings
a. Total Sales & CPI Analysis for 2023
Total sales accumulated growth surpassed accumulated inflation by 12.9%
The year began solidly in February, with total sales reaching ARS$912,365.
As the inflation increased, so did the decline in sales, especially during slow months (April, May, and June), being May the lowest in sales performance at ARS$ 673,757.
Notable spikes in inflation were observed in November and December, reaching 160.8% and 234.9%, respectively. However, a steady increase in consumer purchases since August culminated in an outstanding total of ARS$1,595,890 in December.
Detailed:
Election year, a significant government change and a weakened national economy were the key elements of this landscape. Price markup and targeted customer promotions were implemented to counteract the impact of inflation, posing major challenges.
Despite these difficulties, consumers displayed resilience throughout 2023, culminating in a noteworthy ARS$1,558,740 surge in total sales. This increase was primarily attributed to end-year bonuses and holiday sales.
Ultimately, the accumulated sales growth outperformed overall inflation, concluding 2023 with an outstanding 247.8% growth.
b. Sales & CPI Analysis of Alcohol & Tobacco (2023)
Cumulative sales growth in Tobacco and Alcoholic Beverages 75.3% higher than cumulative inflation
Peak numbers for both sales and cumulative inflation in December 2023 (ARS$808,290 and 213.7% respectively).
There was a significant decline in sales during a substantial leap in inflation in November (from 134.2% to 161.6%), closing at ARS$399,880.
The major sales comeback in December closed the accumulated growth rate at 289% totally outstripping the accumulated inflation by 75.3% in this category.
Detailed:
Fluctuations in the sales growth rate indicated the sensitivity of Alcohol & Tobacco sales to inflationary pressures. Despite that, there was an extraordinary surge in December's sales (ARS$808,290) mostly correlated with seasonal factors such as holiday and end-year bonuses. The overall data showcase both resilience and vulnerability.
c. Sales & CPI Analysis of Food & Non-alcoholic Beverages (2023)
Cumulative sales growth of Food and Non-alcoholic Beverages suffered and cumulative inflation was 4.8% higher
2023 started promising in February with a total sales of ARS$312,025 but later followed a steady decline during the slow months of April and May.
The increase of accumulated inflation from 21.3% in February to 50.6% in May impacted significantly sales performance (ARS$180,640) making it the slowest month in the year.
A steady increase in sales can be observed in June at the face of two great spikes of CPI during November (175.8%) and December (261.6%) but it was not enough for this category to surpass the accumulated inflation.
Detailed:
In February, a promising start was marked by a 51.8% month-over-month sales growth compared to January. Despite this positive momentum, the subsequent rise in accumulated inflation led to a substantial 172.7% decline in total sales.
A favorable trend materialized in June, showcasing a consistent uptrend in sales, reflecting robust consumer spending until December. The year concluded with an accumulated sales growth of 255.8%, falling slightly short of outperforming the year's accumulated inflation, which stood at 261.6%.
Recommendations
1. Strategic Pricing and Marketing Initiatives:
Regularly reassess product pricing to align with inflationary trends observed throughout 2023.
Introduce targeted promotions or discounts during slow months (April, May, and June) to mitigate the impact of price increases on consumer spending.
Communicate transparently with customers about pricing changes, providing value-driven propositions.
2. Seasonal and Holiday Planning:
Develop seasonal promotions or special offers to attract and retain customers, especially during peak seasons.
Anticipate increased consumer demand during holiday seasons and adjust inventory and staffing accordingly.
Leverage data insights to identify specific product categories experiencing heightened demand during certain seasons.
3. Diversification of Product Portfolio:
Introducing new products or expanding existing product lines to cater to evolving consumer needs.
Conducting market research to identify emerging trends and aligning the product mix accordingly.
Collaborating with suppliers to source innovative and in-demand products.
4. Strengthening Supplier Relationships:
Open communication with suppliers about market conditions and potential cost adjustments.
Exploring long-term agreements or partnerships that provide stability in pricing.
Collaborating with suppliers to identify cost-saving measures and operational efficiencies.
5. Data-Driven Decision Making:
Regularly update and refine data collection processes to ensure accuracy and relevance in the context of inflation.
Train staff members to utilize data analytics tools effectively for real-time insights into consumer behavior.
Explore advanced analytics techniques to uncover deeper patterns and trends influenced by inflation.
Conclusion
The year 2023 presented challenges with fluctuating inflation, impacting consumer behavior and purchasing power. Strategic alignment of pricing and marketing became crucial in navigating these challenges. The surge in total sales, particularly in December, highlighted the resilience of consumer spending and the need for adaptive strategies.
The performance of categories like Alcohol & Tobacco and Food & Non-alcoholic Beverages emphasized the link between inflation and consumer demand, influenced by seasonal factors, holidays, and economic transitions.
Looking ahead, the recommendations outlined in this report serve as strategic guideposts to put our grocery store in a competitive position.
Embracing data-driven decision-making, seizing seasonal opportunities, diversifying our product portfolio, and strengthening supplier relationships will enable us to sustain growth in the upcoming period of 2024.