An Application of Forecasting in the Alcoholic Drinks Industry

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Abstract
The sales of cider in the U.K. experienced an upsurge in demand during the good summer of 1975 and the record drought of 1976. Conventional linear growth seasonal forecasting systems are unable to isolate out the effects of this exceptional weather and would produce a high forecast for the (average/poor) year of 1977. Furthermore at the end of 1976 the Government imposed an Excise Duty which depressed demand still further. A model capable of isolating and measuring these (and other) effects was required and this was achieved within the framework of the Dynamic Linear Model proposed by Harrison and Stevens1 usually referred to as the Bayesian methods. The model finally included growth and seasonality plus the effect of exceptional weather together with price, inflation and the transfer effects of price changes. The forecasts have been very satisfactory and enable future alternative pricing strategies to be investigated.

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