A Spoonful of Sugar and a Pinch of Panic: Managing the Candy-Coated Chaos of Social Media Supply Chains

Many of you know me through this newsletter and the personal anecdotes I occasionally share here. However, very few know that my favorite candy, which I rarely indulge in, is Swedish Fish—the Lamborghini of gummies (if this reference escapes you, then you don’t know me at all!).

Imagine my excitement when a former student emailed me detailing the story of a fifteen-fold increase in demand for Swedish candy in January:

“The source of the order explosion was a short video that influencer Marygrace Graves posted to TikTok. In the clip, Graves described her weekly ritual of going to a BonBon location in Williamsburg, Brooklyn, for a bag of decadent multicolored treats, which cost $18 a pound. In a dimly lit video shot inside her apartment, she shows off the contents of her gummy haul—strawberry squids, sugar skulls and sour shrimp—while chatting about her preferences. ‘I like the ones that you feel like you’re gonna break your teeth on,’ she says.”

And in case you’re questioning the impact of a single influencer:

“Within a couple of days, her post had more than a million views. When Graves returned to BonBon on a Friday night two weeks later, she found a “mob scene.” Customers were waiting hours in line to experience the premium candy for themselves. ‘It's like in Willy Wonka,’ Graves says of the fascination with the Swedish sweets. ‘You’re like, I want to eat that. What is that?’”

Six months in, the Swedish candy craze is still going strong. TikTok apparently has over 120 million videos reviewing these sweets, sparking trends like “candy salad” videos where people mix the colorful treats and share personal stories. Vlogs about visits to BonBon, with its playful pink exterior and rainbow candy hauls, are racking up views, with one creator calling it the biggest hype in New York City.

Businesses are struggling to keep up —as mentioned, BonBon’s orders have jumped fifteen-fold since January, forcing them to hire more staff. The surge has also hit stores like Sockerbit in LA, Sukker Baby in Toronto, and Sweetish in Pennsylvania. Both Sweetish and BonBon had to warn customers about shipping delays, opting to air-ship candy from Sweden to keep up.

As much as I keep my candy habits under wraps, my fondness of the newsvendor problem is well-known to my long-time readers.

The challenge here is investing in capacity or building inventory when demand spikes unpredictably due to a social media frenzy. 

Is this phenomenon real, or just anecdotal?

Can businesses even prepare for something like this?

What are the consequences of not preparing? 

Strawberry Squids and Social Contagion – The Power of Opinion Leadership

The candy's rapid rise in popularity due to influencers showcases the impact that opinion leaders can have on consumer behavior and, consequently, supply chains.

The question is whether the article is anecdotal or something witnessed on a larger scale. In particular, how do opinion leadership and social contagion within social networks affect the adoption of and demand for new products?

In their seminal work, my colleagues Raghu Iyengar and Christophe Van den Bulte explore the dynamics of opinion leadership and social contagion in the context of new product diffusion. They utilize network data from a pharmaceutical company to assess the role of sociometric and self-reported opinion leaders in the adoption of a new prescription drug.

The study reveals that opinion leadership is a complex construct, where sociometric leaders (those central in a network) and self-reported leaders (those who perceive themselves as influential) play distinct roles in the diffusion process. 

The original sentence describes the roles of sociometric and self-reported leaders in the diffusion of new products. Here’s a more tangible and quantitatively informed version:

The research reveals that sociometric leaders—those who are central in social networks—play a crucial role in the early adoption of new products, as they are often among the first to try due to their numerous connections. For instance, a sociometric leader might have a network of 20 other physicians, leading to a faster spread of a new drug within that group. On the other hand, self-reported leaders—those who perceive themselves as influential—are more prone to adopting behaviors from others, particularly when they see multiple peers adopting a product. This distinction is important because the timing and influence of these leaders can determine how quickly and widely a product gains acceptance across the broader network.

Most importantly, the paper shows that social influence and social propagation matter when estimating demand for a product, though it’s far from simple. 

For the Swedish candy market, the study highlights the importance of identifying key opinion leaders to manage demand effectively and the fact that the surge in demand driven by influencers like Marygrace Graves underscores the need for supply chain managers to monitor social networks closely and anticipate potential spikes in demand. 

Banana-Caramel Bubs and the Beta-Binomial – Social Networks and Supply Chain Demand Variability

As the article illustrates, the widespread influence of social networks on consumer demand presents significant challenges for supply chains. 

Social media amplifies both consumer choice and demand volatility, complicating a firms’ ability to make strategic capacity decisions. As I often mention in my articles, when present, volatility hurts supply chains more than just an occasional shift in average demand, regardless of how intense that shift may be. 

The paper “Estimating demand variability and capacity costs due to social network influence: The Hidden Cost of connection” seeks to understand how social influence affects demand uncertainty and the corresponding operational risks, with specific attention to supply chain capacity costs.

Menezes, da Silveira, and Guimarães propose an analytical model that incorporates three primary factors of consumer choice: intrinsic preferences, inner-circle social influence, and global market share. The study uses beta-binomial distributions to model demand under the influence of these factors, with particular attention to the variability introduced by social networks. The model is tested using simulations based on the small-world network (SWN) model, which captures the clustering and path lengths typical of social networks.

The study finds the following:

Demand Variability Due to Social Networks: Demand under social network influence is better described by a beta-binomial distribution rather than the traditional binomial distribution. The former allows for greater flexibility in modeling the variance of demand, which increases under social influence.

Impact on Capacity Costs: Higher demand variability translates into increased capacity costs. Companies that underestimate demand face opportunity costs due to unmet demand, while those that overestimate face idle capacity costs. This variability complicates traditional capacity decision-making frameworks, such as the newsvendor model.

Service Level Deviation: Relying on binomial distributions for capacity planning can lead to significant service level deviations when demand is distributed according to a beta-binomial model. For example, a capacity level designed to meet 90% of demand under a binomial distribution may only meet 50% of demand under a beta-binomial distribution, illustrating the hidden cost of social influence.

But first, what is the difference between the two distributions?

The following graphs show the expected lost sales and unused capacity under social network influence when only intrinsic preference matters (binomial) and when social influence matters (beta). They illustrate the impact of using the binomial distribution to forecast demand when in fact, the beta-binomial distribution should be used —for the same mean, the beta-binomial has a significantly higher standard deviation.

The broader implications for supply chains:

Adapting Forecasting Models: Supply chains need to adapt their forecasting models to better account for the increased variability brought about by social media influence. The beta-binomial distribution provides a more accurate representation of demand, particularly in markets where social media strongly affects consumer choices.

Capacity Planning Adjustments: Supply chain managers should revise their capacity planning strategies to accommodate the higher levels of variability introduced by social networks. Traditional methods, which often assume a binomial distribution of demand, may no longer be sufficient in a world driven by social media.

The ongoing increase in demand for Swedish candy exemplifies the challenges described in the paper. BonBon and Sweetish must manage unpredictable demand surges, which are difficult to forecast using traditional models. By adopting models that account for social network influence, these companies can make more informed decisions about inventory and capacity, potentially avoiding costly stock outs or excess capacity. But how often can we anticipate influencers to influence product demand? 

The Power of the Underdogs: Why Bottom-Ranked Reviewers Matter More Than we Think

The problem is that you can’t just hunt down sociometric leaders. 

So the question is: How do top- and bottom-ranked reviewers influence product sales, and what are the implications for supply chain management?

Yazdani, Gopinath, and Carson (2018) conducted an empirical study using sales data for 182 new music albums released on Amazon.com over three months, coupled with user review data. The analysis extended across different product categories, including music and cameras, to test the robustness of their findings.

The study uncovered several key insights into the influence of top- and bottom-ranked reviewers:

Interestingly, bottom-ranked reviewers generally have a more significant impact on product sales than top-ranked reviewers. Despite the assumption that top-ranked reviewers (those with higher visibility and credibility) would have more influence, the study revealed that bottom-ranked reviewers, who tend to be more relatable to the average consumer, drive higher sales.

Top-ranked reviewers are more influential in specific contexts, particularly for very new products or products with high variance in existing reviews. Their perceived credibility becomes more valuable when consumers face uncertainty.

Review content also differs between the two groups, with bottom-ranked reviewers writing more informal, social, and emotionally engaging reviews. These characteristics resonate more with mainstream consumers, enhancing their influence on sales.

Over time, the impact of top-ranked reviewers diminishes as a product ages and the number of reviews increases, whereas the influence of bottom-ranked reviewers grows stronger.

Today’s first conclusion? Don’t chase after top-ranked reviewers! 

Demand Forecasting: Companies must account for the influence of different types of reviewers in their demand forecasting models. While top-ranked reviewers may cause early (or, in the case of candy, sudden) spikes in demand, bottom-ranked reviewers can sustain or even increase demand over time, requiring supply chains to remain agile and responsive.

Inventory Management: The preference for bottom-ranked reviewers, who are more relatable and influence long-term sales, suggests that businesses should be prepared for sustained demand rather than just short-term surges. 

In the case of Swedish candy, the surge highlights the need for a nuanced approach to managing supply chains. The influence of bottom-ranked reviewers suggests that supply chains should be prepared not only for initial demand spikes but also for sustained consumer interest, driven by relatable and emotionally engaging content.

While trying to meet the demand created by these influencers is very tempting, the surge will not be long-lasting. However, this doesn’t mean that firms need to disregard these surges completely, but rather wait for the second wave (of lower-tiered influencers) which might be more enduring, thus giving firms time to build enough inventory to fulfill it. 

What Can Supply Chains Do?

So how can supply chains cope with demand volatility, especially when influenced by social media?

Companies must rethink their supply chain strategies. One practical approach is the tailored base-surge policy, which Jan Van Mieghem and I introduced in our “Global Dual Sourcing: Tailored Base-Surge Allocation to Near- and Offshore Production.” This method involves maintaining a stable supply base from a cost-efficient source while reserving surge capacity from a more responsive, albeit more expensive, source. This strategy allows companies to balance cost efficiency with the flexibility needed to respond to sudden demand increases.

The key tools and conclusions from the tailored base-surge policy include:

Cost Efficiency with Flexibility: By using a low-cost base supplier for regular demand and a flexible surge supplier for unexpected spikes, companies can manage costs while ensuring they can meet sudden increases in demand.

Risk Mitigation: This approach helps mitigate the risks associated with demand variability, such as stockouts and excess inventory, by allowing supply chains to adapt quickly to changes in consumer behavior.

Long-Term Competitiveness: Integrating tailored base-surge policies into supply chain management provides a strategic advantage, enabling companies to handle the unpredictable nature of demand in the social media era while maintaining a competitive edge.

For retailers like BonBon and Sweetish, adopting a tailored base-surge strategy could be crucial in managing the sudden demand spikes triggered by viral social media content, ensuring they can meet customer expectations without sacrificing cost efficiency.

The method was developed to address the complexity of global supply chains, but it can also be very effective in addressing the complexities of social media influencer-infused demand. 

Conclusion: Every Day is Lördagsgodis

As Swedish candy purveyors are learning, every day can feel like Lördagsgodis (Saturday candy) on social media. The sudden surge in demand for their products underscores the importance of understanding and managing supply chain dynamics in an era where a single TikTok video can change everything. 

These companies can survive and thrive in this new landscape by learning how global supply chains are managed, and by adopting flexible, data-driven approaches.

With a nimble approach to supply chain management, these companies can navigate the candy-coated chaos of social media—ensuring that the only thing in short supply is the patience of those waiting in line.