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Allexo Insights

COVID-19: The impact on FMCG and retail so far

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Sam Musgrave COVID19, FMCG, News & Views...

COVID-19: The impact on FMCG and retail so far

FMCG and retail is tough. To survive, and indeed thrive in a marketplace constantly challenged by tighter margins and customers' ever changing expectations, brands and retailers have had to become polished, agile, well oiled machines.

The slightest bump in the road can send the machine into chaos. Initiatives implemented to reduce risk, grow efficiency and cost effectiveness can lead to some potentially serious gaps in the supply chain.

And COVID-19 is certainly a bump in the road!

The latest grocery market share figures from Kantar show that due to COVID-19 March 2020 has become the busiest month ever recorded for supermarkets.

The figures are literally quite staggering:

  • Grocery sales rose by an astonishing 20.6% in the last four weeks, 7.6% in the last 12 weeks.
  • Sales amounted to £10.8 billion, beating even the busiest Christmas.
  • 88% of households visited a grocer between March 16 and March 19, making an average of five trips each.
  • Within these 4 days we have made 42 million extra shopping trips.
  • The average spend per supermarket trip rose by 16% year on year to £22.13, in the week ending 17 March.
  • There was a clear trend towards shopping more regularly, rather than significantly increasing the amount purchased per trip.
  • On average, households increased their spending by £62.92 over the last four weeks.
  • Kantar claims it was just a minority of people engaging in stockpiling. For example, only 6% of liquid soap buyers have taken home extraordinary quantities, and only 3% of dry pasta shoppers.
  • Children's medicine sales were up by 228% versus the same period last year.
  • Toilet tissue sales were up by 140% and facial tissues up by 154%.

Fraser McKevitt, Head of Retail and Consumer Insight at Kantar, comments:

“It’s inevitable that shoppers will add extra items to their baskets when faced with restrictions on their movement and possible isolation if one of them becomes unwell, but many families are also adjusting to having more mouths to feed."

McKevitt continued “We expect restrictions on movement and relatively full grocery cupboards will mean the incredibly high levels of shopping trips made in March will drop off over the coming weeks. Regular trips to smaller local stores are likely to continue, as people avoid travelling and queues at stores with one-in-one-out policies in place.”

The need for insights in real time has never been more important for brands and retailers. The coming weeks will see unprecedented levels of change to how we all do business and consume.

Retailers and brands have quickly adapted and have been tweaking operations to adapt to the growing demand. Many supermarkets have seriously reduced the product ranges they stock and manufacturers have prioritised producing essential products.

Of course, there has been no real suggestion that there will be food shortages, currently the main problem has been logistical challenges. However, over the coming weeks, potentially months, an extra 503 million meals, 40% of our food supply, will have to be prepared and eaten at home every week as restrictions remain on schools, pubs, cafes and restaurants opening. Making high demands very likely in the coming weeks.

Whilst demand will clearly remain, as supermarkets become better at restocking quickly, logistics normalise in the supply chain and customers panic less, and eat up what they have already in their overfilled cupboards, we are expected to return to normal; although it will most certainly be a new normal. The overall takeaway so far in this ever changing story is the growing importance of online.

Surprisingly, despite government’s advice to get groceries delivered where possible, there has only been a small increase in online grocery sales so far. 14.6% of households had their groceries delivered, up from 13.8% in March 2019. However, this of course is mainly due to a lack of delivery slots and these figures should dramatically increase over the coming weeks as supermarkets increase their delivery capabilities. Tesco and Morrisons alone have recruited over 10,000 new delivery drivers in March.

COVID-19 is clearly speeding up the growth of online shopping as we are all stuck at home, with many shoppers purchasing groceries online for the first time. Once people are in the habit then they are highly likely to continue to do so in the future, ushering in a dramatic increase in online food shopping sooner than might have happened organically.

The real potential for problems lies with manufacturers, many whom of course are global, who may be faced with transport restrictions, staff shortages and supply and demand delays.

COVID-19 is likely to impact and change FMCG and retail forever, although in many ways these changes would have happened anyway, they are just going to happen a little quicker.