The food and grocery industry has just experienced a period like no other. The eight or so weeks leading to our exit from COVID-19 Alert Level 3 have been a time of pressure not seen since the days of rationing during the Great Depression and World War II.

As demand in March reached a peak seen only on our busiest Christmas Eve, everyone was impacted: suppliers, supply chain, merchandisers, supermarkets and shops. Some were caught short, but others dusted off their pandemic plans and put them into effect to deal with the sudden rush on toilet paper and sanitiser, and it seemed the world was pretty close to going mad.

It’s a huge shout-out to everyone in the industry that there were no serious gaps in supply. It was a great joint effort, especially with some store staff having to deal with disgusting treatment by some shoppers.

Thankfully, in terms of challenges to the supply chain, the worst seems to be behind us, but the final impact of the recessionary wave hitting New Zealand is yet to be felt. Whether there will be sustained changes in how people shop after COVID-19 remains to be seen.

So what can the industry learn from all this? Sales data shows in the weeks before the Level 4 lockdown, people started stockpiling food and other essentials, and in the week the lockdown was announced they spent 70% more on groceries than at the same time last year. Remember those social media posts of bedrooms filled with toilet paper as shelves for that and hand sanitiser were emptied?

Data collected by retail research company IRi shows consumers spent 63% more on food and 83% more on non-food that week than they did in the same week last year.

Five weeks later – one week into Level 3 – and all categories (except baby food, nappies etc), were still trading well above last year. Total grocery was up 18%, with food up 21% and non-food 7%. Frozen food was up 41%, baking and cooking goods 25%, and beverages and dairy 20%. Though this trend will decrease as restaurants and fast-food outlets re-open, sales are expected to still be higher than pre-COVID as more people cook and eat at home.

The lockdown also saw huge demand on contactless shopping options such as online and click & collect. Both supermarket chains registered a huge jump in demand for online ordering and delivery, with delays of up to two weeks in some areas. Foodstuffs responded by creating an “essential box” of groceries for elderly and vulnerable people, while Countdown launched an e-store to help fill orders.

It seems all these trends will catch on and take hold for some time. A survey by IRi during the lockdown showed 53% of consumers made fewer trips to stock up and limit visits, 31% stocked up on pantry staples and essentials more than before, 17% bought larger pack sizes because they were more economical, and 14% bought more private label to save money. Interestingly, nearly half said they were buying enough groceries for two weeks, 8% for 3-4 weeks, and 2% for more than four weeks. Some 31% expected to keep their pantries well stocked with staple foods, 34% would make fewer trips to the supermarket, and 16% said they would keep buying larger packs. Some 24% said they would permanently buy groceries from online and click & collect and subscription-box channels.

These trends are also happening in overseas markets and seem likely to be part of the new way of doing things, at least for the short term.

Trends are also emerging around price. In times of economic crisis, people don’t have the income to eat out, and the Iri data shows consumers are already moving into what they call a “recessionary mindset” – where there’s a need for more care with expenditure and a greater focus on price as it becomes harder to balance household income with expenditure.

The next year or so is shaping to be disruptive and challenging. If your company is not a member of FGC then perhaps now is the time to talk to us about how we can help you navigate what’s ahead.

(originally published in Supermarket News NZ)

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