{"id":4251161,"date":"2020-10-21T14:04:00","date_gmt":"2020-10-21T12:04:00","guid":{"rendered":"https:\/\/www.deptagency.com\/insight\/how-has-covid-19-changed-the-face-of-fmcg\/"},"modified":"2020-10-21T14:04:00","modified_gmt":"2020-10-21T12:04:00","slug":"how-has-covid-19-changed-the-face-of-fmcg","status":"publish","type":"article","link":"https:\/\/www.deptagency.com\/en-uki\/insight\/how-has-covid-19-changed-the-face-of-fmcg\/","title":{"rendered":"How has COVID-19 changed the face of FMCG?"},"content":{"rendered":"
\n\t\n\t<\/svg>\n\t\t\t\n\t\t\tBack to all articles\t\t<\/span>\n\t\n<\/button>\n\t\tHow has COVID-19 changed the face of FMCG?\t<\/h1>\n\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t<\/picture>\n\t\n\t<\/div>
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\n\t\tMellissa Flowerdew-Clarke\t\t
\n\t\tVP of Marketing, EMEA\n\t\t\t<\/div>\n<\/div>\n\t
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\n\t\t\t\t\t21 October 2020\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t<\/div>\n<\/div>\n\n
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\n\t\t\t\t\n\n\t\tWhen COVID-19 hit, the nation went into panic mode. Consumers rushed to supermarkets, panic buying staple items en masse; hoarding wiped the shelves clear. Businesses rushed to cope with supply and demand while still keeping customers and employees safe. And specialists rushed to predict our untold economic future. Now that the dust has settled, introducing a far more digitised way of life, where do FMCG retailers stand and what trends hold true to projections made during the peak of the pandemic?\t<\/h2>\n\n\n\t\tAcross the board, high street retail suffered substantial losses, with shops like DW Sports, Laura Ashley and Debenhams going into administration. In the U.K.,\u00a0Retail Sales<\/a>\u00a0reported the monthly retail sales volume in March dropped 5.1%.\u00a0

According to ONS, total retail sales volumes have decreased by 4.8% up to August 2020, as all sectors except for food and non-store retailing saw a fall in sales. From March 2020, consumers shifted to spending in essential food stores and online retailers, as many stores within non-food retailing faced temporary closures. Total non-food stores fell by 18.2%, with a strong decline of 30.1% for clothing stores.

Though brick and mortar general stores were hit hard, grocery retailers saw a surge in sales to the tune of\u00a043% growth<\/a>\u00a0the end week ending 21 March \u2013 the peak of panic buying. While shoppers did make 100 million fewer store visits, spend per trip increased by 50%. This surge has since evened out, with food retailing reporting a 4.4% growth from Jan \u2013 August.\u00a0

This may sound like good news for grocery store profit margins, but what is the cost of doing business during COVID?\u00a0Morrison\u2019s spent \u00a3155 million\u00a0<\/a>\u00a0on safety measures to protect employees and consumers. Tesco has reported an increase in food sales of 50% however, it estimates incurring costs ranging from\u00a0\u00a3650-\u00a3925 million<\/a>\u00a0due to the coronavirus. Though these numbers sound devastating, the increase in sales is anticipated to offset these costs, resulting in grocery retailers still turning a profit.\t<\/p>\n\n\n\t\tA focus on life’s essentials\t<\/h2>\n\n\n\t\tWhen faced with a crisis, access to the basics is pushed to the forefront of concern. In the early months of COVID, the nation seemed to have a shortage of the simplest of necessities like toilet paper and non-perishable food items. This deficit was fueled by panic buying, as people frantically prepared for the worst. The coronavirus has highlighted concerns about the fragile complexity of supply chains, in light of the unforeseen strain on the system. But, in actuality, if the masses had gone about their normal shops, shelves would have remained stocked.\u00a0

Anticipation of the worst case scenario by the general public meant supermarket visits were made less frequently, but with the volume of purchases much larger in quantity. Shops struggled to keep shelves stocked, and when people couldn\u2019t find what they needed in-store, they turned to online shopping for these needs.\u00a0

At the height of the online grocery shopping surge, stores like Ocado, Sainsbury\u2019s, Tesco and Morrisons struggled to keep up with orders, leaving some with no choice but to implement virtual queues. In fact, according to an article published by the\u00a0BBC<\/a>, worldwide Google searches for \u201cfood delivery\u201d and \u201clocal food\u201d reached all-time highs in April. In the UK, people were six times more likely to search for \u201cveg boxes\u201d than a year ago.\u00a0

As normality, albeit a new one, begins to resume, new trends emerge pointing to what seems to be a permanent shift to online shopping for all items, especially food and drink. The face of retail has been dramatically altered, forcing FMCG businesses in the food and beverage industry to adapt at an alarming pace, and they have.\t<\/p>\n\n\n\t\tSurvey says delivery for all\t<\/h2>\n\n\n\t\tGlobalData<\/a>\u2019s analyst, Thomas Brereton, stated, \u201cIn the UK, online grocery retail is expected to grow 25.5% this year \u2013 well ahead of the 10.2% growth previously forecasted. On top of the initial increase in volume demand, a continued reluctance to venture to stores for the rest of the year will bolster online market growth over a longer period than in store.\u201d

So far, the numbers support these statements.\u00a0Tesco doubled their online delivery slots in the six weeks prior to May, according to reports made by the supermarket in\u00a0The Guardian<\/a>. In July, Ocado\u2019s chief executive, Tim Steiner, commented in an interview with the\u00a0BBC<\/a>, \u201cAs a result of COVID-19, we have seen years of growth in the online grocery market condensed into a matter of months.\u201d\u00a0
Waitrose<\/a>\u00a0conducted a survey of 2,000 people nationally, that showed 77% of people now do at least some of their grocery shopping online, compared to 61% a year ago. This survey also showed approximately 60% of people have shopped online for groceries more frequently since the pandemic, with convenience being listed as the reason for 41% of participants.

Additionally, it was revealed in this same survey that 32% of people aged 35-44\u00a0 now shop online at least once each week, double the number in 2019.\t<\/p>\n\n\n\t\tRise of independents\t<\/h2>\n\n\n\t\tThough it may seem as if online shopping and large box stores are seeing the most growth due the current climate, this is not the case.\u00a0Reports from\u00a0The Grocer<\/a>\u00a0show that in the week ending 17 May, independents actually prevailed over the U.K. Big Four, with record growth of 63.1%, nearly double the growth of Ocado and ten times that of ASDA.\u00a0It is believed that this is in part due to consumers wanting to support local businesses in times of uncertainty, the lack of available delivery slots, and wanting to avoid crowded aisles at picked-over grocery stores. However, as the months pass the main focus for FMCG still seems to be online shopping, and the implementation of D2C is gaining significant momentum.\t<\/p>\n\n\n\t\tD2C in record time\t<\/h2>\n\n\n\t\tAccording to\u00a0Internet Retailing<\/a>, March \u2013 June resulted in over 85,000 businesses either launching online shops or joining marketplaces. Prior to the pandemic,\u00a070% of growth<\/a>\u00a0for consumer products companies resulted from D2C. Now, with the staggering increase in online shopping, more and more brands are quickly adding D2C to their business model.\u00a0

Brakes<\/a>, the U.K. food delivery service for nursing homes, schools and catering companies, is no exception. Contrary to their name, Brakes stomped on the gas and went\u00a0D2C in 7 days<\/a>\u00a0to regain a foothold in the market, recovering from plummeting deliveries and revenue. Launching on 30 March, Brakes opened to the public, delivering food across nine regions in the U.K.

Larger transcontinental brands like Heinz, Pepsi and Nestle, have also opened D2C online shops to serve a label loyal customer base. A good choice, considering\u00a049% of UK consumers<\/a>\u00a0during lockdown tried to only buy from their favourite brands. Additionally, GlobalData found 50% of consumers stated that familiarity, trust-worthiness, and how \u2018risk-free a product feels\u2019 has the greatest influence on their purchase choice.

Independent companies are also joining the world in D2C. For example, Cecily Mills crowdfunded\u00a0Coconuts Organic<\/a>, a small producer of plant-based ice cream in Cornwall, expanding her B2B business model with her own online store on Shopify. Mills commented in an interview with\u00a0Business Leader<\/a>, \u201cby developing a reliable and cost-effective way to send ice cream by post, we have suddenly opened up a whole new side to the business.\u201d

In light of the changes to the landscape of the food and beverage industry, businesses continue to push the envelope when it comes to online visibility and delivery of products. It\u2019s becoming apparent that online grocery shopping is, indeed, the new normal.\u00a0\t<\/p>\n\t\t\t<\/div>\n\t\t\t<\/div>\n\n\t\n\t