How consumer behavior is forever changing the grocery, CPG industry
The coronavirus pandemic has upended the food industry and is forcing food retailers and CPG manufacturers to quickly adapt to a new normal. Consumer buying patterns are changing by the week and the industry must remain agile in order to stay afloat.
Nicole Collida, senior vice president of brand effectiveness for Nielsen, shared insights into customer behavior both online and offline and what these behaviors mean for the future of food during a recent webinar hosted by FMI - the Food Industry Association.
According to Collida, three main questions have emerged among food retailers and suppliers:
- How do we solve for the immediate situation?
- How do we respond quickly and plan for the near future?
- How do we keep focus on the long term in these unprecedented times?
While there are often more questions than answers, consumer trends are beginning to help pave a way forward. CPG demand is shifting both online and offline, Collida explained, and while consumer demands are changing now, they are also likely to change for at least four months into the future.
The great behavioral shift
Several stages of spending have emerged throughout March and April as consumers adapt to a new normal. Nielsen found $18.8 billion was spent on CPG items in March alone, which is directly attributable to coronavirus buying. Some $10 billion of that spend was due to increased consumption and $8.2 billion went directly toward pantry loading.
As for the channel in which consumers prefer to spend their money, a Harris Interactive and Toluna poll found that 70% of people still like to venture out to grocery stores.
In line with this trend, many shoppers are visiting different types of brick-and-mortar stores, including convenience stores and pharmacies, in order to find everything on their list -- a habit Collida thinks could continue based on their experiences at those locations. “It all comes down to experience,” she explains. “If that experience is strong, I would expect consumer behavior to shift and continue down that path.”
Likewise, brand loyalty is beginning to shift as grocers work to keep shelves stocked with a full assortment of products. Consumers have been more open to trying new brands in recent years, Collida explained, and often their satisfaction with a new brand tells them their decision to switch was a good one. “It’s unlikely that consumers will go back to always shopping the brands they’ve always shopped,” she said.
FMI’s Doug Baker, who moderated the webinar, agrees. “When it’s a matter of necessity and there might be fewer brands, it’s more about caloric intake and less about the brand,” he shared. According to Baker, brands that put a premium on being transparent will continue to win over consumers. Collida also stressed that efficacy and localization claims can help attract customers.
Highs and lows in e-commerce
In addition to shopper behavior, grocery industry e-commerce is an equally important piece of the puzzle when it comes to making strides in a post-pandemic world.
According to Nielsen data, e-commerce orders saw a major surge in March, with online CPG orders increasing by 60%. Some 37% of that growth came from new households or those that significantly increased purchase frequency, and 40% of new online shoppers were over the age of 55.
It’s clear that the growth of e-commerce at food retail is unprecedented, but with this growth has come challenges. “Online volume was pushed to its limits,” Collida explained. “Click and collect and delivery were maxed. As a result, fulfillment times for customers increased by 30% at the heart of pantry-loading.”
Along these lines, Nielsen data found that 10% of households tried to place online orders but canceled them due to undesirable delivery options.
Still, grocers achieved double-digit growth in e-commerce volume when compared to last year. After this growth peaked around March 14, however, online orders leveled off. A question the industry should seek to answer as it plans for further shifts, Collida said, is whether or not these e-commerce challenges will color consumer opinions of the services in the future.
With the majority of sales volume moving back to brick-and-mortar stores, Collida believes it’s imperative to focus efforts on both online and in-store channels.
“The growth over the past five weeks is phenomenal,” she said. “The growth that we’ve seen in recent weeks paired with the continued strength of in-store tells us it’s absolutely critical that you have a strategy to address both.”
“You have to measure total commerce,” she continued. “Measuring total commerce will allow you to meet your consumers where their needs exist as they consider shopping based on need state.”
With the majority of pantry-loading behavior now past us, Collida foresees a lower-than-expected volume of sales of pantry staples like toilet paper, household cleaners and center-store items in the weeks to come since consumers stockpiled so much early on. Products seeing increased use such as frozen pizza, baking supplies and alcohol, however, are likely to see a tail wind with sales remaining higher for some time before consumers slowly ease back into more regular buying habits.
Collida contends that it’s still too early to tell what the long-term financial impact of the coronavirus pandemic will be on the food industry, especially since current consumer behavior is different from any seen previously. Although things look similar financially to how they did after the recession hit in 2008, buying behavior is quite different, making it difficult to draw parallels between the two time periods.
This new era of consumer behavior requires a new era of measurement, Collida said. Retailers and manufacturers need to take a look at how evolving consumer patterns lead to supply chain disruptions and how that impacts demand planning. Embracing this need for new and different retail measurement can help companies conquer disruptive forces and meet consumer needs with confidence now and in the future, she explained.
“One thing is clear,” Collida concluded. “Consumer behavior has changed and it’s not going back.”
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