July 15, 2020
Six months into our new decade and we’ve lost any hope for a “Roarin’ Twenties” boom time. Months of stay-at-home orders across the country because of COVID-19 have changed the economic and cultural landscapes for years to come.
Consumer incomes and discretionary spending have significantly declined the last four months due to extraordinarily high unemployment rates. More than 17 million people were unemployed as of June 1. New jobless claims have been coming in at over one million for 14 weeks in a row. There appears to be no relief in sight and consumers have become understandably frugal with their spending, including in food purchases.
The loss in average household income has actually shifted spending priorities to food and away from mortgages and credit cards. Mortgage delinquency rates reached 7.76% in May, the highest since 2011 according to Black Knight, while lines at charity pantries and food banks have never been so long, the New York Times reported. According to a national survey conducted in May by AP-NORC Center, 70% of people surveyed now view the state of the economy as poor.
In this stressed consumer climate, home pantries are being stocked with processed, long-shelf-life dry goods and at-home-cooking ingredients versus healthy, higher-priced delicacies that were recently more preferred. Over the past five years, the purchase of home cooking ingredients has declined by 4% and meals purchased away from home (restaurant eat-in, takeout, delivery and supermarket café or prepared food within the store) has increased by 49%.
All of that appears to be quickly reversing with so many staying at home and restaurants closed or having serious difficulty in the COVID-19 environment. The significant switch to more at-home meal preparation will have a lasting effect, according to SFA research presented by Mintel. The effects can be seen in Nielsen scanning data for the 15-week period ending June 13, with packaged food dollar sales still very strong. Total CPG & Food/Beverage is up 20.6%, Food/Beverage Edibles up 24% with product category highlights that indicate the ongoing purchasing of pandemic needs like disinfectants (+181.1%) as well as several established specialty food product categories like oat milk +296.1%, fresh meat alternatives +223.3%, and baking yeast +213%.
With consumers focusing on in-home meal preparation, it’s no wonder that larger food brands reported significant sales gains during the second quarter. Brands like Beyond Meat +160%, McCormick +49%, Hormel +28%, Tyson +27%, ConAgra +21% and General Mills all reported historic, high revenue — up 21% (to $5.02 billion) compared to last year. This COVID-19-inspired consumer resurgence of home-cooking, especially baking, has all the signs of Depression-era behaviors that may be here for quite a while. A big baking season is projected for the fall and winter Holidays according to David Lockwood of the SFA 2018 research from Mintel.
As much as consumers have changed their brick-and-mortar shopping behaviors, the real shift in household purchasing is the move to ordering online. According to Adobe’s May 2020 Digital Economy Index, e-commerce shopping levels in April to May were $153 billion, 34% more than April and May 2019 and 7% higher than what was spent online during the 2019 holiday period in November/December. Only about 3% or 4% of grocery spending in the U.S. was online before the pandemic, but that’s surged to 10% to 15%, according to research by Bain & Company.
Specialty Food online sales expanded to an all-time high of $5.4 billion before the pandemic as consumers became more comfortable with the format.
“COVID-19 has changed business forever,” says John Copeland, vice president of customer and marketing insights at Adobe. “We think that over the next couple of months we will see an even bigger focus on experience-driven e-commerce, as the competition heats up where consumers are now putting so much of their attention — online.”
The hope for another “Roarin’ Twenties” era of economic prosperity with a complimentary world-changing cultural transformation isn’t turning out quite the way some of us imagined a year ago. But a “Roarin’ Twenties” 2.0 is here in its own way, and there are big opportunities for some businesses. Certainly for traditional CPG food manufacturers and grocers who modify their business models, the crisis caused by COVID-19 may offer new ways to achieve a healthier bottom line.
(Sources: Forbes, Adobe, The Associated Press – NORC Center for Public Affairs Research, Bain & Company, and Mintel Global Market Research)