How the FMCG Industry Grew During a Pandemic | The Sterling Choice
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How did a year of COVID impact the FMCG industry?

The past 12 months have seen many industry sectors suffer at the hands of the pandemic – from leisure and hospitality to fashion and tourism.

However, despite the many negatives of Covid, the FMCG industry tells more of a positive story.

FMCG goods cover a large range of household and food items that are essential, used day in, day out. Items such as cleaning and laundry detergents, personal care, toiletries and make-up, over the counter medicines and food items all fall into the FMCG category. However, the category is far-reaching and pharmaceuticals, stationery, plastic products and consumer electronics are also classed as fast-moving. When you consider the way in which we use and replace these types of items, it soon makes sense.

 

 

What does the data tell us?

Since lockdown began, consumers have been heavily stocking up on basic FMCG and sometimes, home luxury goods – remember the supermarket panic buying for items like pasta and toilet rolls and during March 2020?

The supermarkets, initially the only places that people could cautiously visit in person, took the lion’s share of our cash – and retailers with strong digital capabilities began experiencing a noticeable growth, having delivery slots (including priority slots for those shielding) booked for months in advance.

Taking into account the search queries for online groceries and supermarkets between February and March 2020, there have been changes in the ranking for each country’s top brands. The ones benefiting from the growth of the FMCG sector have established online retail stores and engaged in local community activities.

At the same time, it’s important for FMCG brands to hit the right communication tone and not to risk having their campaigns considered inappropriate. Data shows that only brands with purpose-driven advertising and social support seem to be successful.

According to some excellent research by insight specialists Reply, growth has mainly been reported by the brands that are particularly well-positioned online (due to their high e-commerce presence). For many people in the countries under curfew, online ordering became the only alternative after the closure of many shops.

Figures suggest that between February 2019 and March 2020, there was 34% growth in the UK’s FMCG sector, just in front of a 28% growth for e-commerce. At the other end of the scale, the fashion industry suffered a 24% decline during that time – hardly surprising given the sudden lifestyle restrictions the world faced.

Evidence suggests that the FMCG industry is one of the few industries that has been able to grow during the crisis. Let’s take a close look at how European consumers reacted to the pandemic.

In France for example, the spread of Covid has led to an increase in sale of basic products, like pasta and soap. German discounters like Lidl were reported to be experiencing high demand for certain products, including dry goods and products from the hygiene sectors.

From 24 February to 21 March, Brits made three additional shopping trips per person, which equates to a staggering 79 million more shopping trips than the same time last year and spent an extra £1.9 billion on groceries. Total sales in UK supermarkets rose by 43.1% during the week ending 21 March, just before stores acted to limit numbers and enforce social distancing.

How have consumer habits changed?

There is no doubt that consumer habits have changed, possibly irreversibly since the start of the pandemic. For many, what began as an inconvenience has now become the norm.

With a halt on people leaving their home for school or work; we have turned to buying more health and beauty products online, the office takeaway coffee and sandwich has become a thing of the past and popping to the shops for a few after-work essentials has stopped.

Uncertainty early on during Lockdown:1 resulted in stockpiling long life or frozen food, but with restaurants closed, we soon became a nation of budding chefs!

From the humble banana bread (and let’s not forget the supermarket search for flour and eggs!), shoppers started to become more adventurous and experimental when it came to cooking for themselves and the family.

Many of us have built up our own repertoire of go-to meals during months of eating at home, with research from Premier Food showing that households are now having 136 million more meals together than they were before the pandemic.

And as a nation, it seems we have fuelled an obsession with health; buying more fruit and veg during the pandemic, according to Appinio. In February 2021, its ‘Corona Report’ found that 35% of Brits were consuming more fruit and 33% were consuming more vegetables (up five and six percentage points respectively).

With meals out being impossible, our health-conscious selves turned to experimenting in our own kitchen; with meat-free options like Tofu, staple BBQ favourites and even gourmet popcorn appearing on the menu. For a full report into how Covid has changed UK eating and shopping habits, this article by The Grocer explores the trends.

 

Is the FMCG Industry still raising a glass to alcohol sales?

OK – so hands up how many people started added just those few more bottles of wine, gin and beer to their lockdown shopping list?  While the drinks industry certainly hasn’t been in the mood for celebrating, the champagne corks have been popping for the supermarkets – with Tesco, Sainsbury’s and Morrisons the biggest winners.

With pubs shut for most of 2020, Brits have brought home an extra half a billion litres of booze; with wines spirits and beers the fastest-growing drinks during the lockdown lock-in. Here’s a really fascinating report into home drinking consumer habits during lockdown.

And it wasn’t just the first lockdown that got people raising more glasses at home, as Lockdown:3 got underway, Waitrose reported a 49% rise in beer, 64% in rum and a 56% jump in Tequila sales on the same time last year – proving that January 2021 was anything but dry!

But with the highly-anticipated re-opening of pubs and outdoor drinking; it seems that not everyone is queuing to support the struggling hospitality industry. Consumers may have ranked eating and drinking out as their highest priority activity after lockdown, but only two in five plan to return to the pub before August and less than a fifth immediately, according to new polling by RBC Capital Markets.

 

The future of online grocery shopping

The growth in online grocery shopping has continued into 2021, with recent Barclaycard data revealing a 115.2% increase in online grocery spend in February alone compared to the same month last year. The trend is even more pronounced among the over 65s, whose online supermarket spend more than quadrupled (+332.5%) year-on-year, according to Barclaycard.

As older people become more tech-savvy through WhatsApp family groups, Zoom meetings and FaceTime calls with grandchildren, so they began to master the art of online shopping.

Not only did this help combat loneliness for those living alone or shielding but was (and remains) a highly convenient service. Last summer, Waitrose reported its number of regular shoppers over the age of 55 had trebled since the start of the year – from eight per cent to 23%.

Infact, almost six in 10 Brits (57%) say they’ll continue to buy at least some of their groceries online even after all restrictions end, according to a recent survey of 2,000 UK consumers by Opinium Research on behalf of Barclaycard Payments.

 

Hygiene fears drove sales – but not as you would expect

With anti-bac wipes and sanitising hand gel become scares amid the growing concerns of keeping hands and surfaces clean, it seems that demand for other hygiene products wasn’t as high on the consumer agenda as other items.

However,  FMCG employer Unilever reported increased demand for household cleaning products, such as Cif surface cleaners and Domestos, which campaigned to educate consumers about targeted cleaning of high-touch surfaces in the home to help prevent the spread of coronavirus.

And while laundry products saw a 16% rise in sales, cleaning supplies fell by 3%. And when it came to hygiene –  soap (8%), toothpaste (4%) and deodorant (1%) saw a slight increase in sales. Some suggest that this is because people washed their hair less often (with not having to leave the house for work) and or putting off shaving.

 

How did brands respond to the COVID-19 crisis?

Brands faced – and still do – a challenging time. As if advertising in a noisy FMCG marketing isn’t tough enough in ‘normal’ times, the pandemic brand experience required ads to be useful, show empathy, be part of the community and support the cause; using Covid as a platform to talk to people working from home, self-isolating, taking on new hobbies and even telling people it’s ok not to be ok – you will remember the Tesco #naughtylist Christmas ad! Tesco has recently won more fans since pubs and restaurants re-opening, using ads that urge the public to support their local establishments rather than purchase alcohol in Tesco stores.

Another great brand responses came from Unilver, which ramped up its corporate social responsibility with a message from the CEO, donating funds to the COVID Action Platform of the World Economic Forum, adapting its manufacturing lines to produce sanitiser for use in hospitals, schools, and other institutional settings and donating food, bleach and soap to developing nations, especially in areas with limited resources and fragile healthcare systems.

At the other end of the scale, KFC’s signature tagline “finger lickin good” left a sour taste amid people’s growing awareness of hand hygiene and health. The company was forced to shut down a “finger lickin” video campaign after acting on consumer complaints immediately withdrew the ad.

 

 

What does the future of FMCG & consumers look like?

Having established that people’s shopping habits have changed considerably over the past year – from what they buy to how they buy it and where they buy it from – what does the future look like for the FMCG industry and its consumer?

These have been unprecedented times, and the choices that many consumers have made may have initially moved them out of their comfort zone. But the pandemic has proved to many that change isn’t always something to be feared or resisted. An interesting read on brand loyalty in Marketing Week suggests that almost three-quarters of consumers (72%) have changed stores, brands or the way they shop since the onset of the pandemic. And many of these changes look set to stay, with 84% of those who tried a new brand planning to stick with it.

Millennial consumers have been most likely to shift their habits, with 85% stating they have tried a new shopping behaviour since Covid began.

Looking ahead, 30% of consumers are optimistic the economy will rebound within two to three months and will grow just as strong, or even stronger, than before the pandemic hit. This compares to 17% in November 2020 – with the FMCG sector going from strength to strength, we are looking forward to seeing what is in store in the coming months.

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