The landscape of the food industry is rapidly changing as the global pandemic uncertainties take hold of our world. While it's true, everyone must eat, the food industry may also have long-term impacts thus. In this article, we will walk you through the effects of COVID-19 in the Grocery industry. Based upon the recent FMS Pulse, same-store sales increased 60 percent in the last couple weeks of March compared to the same period in 2019.
Effects of COVID-19 in the Grocery Industry
The mix of this business has dramatically shifted with the surge in packaged goods. The produce business has increased in sales while the loose product has seen some decline. Another example worth mentioning is the "ready-to-eat" meals. Our culture has shifted that consumers have forgotten or never learned how to prepare a meal from scratch. Prepared meals have been on a growth trend for many retailers; however, the pandemic has created a shift back to packaged goods and non-perishable items.
Per FMS 2019 Independent Grocers Financial Survey, profit leaders shrink (2.1%) was one percent lower than the average independents (3.0%). Therefore, understanding these changes in buying behavior will keep being a key performance indicator to focus on controlling shrink escalation.
Manufacturers are pulling back their promotional spending programs. At the same time, consumer packaged goods (CPG) vendors shift into reconfiguring their operations to keep up with the swelling demand. Traditional retailers have long been dependent on CPG trade funds to drive sales and support promotional activity. Over the past few years, many major players are focusing more on store brand value and premium specialty products. The more unique the products, the more profitable. Retailers that have made this transition should have some shelter from the depleting of vendor funds.
Independent retailers have a massive advantage with the local market knowledge and can rearrange priorities based upon their community needs. A long-term example can be seen with the number of international operations taking over traditional chain brick & mortar locations. Will consumers reward local retailers with increase loyalty for stepping up in the community?
Once this pandemic is over, retailers will need to think about the cross-shoppers. How will they retain their most valued customers? Consumers trying online shopping during this outbreak will get a taste of convenience that retailers will have to overcome. The question is–– once shoppers try e-commerce alternatives, are they bound to adopt it? If so, grocers need to prepare to tackle the market with offline and online strategies after everything gets back to normalcy.