The coronavirus pandemic and the resulting recession has produced an odd dichotomy in consumers, who are still in a pandemic shopping mindset while having to employ recessionary buying measures and still concerned about health and well-being.
“You see consumers with coexisting behaviors when it comes to permissible indulgence, nostalgic, tried-and-true brands that are familiar,” said Ana Ferrell, VP and head of marketing of North America for Archer Daniels Midland (ADM) in an exclusive interview with WGB. “All of those consumer motivations that have been really driving center of store staples to rocket in sales, but at the same time, you also have this rapid consumer education toward health-forward benefits in immunity function, in sleep and anxiety relief, and all of these much more health-forward emerging needs states that are at the same time gaining tremendous momentum. And so it's that where we see a little bit of a dichotomy, because it's very rare to see those behaviors coexisting to the magnitude that we are seeing right now.”
Ferrell noted there are three consumer buying groups when it comes to the pandemic. The first are those that can work from home and haven’t seen their income levels change. They are driving demand for product innovation around health-forward benefits such as immunity and clean label. The second group has seen a change in income but are still earning and are therefore much more cautious about their purchases, looking for value and variety. The third group are those most impacted by the pandemic and have seen a significant loss of income. This group is purchasing heavily in center store for convenient, and likely, more processed food solutions.
But one thing all groups have in common is that they are all staying at home more due to the effects of the mandates put into place to try to curb the spread of the coronavirus. A result of all this home time is that people turned to baking.
“I think that kind of behavior at home is certainly something that we're going to see in lingering, because even though the economy is opening, restaurants are opening up, people are just too very hesitant. So you go back to the normal that we used to know,” Ferrell said. “We believe this is going to stick. During the months of March and April, when baking was all the way up there, it was growing 60%. What we see just in the last 30 to 40 days, it's still up 46% versus last year in terms of category growth and not only baking at home, but the purchase of baked goods and other types of baking related products.”
Baking at home will likely remain popular for the near future because it’s an activity that is conducive to family togetherness, but also because the younger generations are very interested in trying new things, one of which is baking and cooking at home.
What follows are excerpts from WGB’s conversation with Ferrell, which was conducted June 25, right before news broke that several states were starting to see a resurgence of COVID-19 cases.
Kat Martin:The surge in online grocery ordering during the pandemic has been phenomenal. Do you think that behavior is going to stick around or once they feel a little bit more comfortable, are people going to want to go back into grocery stores and do their own shopping again?
Ferrell: We think it’s going to continue big time. Of course it may not be to the magnitude of what we're experiencing right now with everybody avoiding being out and about if you don’t have to. But what happened was, myself included, we had not purchased groceries online up until a couple months ago. This is a new convenience that all of us are practicing. We definitely think that that’s going to continue also because a lot of this online surge in shopping behavior is happening for the first time for many consumers.
It’s been really incredible to see the channel disruption here. Because you have retail quickly benefitting from people being at home more. Some of that channel shifting is coming from convenience stores where people used to just pick up snacks. But definitely online sales is taking a different role in our lives, especially as technology evolves. And these players have the ability to break more convenient digital options. So think about with the click of a button, you get a repurchase of something that you’ve already purchased before, right. Or it could be multiple delivery options where you can actually schedule the day in the time. These are all conveniences that will very likely start to become relevant for that channel, which makes it a lot easier for people to manage their lifestyles as we all go back to the office or have a mobile lifestyle again.
As you talk about managing lifestyles, are people going to continue to spend more time with their families and continue to cook at home or continue to schedule that time to bake as a family?
I totally saw myself in your question! What we are reading through many different pieces of consumer studies is that this damage has just driven a lot of reflection. Mental health is one of the top rating concerns right now because of social isolation, because of the anxiety and ambiguity of this uncertainty in the last few months. I think people have really had an opportunity to reconnect with their families, with their loved ones. There is a different appreciation for that time that is together. There are multiple factors here between developed habits in the house because everybody’s sheltering in place, but also other factors that may be related to new ways of working by many companies and businesses with their employees, certainly more quality time and a little bit of a slow down. It’s certainly something that we're going to see.
When it comes to the pandemic, we saw basket sizes go up considerably because everyone was home for every meal, both parents and kids. For a lot of families, that is still the situation even as the states are opening up again. Are we beginning to see shopping patterns that will be the norm for the next several month? Will basket sizes continue to larger than previously?
What we are seeing right now is that the frequency of shopping has decreased except for when people go to multiple places because they are not finding what they’re looking for, which is not as bad as what it was in March. The other thing that we are seeing, which again is impacted by the financial situation and recessionary environment, is that the shopping carts are not nearly as full as they were. In the aftermath of the March/April timeframe, we are seeing consumers much more pragmatic in their behaviors. This is something that we’ll likely see as more of a consistent pattern from an economic standpoint until a new variable comes in. If we do have a wave two, we're likely going to see a little bit of a repeat set of behaviors when it comes to stocking up on soups, cereals and some of those product categories that offer the shelf life and the convenience to address the sheltering in place kind of dynamic. But we’re starting to see a little bit more of a normalization if you will.
The other thing is the supply. From a grocery scenario, just think about the uncertainties in predicting demand. It's been a little crazy and that's where we’ve seen a tremendous momentum behind private label and store brands, because they’ve really seen an opportunity to fulfill that purchase opportunity by consumers that could not find their brand. And I think the other dynamic is that store brands are now very, very trusted because those retail brands have greatly built that connection with the consumer. That’s another interesting dynamic here that we are seeing.
You mention the supply chain and some shortages and purchase limits that we saw. Do you predict any changes to the supply chain because of this?
The retail versus online channels are now giving companies more intelligence in terms of how to best prepare to meet demand in all of these different channels. That learning was not there before. There's a lot more intelligence and behaviors that are being observed that it help companies be more agile from a supply availability.
We also suffered from a marketplace perspective when you saw so much surplus in foodservice, that all of a sudden had no destination. I feel like companies have been able to better balance across channels, inclusive of retail and foodservice. Communication, big data technology, real time, visibility of demand: All of these tech-enabled tools are definitely going to be critical for companies to better manage their ability to supply the market. There are many, many companies already working on all of that. It’s never been as important to have supply chain transparency all the way from suppliers to the final consumer, whatever channel that consumer chooses to use.