SpartanNash has seen a big impact from the coronavirus pandemic. Like the rest of the industry, the crisis gave rise to a large increase in sales, however, the company has incurred $6 million to $8 million in COVID-19-related costs during the past six weeks of the quarter and is expecting a similar expense in the current quarter as it implemented new sanitation measures as well as paid weekly bonuses and a temporary $2-an-hour pay increase to workers.
EVP and Chief Financial Officer Mark Shamber declined to say how long the pay increases would last during a recent earnings call but did note that the company had pivoted its programs several times during the pandemic and that some of the current costs would be curtailed as SpartanNash continued to make changes, such as moving the sanitation process from a third party to in-house by procuring equipment that will save 75%-80% on a weekly basis.
E-commerce also has boomed during the pandemic and the retailer/distributor has seen the benefits of that as well. Dennis Eidson, president and CEO, noted that 84 of the Grand Rapids, Mich.-based company’s 155 retail locations have an e-commerce solution, with delivery making up 20% of the volume and the remaining 80% click-and-collect. “We were doing 2.2% of the volume in those stores in our e-commerce platform. And then when we got to the six weeks of COVID, where it hit, that went up to 5% of the volume in those stores,” he said. "Through the first five weeks of of the current quarter, we’re just short of 7% of the volume being done in our e-commerce platform."
While he said the company did struggle with out-of-stocks and long wait times for a delivery or pickup time slot early in the pandemic, 76% of customers said they would continue to use e-commerce solutions after the pandemic ended.
Economic Impact on Consumers
As consumers continue to be impacted by job layoffs, SpartanNash’s retail stores are seeing the effects with an increase in SNAP dollar and private label sales.
In April, the U.S. Department of Agriculture implemented the Families First Coronavirus Response Act, which granted emergency allotments totaling nearly $2 billion per month, a 40% increase, for the Supplemental Nutrition Assistance Program and also allows families to receive the maximum amount allowed.
“The EBT sales have dramatically changed for us,” Eidson said, noting that food stamp redemption was up by 45% in the last weeks of the first quarter and accelerated to 113% in the first five weeks of the current period. “So we’ve seen a significant increase in food stamp redemption into this early part of the second quarter.”
As families look for ways to stretch their food dollars, they are turning to the company’s private label products, he added, saying private brand purchases were up by as much as 60% during the quarter and remain elevated.
Some of this can be attributed to national CPG brands not being able to keep up with demand, he said. “We benefited from that consumer trial on private brand. The good news is, as we surveyed our customers about that private brand when they made that switch and they tried it, it’s like 90% of the customers said that they gave our private brand either a good or an excellent rating and the intention to repurchase was strong. So yes, it may be talking about a little bit of stress on the consumer. It maybe is about availability, but still, I think, it’s a positive for us going forward.”
As CPG companies worked to ramp up production to meet demand, some SKUs were left by the wayside and are no longer available, a trend that Eidson expects to continue. “We’ve actually got north of 2,000 SKUs that are either on a strict allocation and/or they’ve just ceased producing in order to be more efficient in their systems. So we’re feeling that. And I think going forward, like so much of what’s happened here with the pandemic, the change in behavior. I suspect we’re going to have manufacturers reducing unproductive SKUs from their portfolio," he said.