While we appear to have made it through the first phases of the pandemic without seeing significant food shortages (apart from staples such as flour and eggs), cracks are beginning to show that will likely get significantly wider over the coming weeks.
You’ve never been busier. You’ve got at least two full-time jobs right now - keeping your business moving forward while keeping your people safe. And yet, you know that in this constantly changing situation, you need to stay on top of the reports, the data, and the insights that are coming at you thick and fast.
And that in itself is another full-time job…
So, every few weeks we will be dedicating our weekly post and our Wednesday Webinar to combing through the hundreds of pages of content that we receive every week from around the world to pull out what you really need to know.
You can think of us as the Coles Notes of COVID-19!
This week we are featuring seven trends and tidbits that need to be in your toolbox.
1. D2C is the new B2B and B2C
If the one thing you are missing in lockdown is comfort food, delivered right to your door in less than 48 hours, then PepsiCo has the answer. Created from scratch in just 30 days, PantryShop.com and Snacks.com are two new D2C or direct-to-consumer websites where you can order over 100 Frito-Lay products, including kits of pantry favourites grouped into categories such as “Rise & Shine”, “Snacking” or “Workout and Recovery”, clearly designed to appeal to the new work-at-home masses.
And while comfort food may be one thing that your lockdown is not lacking, this significant investment and pivot from one of the world’s largest CPG companies serves to demonstrate the traction that direct to consumer models are now getting.
Heinz has made a similar move, with its Heinz to Home platform in the UK, enabling Brits to stock up on baked beans and tomato soup from the comfort of their couches.
D2C sales are expected to grow 25% this year, on the back of research that shows that 40% of consumers expect to buy 40% of their purchases direct from manufacturers in the next 5 years. The acceleration provided by COVID-19 to this trend doesn’t look like it’s going away anytime soon, with food service firms and restaurants being among those here in Canada who are pivoting to this new and growing marketplace.
2. Stick to what you know
Grocery retail has been one of the winners (if one can talk about the pandemic in such terms) over the last two months. Loblaws saw sales increase 44% immediately after lockdown began and while that peak has levelled out somewhat, data from StatsCan shows mid-April sales were still up nearly one-fifth on the same time the previous year.
However, not all brands are benefitting equally. McKinsey reports that in the US, “large and midsize brands captured 60% of that recent growth, compared with 20% in previous years”.
This buying trend of sticking to what you know and trust appears to be supported by data from GlobalData’s COVID-19 consumer survey, which shows that 61% of US consumers are trying to only buy products from well-known and larger brands.
When you add into this picture the fact that many food and beverage manufacturers and processors have reduced the number of SKUs to increase production, and the fact that in the last major downturn (2008-9) the number of new food and beverage products in retail outlets fell 30%, it does appear that the retail landscape for smaller food companies is going to become increasingly challenging. This only serves to highlight the importance of D2C as a market channel and the opportunity that it represents to build new connections and community between smaller food companies and their consumers. I discussed this in some detail in last week’s post, but I wanted to add one more data point in support: a poll showing that as the pandemic wears on, consumers are increasingly expressing their intention to buy more local products once things return to some kind of normal. Small firms, local products, D2C - there is definitely a theme emerging here that is going to shape the future of food distribution in Canada and elsewhere.
Health and wellness, already a major driver of food and beverage prior to COVID-19 appears to have become even more important. Healthy eating has remained the top priority of shoppers throughout the pandemic, and concerns around overall health and immunity, driven by the pandemic shows that nearly three quarters (73%) of consumers plan to eat and drink healthier even as a similar number (71%) report that their income has, or will be, affected by COVID-19.
This trend towards more health with less spending appears to be even stronger with Millennials, the group most affected financially by economic impacts of the pandemic. Half are exercising more, and 26% have chosen to “drysolate”, avoiding alcohol in lockdown.
As McKinsey notes, “brands should consider the implications for their strategy and communications”, particularly as it relates to emphasizing health and cleanliness in marketing messages. This, of course, puts the onus on manufacturers to be able to provide more transparency and more data to back up those claims - which is an area we know that the industry has more work to do on, particularly as it relates to supply chain transparency and responsible sourcing.
To be successful in appealing to this growing cohort of health conscious consumers, marketing is not enough. You need to be actively collecting and tracking key data around your social and environmental impact, as well as reporting KPIs on health within your facility and the health of your products.
4. Purpose, purpose, purpose!
As those of you who read these articles regularly will know, purpose is one of our biggest areas of focus at Provision. Purpose-driven companies make more money, are more sustainable, more resilient, have a North Star which guides them in challenging times, and the list goes on. Putting it simply, purpose (along with sustainability) is probably the biggest underutilized driver of business success and competitive advantage that is out there today.
And so it brings me a lot of joy to see how much purpose is front and center in so many of the articles, reports and recommendations on next steps that are being published at the moment.
As Tom Moore from bthechange notes in his May 7th article, “Purpose grew out of a post-2008 belief that business needs to redefine its role and relationship with society, and that companies can be a force for good. Instead of limiting their focus on generating value for shareholders, businesses can adopt the idea of creating shared value for all”.
The data has been clear on the importance of purpose for several years, but the pandemic is exacerbating its importance. Edelman’s’ Trust Barometer, taken at the height of the previous recession in 2011, showed that 75% of consumers agreed that corporations were responsible for making real impact in society. And Kantar's COVID-19 barometer published last month confirms that trend. Almost half of consumers (47%) feel that companies should be supporting hospitals during the crisis, and 31% want “brands to help them during their everyday life, suggesting that how brands behave now will be remembered in life after the pandemic”.
Again, we see this trend in even stronger contrast for Millennials, 23% of whom feel that brands should not just be participating, but actually leading the change in creating a new normal that is more aligned with the values of sustainability and purpose.
The findings here are stark. Simply put, if you’re just about making a buck today then you won’t be here tomorrow. What is your purpose beyond profit? What do you stand for? Why do you do what you do? And why should anyone else care. If you cannot answer those questions, then the pandemic could be the least of your worries.
5. All is not well in our supply chains
We return here to an issue that I’ve spoken and written extensively about in the last few months - the fact that our food system, and particularly our supply chains, are broken. While we appear to have made it through the first phases of the pandemic without seeing significant food shortages (apart from staples such as flour and eggs), cracks are beginning to show that will likely get significantly wider over the coming weeks.
The shutdown of the Cargill plant at High River in Alberta for nearly two weeks, a plant that represents 36% of Canada’s beef processing capacity, has contributed to between 6,000 and 9,000 head of cattle per day being backed up on farms. Many of you that I have spoken to over the last few weeks who are involved in meat processing are feeling this acutely in your plants and on your bottom lines already, and the return to operation of High River isn’t likely to make any immediate impact on the problem.
On the hog side, things may be even worse. Rick Bergmann of the Canadian Pork Council was quoted in a recent article by Evan Dyer from CBC News as saying that 42% of the hog plant capacity was closed last week and that farmers are taking a hit of between $30 to $50 per animal.
The Chicken Farmers of Canada have reduced the sector’s May and June output by over twelve percent across the country and expect to continue output cuts over the summer after the closure of much of the food service industry, responsible for 40% of Canadian chicken production.
The Government is providing $125M to help farmers manage the additional costs while waiting to get animals to processing, in a program that was last activated in 2004 for the mad cow disease (BSE) crisis. But, as Bob Lowe of the Canadian Cattlemen's Association has noted, in something of a sobering thought, BSE caused 27,000 beef farmers to leave the industry.
It is clear that our supply chains are wobbling. It is unclear, yet, what the full impact will be. What these examples do illustrate, however, is that without more sustainability and resilience in our supply chains, our Canadian food security is increasingly at risk.
6. Nesting at home is here to stay
During lockdown, staying in has become - by necessity - the new going out. Sales of bread makers have increased 652%. Ping pong table sales are up 89%. More than three times more weight training equipment is being sold this year than last.
And according to McKinsey, “once restrictions are lifted, we expect consumers to continue spending more time at home, driven by a desire to save money, persistent safety concerns and a newfound pleasure in nesting”.
The implications for food service industries, and the manufacturers that serve them, are clear, as are the responses that are emerging.
Three that caught our eye this week are Guelph Box (a local initiative), Bread Ahead, out of the UK, and Diningbond, a global movement to support restaurants.
Guelph Box was started to help local businesses in Guelph, Ontario continue to sell their products during this uncertain time. They offer boxes made of all locally sourced, hand-picked items delivered straight to your doorstep. There is no need to leave the home and you can still support local, and on top of that, $5 from every box is donated to a charity.
BreadAhead is a boutique baker, with four locations across London, all but one of which is currently closed. But seeing the huge uptake in bread making machines, the firm launched Bread Ahead School, a virtual learning platform to teach the hordes of new home bakers how to make delights such as full butter croissants or gluten free bread.
This example really speaks to understanding your currency as a business, something that we talked about in our webinar on pivoting. Your currency is the sum-total of the skills and equipment that you have as a business, not just the products you make or the services that you offer. Clearly within the skillset of BreadAhead is the knowledge of how to bake. So they have found a new way to package that part of their currency to meet changing market demand in a way that is clearly quite lucrative.
Diningbond.com is an initiative launched by Helen Patrikis, Steven Hall and Alan Aurmont to help get funds into the hands of restaurants now, even if they are temporarily closed. It functions like a savings bond or gift card, which you purchase now and can redeem once the restaurant opens for a higher value. This is a powerful way of creating cash for restaurants to ensure their survival by leveraging a community of supporters, fans or regular diners and actually giving them something to do that can help support a business.
7. Lessons from Asia
We are paying a lot of attention at the moment to China and the broader Asian region to track consumer behaviors and other macro-economic trends through recovery, and see what might be relevant for the food and beverage industry here in Canada.
One of the things we are seeing that could have significant impact here is the extension of traditional food safety controls to employees. Customers who order fast food in China through the Meituan delivery company (who have a measly 5.9 million partner retailers!) can opt to receive the real-time temperature of the delivery driver, as well as anyone else who has come into contact with the preparation of their meal. More than 80% of customers have been requesting this option.
It also appears that not all recoveries are created equally. Kantar has tracked the performance of different fast-moving consumer goods (FMCG) categories in China post-lockdown and have shown that health continues to be a key driver of consumer behavior. Fresh produce and core ingredients for home cooking are up, while alcohol, chocolate and candy are still lagging as people focus on food and beverage choices that help keep their bodies healthy in case they need to fight off infection.
Fast food franchise Myeong Dong Topokki has provided a fascinating model that food service here should consider replicating. Within a week of lockdown starting, which closed all their restaurants to eat-in, they had launched a new meal-kit delivery product for their popular Korean dishes. The firm then leveraged social media platforms to broadcast cooking shows telling people how to prepare them. This clever combination of currency and community helped ensure that overall sales did not drop during the pandemic.
I hope you have found this information roundup to be helpful. If you did, let us know and we will repeat it again in a few weeks. And if there are any other trends, reports or other tidbits of knowledge that you have seen and could be transformational for another company, then please send it through.
And so, to close this week’s article, I wanted to leave you with an extract from a powerful and moving piece written by the author Arundhati Roy, in the Financial Times.
“Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next. We can choose to walk through it, dragging the carcasses of our prejudice and hatred, our avarice, our data banks and dead ideas, our dead rivers and smoky skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it.”
It is our privilege to be ready to fight alongside you for a more resilient and sustainable food system, where companies are driven by purpose and powered by people who care equally for people, planet and profit.
By Cher Mereweather, CEO and President, Provision Coalition Inc.
P.S. – Provision has just launched R-Purpose Micro, a high-impact accelerator program to help you save money now and recover faster. Delivered over twelve weeks, with just two hours a week – it will fit into the schedule of the most over-worked small business owner. R-Purpose MICRO begins on June 5th. It’s affordable. It will answer your questions. It will quieten your doubts. Sign up today to reserve your spot.