Digital Marketplaces Thrive in Quarantine Times

Consumers under various stages of lockdown across the world are more than ever turning to online resources to shop for basic foodstuffs, bakery products included. Disheartened by empty shelves and wary to venture outside unless absolutely necessary, they are finding their footing in online offers, even at the expense of brands they were once loyal to. Private labels stand to benefit from this shift, followed by local brands; for example, as many as 65% of U.S. consumers said they have tried new brands after sheltering in place became commonplace, according to data from AlixPartners. The majority (79%) said they did so because their usual product was out of stock. “One of the likely causes is that there’s usually a lower price line for private labels, and consumers have had uncertainty or direct impacts on their incomes going through the current crisis. It’s not just a stockout that’s driving that. We saw it in the great recession in 2008 and 2009 as well,” said Randy Burt, managing director in the consumer products practice at AlixPartners.

Substitutions have been particularly high among fast-selling staples like meat and protein, dairy, pasta, canned goods, frozen foods, bread and baked products. The initial wave of panic buying and consequently depleted stocks is now winding down. We begin to discover and try to understand the new consumer, with changed priorities, needs and wants.

Cyrille Fillot, global strategist Consumer Foods, Rabobank, looked at the short-term impact of the pandemic on companies and in the long run. “The now” sees the channel shift from foodservice (where sales are down 40-80%) to food retail, with a 5-10% sales increase, he said in a webinar I recently watched. Rabobank expects a decline of 2.6% in the economy in 2020, with a huge impact in the U.S. (-6.4%) and the UK (-6.8%). Although the stock market has rebounded, many economists have negative predictions for this and next year, he pointed out.

The long-term outlook has many unknown factors still, a crucial one being the recovery pace. Differentiation will be a valuable asset for bakery products and availability: take, for example, bakeries and foodservice companies migrating to the online marketplace to stay close to stranded consumers. Cafés will eventually open again and some sort of new pace will find its footing. But consumer’s comfort with digital offerings is here to stay and it was, perhaps, only accelerated by the current crisis. This comfort might even be more appreciated when delivery times will improve.

Simply Healthy

While bakeries generally see a – sometimes overwhelming – request for their core products and are scaling back on more premium goods like some pastries, panic shopping has subsided and the flour dust settles. The new consumer bakes at home, too, so much so that the National Association of British and Irish Millers (Nabim) has teamed up with retailers to create a nationwide “retail flour network”, for example. With flour largely absent from shelves in the UK and suppliers struggling to keep up with demand, sellers who can provide the public with bags of over 3kg are listed on this map. Consumers can find packaging sizes usually reserved for businesses. Nabim, however, pointed out that the issue was not with the amount of flour available, but with the sudden surge in demand. Smaller bags normally made up just 4% of the flour market here.

Basic bakery products need not be just “basic”; the public seeks healthy goods and is trying to reboot eating habits to be as healthy as possible. It is known underlying conditions are a serious risk for Coronavirus symptoms; moreover, physical activity is mostly restrained, so the consumers will favor food that’s deemed “better for you”.

Snacking Transforms

This doesn’t mean snacking is shunned, but the powerful trend is also shifting – bakery snacks included. For example, Mondelez International was reporting “unprecedented demand” (which is now normalizing again) for its Oreo, Ritz, Triscuit and other snack offerings online. Euromonitor information showed that snacks are benefitting from family units, children included, being restricted to staying indoors, as it creates new opportunities for providers. They can expand their reach and offer more diversified and indulgent options; here, the digital marketplace is again an important asset for snack producers.

Depending on how long periods of quarantine and closures of foodservice providers last, the ‘snackification’ trend may be affected, Euromonitor highlighted in a recent webinar analyzing Covid-19 effects. Even as foodservice reopens, consumers will prefer eating at home, the research company anticipates. In this context, Euromonitor forecasts ready meals and staple foods to be better positioned than snacks. However, snacking is here to stay and will not suffer too much – a pattern shown by data from the 2008 crisis. “Affordable treats can still survive and thrive under economic instability, as people look for small ways to alleviate the depression of a more straitened existence,” according to the update shared in a webinar.

Sustainability Sets Sail

Europe’s top scientists agree that a radical change is coming in how we produce and distribute food, to ensure food security and deliver healthy diets. We have to mind the gap in the new context, in the way we think about food. Opportunities arise for local products and ingredients, for example.

The report “A Sustainable Food System for the European Union” provides a resource in reevaluating sustainability, because “business as usual” is no longer an option – as Professor Peter Jackson, the chair of the working group that wrote the report, warned. The transition to such a system implies changing the way our society consumes food, the research finds, which is best accomplished with coordinated action addressing communities. In this context, taxation and legislation are key ways to drive change.

Very importantly, “In order to transform the food system, we will also have to change current modes of governing, both by the government as well as by markets and society”, said Katrien Termeer, professor of Public Administration and Policy, Wageningen University & Research – one of the contributors to this project. “Among other things, we will need more space for experimentation, flexibility and inclusiveness in decision-making,” she highlighted.

Digitalization provides a great platform to support the market, especially at times when self-isolation is a goal. Digital-space strategies and efforts must build on bakery products that deliver what consumers want and also tick sustainability and safety check-boxes for businesses to continue long-term. It’s a fine balance; digital marketing planning can help identify creative paths to the consumer’s cart.

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