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IRI COVID-19 data reveals impact of pandemic on FMCG and retail

The latest IRI Markets Dashboard report has reviewed the FMCG trends to watch and implications for food and drink brands, retailers and supply chains as the world continues to battle the effects of the coronavirus pandemic.

For the first time, the monthly report incorporates US market analysis, in addition to seven Western European countries (France, Italy, Spain, Greece, Netherlands, Germany and the UK). 

Key trends to watch in the US and Europe include:

  • After unprecedented value sales growth (up to +9% at the peak) due to panic stockpiling, FMCG demand growth remains high, but has recently slowed down in Europe (+3%), with the exception of the Netherlands (+13%) and France (+7%). In the US, demand remains 10% higher than year-ago levels. 
  • Food value sales outperform non-food, but declining trends have stabilised in most European countries and the US.
  • Private label sales are slowing down in food and drink in Europe, except in the Netherlands. Brands of mid-size and small companies are the winners in most countries. This aligns with consumer expectations for more local and healthy products. In the US private label sales have not increased as anticipated.
  • In terms of range optimisation that retailers have undertaken, private label in food and drink is significantly more impacted than brands, shrinking respectively by -6% and -3%. E-commerce is the only channel where range is not impacted. 
  • Channels: Online growth remains high. Recently hypermarkets in most countries have seen their performance increase as they are seen to be the best place for social distancing with all products available ‘under one roof’.  Despite a favourable economical context, discounters are struggling against other channels; lack of investment in e-commerce is a weakness.
  • Price growth has started to decrease (+2.7%) as promotions are back (+6.4%) in Europe with the exception of the UK where inflation remains high in food and drink (+7%) until the Every Day Low Price (EDLP) strategy that retailers have recently adopted has an impact. In the US, promotions remain down compared to a year ago, but with some easing evident. 

Opportunities in FMCG:

  • As consumers work from home and dine out less, they will continue to eat more at home, impacting the demand for convenient, healthy and affordable price options. Demand for categories such as healthy food, treats, ready- to-cook, ready meals and home-cooking ingredients will remain high: chilled pastry sales in the UK are at +31.1% value sales.
  • Shoppers have a national supportive behaviour and prefer to buy national to save jobs but at the best price. 
  • Price is important as unemployment is rising again in most European countries and the US. As promotions return to support weak demandthere is an expectation of weak prices (estimation for Italy: average 2021 -0.3%) in the context of a price war.
  • The growing EDLP strategy is mainly in the UK for the moment. It will require suppliers to adapt products to this low-price expectation.
  • Innovations will shift the focus from price to the consumer experience. Brand equity and innovation is the must-have that drives category growth and/or the footfall that retailers need: for instance, a collaboration to provide meal solutions that combine national brands and private label.
  • Range reduction is also an opportunity to refocus the portfolio and align range with demand in the ‘new normal’, ensuring that the right products with the right attributes are available in the right channels.
  • As e-commerce remains the winning channel, supply chain will need to sustain this growth, avoiding out-of-stock issues that is a blocker for shoppers. The momentum of hypermarkets in Europe highlights interest for bricks and mortar as a marketplace. 
  • The success of local and small brands can be acquisition opportunities for companies that need to expand in new consumption universes. 

Additional reports and analysis can be found on the IRI COVID-19 Impact Portal and IRI CPG Economic Indicators, which include FMCG demand and supply indexes and inflation trackers, and more on how the pandemic is impacting FMCG.

IRI is also hosting a series of in-depth discussions with C-level leaders on how businesses are managing through the COVID-19 pandemic.

FMCG retailers ‘not measuring supply chain sustainability KPIs’

New research has found supply chain sustainability is a top priority among FMCG retailers, but many aren’t formally measuring KPIs.

According to research from iPoint BiS, more than three quarters of firms (77%) have a clear plan and vision for supply chain sustainability.

However, 40% do not have formal KPIs and 55% said they only have informal measurement metrics.

Only 8% of firms have met their supply chain sustainability plan because of perceived time and effort.

While 41% of managers believe getting supply chain sustainability right will save money.

1 in 3 see supply chain sustainability as protecting against reputational damage. The same number see it as meeting stakeholder expectations.

The survey questioned 250 US and UK supply chain decision-makers and found that while 77 per cent consider supply chain sustainability a strategic priority with a clear plan and vision, 92 per cent of firms are falling behind on their commitment due to perceived time and effort.

The research looked at supply chain sustainability drivers and unsurprisingly found that cost saving is the number one goal amongst managers when creating a sustainable supply chain with 41 per cent citing it. This was well above 31 per cent looking to reduce environmental impact.

In the USA, managers are much more concerned about protecting against reputational damage, with 40 per cent more managers citing it as a sustainability goal in the USA compared to the UK.

Among the reasons given for barriers to implementing a sustainable strategy, 44 per cent say it’s because of the time and effort required, and 43 per cent say it’s difficult to prove the business case. Firms realise that sustainability is important but are finding it difficult or time-consuming to implement.

Despite increasing regulatory pressure and the acknowledgement that sustainability is a key priority, less than half of businesses have a formal measurement of the environmental impacts of their supply chain and track progress towards their sustainability goals.

Joerg Walden, CEO of the iPoint Group, said: “More than ever before, organisations are facing increased demands for insight into their social and environmental performance. CSR or Environmental Social and Governance (ESG) data is no longer just a compliance or financial issue, it has become a social issue where stakeholders, including the public, take an interest in an organization’s CSR or ESG reports. It’s clear from our research that enterprise understands this, but the evidence points to the fact that there is a long way to go before the benefits of sustainability are realized through proper measurement.”

Oliver Mueller, Co-Founder and CEO of iPoint BiS, added: “We live in an era where data can deliver easily trackable progress and actionable insights for decisions and improvements in real time. EHS and sustainability need solid reporting to make a measurable difference and to prove the business case. More than this, EHS and sustainability can rise above organisational boundaries by providing complete transparency into organisational and supply chain relationships through automation, turning sustainability into a business advantage and easily proving the business case.”