Covid 19 coronavirus: How FMCG reaped the benefits of lockdowns
The fast-moving consumer goods industry is one of the lucky ones to experience a boost in earnings and activity during lockdowns that sent most into a period of hibernation.
In the year to the middle of October, Kiwis spent $15.8 billion on packaged groceries, up $1.4b or 10 per cent, $685m on pharmacy goods (excluding prescription medicines), up 1.9 per cent by $12.9m and $1.4b on petrol and convenience goods, up 2.8 per cent or $32.8m.
Those increases are largely attributable to the nationwide lockdown that sent consumers into a frenzy in April, shopping up a storm and clearing supermarket shelves.
According to market research and analytics company IRI, categories such as frozen foods experienced significant growth through the lockdown periods, which continued even after restrictions were lifted.
The spend on icecream was up 11 per cent, chocolate up 5 per cent, while sales of frozen goods were up 20 per cent and disinfectants up 24 per cent. Beer was up 14.5 per cent, wine up 8 per cent and cider up 23 per cent.
Craig Irwin, managing director of IRI for New Zealand and Hong Kong, said grocery, having been deemed an essential service during restrictions, had had a good year despite disruption brought about by the onset of the coronavirus pandemic.
Some FMCG supermarket brands made an additional $10m to $20m in revenue in the six months of alert level restrictions, equating to increases of between 10 and 20 per cent on usual sales, Irwin said.
“There are a lot of [FMCG businesses] that are happy with their performance, but there are a few that service the hospitality industry that won’t of had a great year,” Irwin told the Herald.
The pandemic had exacerbated two emerging trends within the sector, he said: consumers increasingly looking for value, and those that were spending more on premium items. For example, buying nicer and more expensive icecream or nicer bottles of wine.
“Year to date in grocery, we’re up about 10 per cent up in value, but we’re starting to see weekly sales trend back down,” Irwin said.
“Overall, the sector is travelling pretty well and back to normal. We are starting now to see sales slowly come back to that typical sales growth of around 3 per cent.”
While sales were levelling out to normal levels, Irwin said the desire from consumers to want to shop local in both a regional and national sense had not ended, and people were now wanting less packaging and more sustainability from their products.
“Kiwis are making more conscious decisions about the products they buy.”
During lockdown, FMCG manufacturers had been forced to come to terms with consumers shopping more online for all sorts of goods and services and to make sure their products communicated the relevant information through online sales channels.
Online sales of groceries increased by 50 per cent during the first lockdown, IRI found.
Irwin said the biggest challenges facing the sector were consumers increasingly shopping online and organisations that imported product or ingredients having to deal with disruption to international supply chains as shipping and freight remained limited and delayed.
“The New Zealand industry is at the mercy of the global situation,” he said.
“A big amount of pressure is actually getting consistent supply chain supply lines. How do they respond to that? They carry a lot more stock, which comes at a big cost for businesses.”
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