“We need to stay very close to consumers and their habits, needs and desires, more now than ever,” the company’s chief financial officer, Jon Moeller, said during an earnings call last month.
The early evidence suggests the shift to online buying is accelerating, consumers are buying more products for their health and home, and they are becoming increasingly cost conscious while choosing to save more.
In an environment where nearly everything changed overnight, consumer goods companies need to figure out which new buying patterns are temporary, likely to end along with lockdowns or the arrival of a vaccine, and which will linger, reshaping the way consumers spend their money for years to come.
There’s no “playbook” for this recession, she told CNN Business. “It will require us to be extremely agile and flexible for the foreseeable future.”
Their research found that the three largest UK grocers added more than 500,000 new delivery slots in the space of a few weeks, an increase of more than 30%.
Nestle’s e-commerce sales globally shot up 30% in the first three months of the year, while Procter & Gamble reported 35% growth in online sales over the same period.
E-commerce is unlikely stay at the very high level it is at now, but “we’ve reached a higher plateau to grow from,” said Jack Neele, a portfolio manager at Dutch financial services firm Robeco.
Health and hygiene
“We’re pretty confident that anything in the space of health and wellbeing is going to enjoy sustained strength,” Unilever CEO Alan Jope told analysts last month.
Unilever has seen higher sales of products such as Lipton Immune Support, as well as drinks that contain zinc and vitamin C, said Faber. The company is moving quickly to roll these out around the world, and health will remain a priority for product innovation, she added.
“We will serve what will likely become a forever altered health, hygiene and cleaning focus,” said Procter & Gamble’s Moeller, noting that US consumers are washing their clothes more frequently, adding up to more laundry loads per month.
Nesting at home
Even when lockdowns are lifted and restaurants, bars and cinemas reopen, there’s a sense that people won’t be in a hurry to go out again.
“There may be an increased focus on home: more time at home, more meals at home, more cleaning at home,” said Moeller.
For others who have spent time and money upgrading their homes and gardens, or have picked up new hobbies, the prospect of staying in is more appealing than it was before.
“Staying in is the new going out,” according to the McKinsey report. “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 new-found pleasure in nesting.”
The growth in online sales of bread machines in the United States was second only to disposable gloves in March, up 652% compared with a year earlier, according to data compiled by retail technology company Stackline. Online sales of weight training equipment (+307%), craft kits and projects (+117%), and table tennis tables (+89%) reflect that many consumers were finding new ways to keep themselves entertained at home.
In a nod to this trend, Nestlé USA last week launched a new range of health conscious ready meals. Faber, the Unilever executive, described the trend as “cocooning.”
Value and trust
Even in wealthy countries, value and affordability will be increasingly important, said Unilever’s Jope. He pointed to the company’s ability to offer products at the “incredible low price” it can in countries such as India as a “gigantic strength.”
“In Europe, we can count on stepped up negative pricing pressure as economies… go into the doldrums,” he said.
In the same vein, Procter & Gamble said it is in a better position to weather the economic downturn because its portfolio is focused on daily use items. “We have never faced the level of unemployment that we’re like to see in this country [the United States] and potentially in others, and we don’t know how long that will occur for,” said Moeller.
But, at least for now, Nestlé, Unilever and Procter & Gamble are confident that consumers will balance price against value, choosing the established brands that they are familiar with and experimenting less.
“People will go back to big, trusted brands,” said Unilever’s Faber. “They simply can’t afford to spend money on products they’re not sure of.”