Never in the history of modern food retailing have consumer behaviours, lifestyles and purchasing habits been so profoundly influenced by a single event more than COVID-19. The unparalleled upheaval set in motion by the prolonged pandemic has had cascading ripple effects that have accelerated the pace of change across all businesses and industries—but none more than grocery, where nearly every single aspect of the consumer experience is being put to the test.
And though it’s too soon to tell how long the uncertainty will linger, the shifts brought about when stay-at-home orders went into effect—when grocery stores became lifelines for communities—have since found consumers adapting their behaviours in different ways than witnessed at the peak of the pandemic.
To help provide clarity and foresight into the rapidly changing retail landscape being reshaped by a world-changing phenomenon, Nielsen breaks down the top eight ways Canadian consumer behaviours are evolving and how businesses will need to adapt to the realities of a new era.
1. Consumer Confidence Levels Will Remain Fragile
Contrary to what many people initially believed would be a relatively brief disruption of a few weeks or months prior to resuming their regular routines, the prolonged pandemic has put a severe damper on consumer sentiments. With the majority of consumers eying an economic recovery that will take far longer than originally anticipated, their outlook and spending habits are changing as the pandemic grinds on.
When comparing the pre-pandemic consumer journey with the present, insights from Nielsen and the Conference Board Survey from the first quarter of 2020 (February) vs. the second quarter of 2020 (July) found declines across the board.
2. 2020 Grocery Sales Are Posting Record Growth Levels
COVID-19’s impact on weekly sales during the early weeks of the pandemic was unprecedented, accounting for eight of the top 10 sales week in the past year between March 7 and April 25 and attributable for 80% of the year-to-date increases above expected 2020 gains. Year-to-date 2020 dollar sales of FMCG posted record growth levels (chart 7) during the 32-week YTD period through Aug. 15, 2020.
3. Supply Chain Struggles are Real—and Costly
Even though FMCG sales have stabilized, there is still work before many brands to meet demand, as evidenced by the 60% of shoppers who faced out of stock items in July, -11 points vs. May, according to Nielsen’s most recent Shopper Shifts Report to a New Normal Report.
Not surprisingly, the top five categories impacted by out-of-stocks include the usual suspects: hand sanitizers, antibacterial cleaners, paper products, fresh food, bread and baked goods. However, if brands don’t get their supply chains squared away, the implications of out-of-stocks are severe and projected to account for lost sales 66% of the time, according to insights from Nielsen Homescan Panel’s COVID-19 Moving Forward Survey, August 2020, Canada.
4. Two Types of Consumers Emerged: Insulated and Constrained
On top of changing habits, future socio-economic consequences are weighing much heavier on spending decisions, and the impact across consumer groups isn’t equal in the COVID-19 behavioural reset, which has polarized into two camps of consumers: constrained and insulted. Constrained spenders—those whose incomes have been negatively impacted by COVID-19—and insulted spenders—those whose incomes have not been seriously impacted. Constrained spenders will spend to survive, compared with insulated spenders, who may adjust situationally (or with cautiousness for the future) even though their incomes remain unchanged by the pandemic.
Household spending on FMCG is growing faster among insulated spenders, whose purchases increased +11%, according to Nielsen Homescan 22-week data through Aug. 1, 2020, while constrained spenders’ purchases comparatively rose by 7%.
In terms of the two groups’ responses to the basket reset, insulated spenders will more carefully manage basket size as they grow accustomed to keeping a larger and broader stock of “essential” products while constrained spenders will minimize stockpiling due to economic conditions that will force limitations on basket choices.
5. The Four Faces of Behavioural Reset
Nielsen has identified four emerging patterns that can help predict the drivers of pandemic purchase decisions moving forward: a basket reset, a homebody reset, a rationale reset and an affordability reset. All four segments are underlined by rising unemployment levels and economic concerns.
Carman Allison, Nielsen’s Vice President of Consumer Intelligence, Canada, highlights why it’s important to get ahead of these expected consumer responses. “Canadian consumer behaviour is substantially stirring and fundamentally shifting,” he says. “The unmatched macro conditions of a pandemic driving economic recession are forcing consumers to rethink how they shop and what they buy.”
Nielsen’s read into both point-of-sale and consumer data further shows that changes are already unfolding in households across the world. “Habits are changing at a daily and weekly pace,” adds Allison. “Due to the rapid pace of change, we no longer live in a world where we have the luxury of time to adjust to new conditions. With this in mind, the implication for brands trying to meet the new needs of consumers is that being fast and focused is now essential.”
6: DIY is H-O-T
Do-it-yourself (DIY) has become the operative term for consumers in the stay-at-home economy due to unprecedented and continued demand for a variety of self-serviced consumer needs. As we previously reported, baking became a favorite activity for consumers under quarantine. From the strong 201% rise of yeast sales in the 24 weeks ended Aug. 15, 2020, to newly discovered baking enthusiasts around the globe, consumers are more willing to try and rely on self-managed routines.
When asked about what food and meal planning and preparation activities consumers have done more of in the past month, Nielsen’s Moving Forward Survey (August 2020 – Canada) found that cooking increased 46%; trying new recipes, up 43%; baking rising by 30%; using meal deliveries 11% more; purchasing grocery prepared meals 10% more; and ordering 5% more meal kits.
A breakdown of the following DIY segments, meanwhile, shed light on the strongest performing categories in six sectors, according to Nielsen MarketTrack’s YTD 32-week insights ending Aug. 15, 2020 vs year ago.
7. Battling High Grocery Bills
A majority of Canadians—66%—are trying to spend less on their grocery bill, according to Nielsen Homescan Panel insights from its August 2020 COVID-19 Moving Forward Survey. At 58%, insulated consumers are obviously concerned about the size of their average grocery receipt, albeit less so than the 89% of constrained consumers who are committed to spending less on groceries.
8. Online Shopping Is Here to Stay
Of the many ways consumer spending has changed as a result of COVID-19, the shift to online grocery shopping is at the top of the list in 2020, with a whopping 86% increase among all retail formats, per recent Nielsen MarketTrack insights. The surging rate of grocery e-commerce in the second quarter was fueled by increased buyers, frequency and baskets.
While much uncertainty remains in terms of how long the pandemic will linger, COVID has escalated unprecedented adoption rates that would have taken years to achieve pre-pandemic and online shopping is here to stay.