By: Doug Baker, Vice President, Industry Relations, FMI
Normal is a comforting word; even saying it aloud offers context and sets expectations.When it comes to the business of food and our greater marketplace, the COVID-19 pandemic has clearly upended the ordinary. Today, the meaning of normal seems to be like a goal post that keeps moving down the field, and I’m often asked what needs to happen for our supply chain to stabilize and regain some sense of familiarity in terms of operations – but the answer isn’t that simple.
A few things need to happen:
First, consumer confidence needs to improve. According to FMI’s U.S. Grocery Shopper Trends COVID-19 Tracker, concerns have shifted from consumers’ own ability to pay and temporary out-of-stocks to a broader concern about the supply chain as a whole. While consumers are still concerned about the virus, they say they are becoming more comfortable as a lower level of concern is reflected in weekly grocery spending for the household, which has dropped closer to normal levels – $134.00 for the weeks of May 13-24 versus $161 in late March. While it’s not necessarily a direct comparison, to give you context, in our yearly Trends analysis, consumers report spending an average of $121.00 per week at the grocery store.
Second, demand needs to slow. IRI reports that sales trends continue to maintain well above-average (dare I say unprecedented) levels. Fresh meat, cleaning products and shelf-stable products such as flour, beans and rice have been experiencing the most out-of-stocks throughout the pandemic. Based on projections by publicly traded companies, some consumer goods manufacturers predict that the summer months will witness more of these AWOL products flowing freely in the supply chain.
It also goes without saying that these demands put incredible stress on ecommerce solutions. Before COVID-19, our members tell me that their ecommerce sales averaged about 3% and during the height of the pandemic, some retailers witnessed 20-25% on average of total store sales in ecommerce. In our Trends COVID-19 tracker, one-fifth of shoppers reported using online for grocery items for the first time, and those that used it occasionally before are using it more frequently and some are now using it exclusively.
Third, foodservice needs to come back online. Pre-pandemic, $0.54 of every dollar was spent away from home, and the pandemic effectively flipped this scenario. More meals at home is certainly a good thing for grocery, but the food retail industry wasn’t built to absorb exclusive demand. As foodservice establishments re-open operations safely under various phases, they will also slowly begin to reinvigorate unfulfilled supplier contracts.
Fourth, the supply chain needs to consider new ways of doing business. The Wall Street Journal recently reported, “America’s food companies have been given a financial windfall and a chance to reset their relationships with major retailers. Now they need to capitalize on the moment by boosting investment in innovative and updated products as well as marketing and distribution capabilities suited to the online future.” This is one of the main reasons FMI is so focused on creating virtual opportunities to enable business planning and renewed communication. We recently conceived and began developing a new virtual event, Midsummer Strategic Executive Exchange; we partnered on a secondary procurement platform with The Seam; and we forged new ground for talent search and procurement using artificial intelligence. We also continue to bring topics, conversations together with our FMI Education and webinar series. We record the conversations so FMI members can listen in when schedules permit.
Recently, we hosted an online session Collaborating on Assets in a Post-COVID-19 Supply Chain with transportation leaders in the food supply chain who have successfully leveraged underused assets, reduced costs and improved capacity before and during the crisis.Our industry is uniquely positioned to have its pulse on shoppers’ behaviors and patterns, but our strength in understanding the consumer also made us susceptible to their anxieties during this national emergency. Still, our supply chain’s response to the shopper has never been typical, standard, average or ‘the usual,’ so we will define our new normal – together.