covid-19: impact on cpg and retail za & global · 150 200 250 ‘pandemic’ (search term)...

March 27, 2020

COVID-19: IMPACT ONCPG AND RETAILZA & GLOBAL

IRI Thought Leadership

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2

Since the virus was officially identified in early Jan it has spread rapidly across the globe

Dec 31

China alerts WHO

to many unusual

pneumonia cases

in Wuhan

Jan 7

Confirmation that

officials have

identified a new

virus

Jan 11

China reports

first death

Jan 20/21

Confirmed cases

outside mainland

China in Japan, South

Korea, Thailand & US

Jan 23

Lockdown in

Wuhan

Jan 30

WHO declares

global health

emergency

Feb 2

First death

outside China

Feb 21/23

Virus surges in Italy

as officials lockdown

towns

Outbreak in Korea &

Iran

Mar 5

First South African

tests positive for

Corona VirusMar 15

Ramaphosa

declares a National

State of Disaster

Mar 23

21-day lockdown

announced to

begin on Thursday

at midnight

Jan

2020

Feb

2020

Mar

2020

Apr

2020

Mar 11

WHO declares

Corona Virus

outbreak a

Pandemic

Current

Data Week


Covid-19 was declared a ‘pandemic’ on March 11

0

50

100

150

200

250

‘Pandemic’ (search term)Interest over time

South Africa Worldwide

The term pandemic was being used in the media and public

discourse long before COVID-19 was officially declared as such by

WHO on March 11. It aligns with the stockpiling

phenomen that has occurred, and since intensified.

Top 10 trending questions in South Africa

1. What is corona virus?

2. What causes corona virus infection?

3. How did the new corona virus outbreak start

4. How is corona virus spread?

5. How to prevent corona virus infection?

6. How many people have died from corona virus

infection?

7. Has the corona virus appeared in SA?

8. What are the symptoms of corona virus infection.

9. Where has the corona virus spread to?

10.Where does the corona virus come from?

https://www.health24.com/Medical/Infectious-diseases/Coronavirus/your-

10-most-searched-coronavirus-questions-answered-20200305

WHO

declares

pandemic

SA President

announces

State of

Emergency

https://www.health24.com/Medical/Infectious-diseases/Coronavirus/your-10-most-searched-coronavirus-questions-answered-20200305


The global pandemic continues to grow and South Africa is officially in lockdown –

27 March 2020

The number of infections in the US surpassed Italy and China

South Africa goes into lockdown for 21 days and reports the first two deaths in the Western Cape

https://www.worldometers.info/coronavirus/Last updated: March 27, 2020, 10:17 GMT

https://www.dailymaverick.co.za/article/2020-03-27-u-s-has-most-coronavirus-

cases-in-world-next-wave-aimed-at-louisiana/?utm_source=Ince_FirstThing

https://www.bbc.com/news/world-africa-52058717

https://www.worldometers.info/coronavirus/

https://www.dailymaverick.co.za/article/2020-03-27-u-s-has-most-coronavirus-cases-in-world-next-wave-aimed-at-louisiana/?utm_source=Ince_FirstThing

https://www.bbc.com/news/world-africa-52058717


South Africa currently has 927 positive cases, and 2 deaths reported as of March

27th

Cases Deaths

Days since first reported case

21 86 64 55 55

542,031 globally 24,365 globally


Current data trends reflect Containment phase, but the Lockdown phase in SA also reflect

global trends

Market Response to COVID-19: Expected Phases

Some Consumer Segments, Including 65+, are Likely to Exhibit Behaviors Within the Next Phase Before Their Market Moves into it

PhaseGov’t / Societal

ResponseCharacteristics

Consumer

ResponseExpected CPG Impact

I MonitoringMonitoring for potential incidence but no formal

restrictions

Passive Prevention

Increased sales of virus prevention items, e.g., hand sanitizer, HH cleaners, vitamins

II Containment

Self-quarantines, social distancing, large group

event cancellations, increased work from

home

Active Preparation/Prevention

Above +• Stock up on necessities and symptom relief, e.g., frozen

and shelf-stable foods, toilet paper, sports drinks, cold medicine, pain relief

• Start of declines in away-from-home consumption and small-format sales

III Lockdown

Enforced quarantines and travel restrictions; significantly limited personal interaction outside the home

Cocooning

Above +• Increased sales of products enhancing at-home

experience, e.g., DVDs, streaming services, salty snacks, ice cream, chocolate

• Rapid increase in online purchases and frictionless food delivery; massive declines in away-from-home consumption

• Likely to see an increase in Home Maintenance & Garden categories as shoppers look to DIY during lockdown

Note: Data reflected in report does not include Costco or Total e-Commerce.

Mar 27th to

16th Apr

Current

Data Week

Next Data

Week

March 16th

to Mar 26th


SA has joined a third of the worlds 7.8 billion people currently living in full or partial lockdown

No one will go to

work/school & you must

stay at home

Exemptions: Health

works, SAPs, Military, lab

services, media

Only Essential Services

will remain open;

including banking

systems & food

production & supply

Government to

engage with

manufacturers of

necessary goods &

services to ensure

supply and prevent

panic buying

4m employees will

benefit from the

Employee Tax

Incentive Scheme; a

R500 subsidy per

month for the next 4

months

Compliant companies

whose turnover is

<R50m will be allowed

to delay 20% of their

PAYE liability over the

next 4 months

Dept of Small Business

Development will assist

distressed SMEs with a

R500m fund

The IDC & DTI have

formed a R3b relief

package to assist

vulnerable firms & fund

companies involved in

fighting the pandemic

NPA will

prosecute

companies

involved in over

pricing

Banks will be

exempt from the

credit act to

develop strategies

for debt relief

Grocery stores will

only sell essential

foods; this excludes

Liquor, cigarettes,

homewares, & clothing


Week ending March 22nd was the beginning of panic buying as consumers ensured

they are prepared for the lockdown

16/02/2020 23/02/2020 01/03/2020 08/03/2020 15/03/2020 22/03/2020

Total All Products

% Change in Units sales vs. Year Ago

Start of panic

buyingStock-up shops

Mar 5

First South African

tests positive for

Corona Virus

Mar 15

Ramaphosa

declares a

National State of

Disaster

Mar 23

21-day lockdown

announced to begin

on Thursday at

midnightSunday Wk

ending date

Units per Basket

nearly doubled vs. wk

ending Feb 23


% Contribution to Unit growth

vs. Prior week

17%

83%

LSM 1-6

LSM 7-10 accounted for higher growth in 40 of

the 50 top categories, with some exceptions

such as Airtime, In-store Bakery and Deli

LSM Contribution to Growth

*IRI POS data and Census Data

The lockdown announced on 23 March was 2 days before the average pay day in SA, and LSM 7-10 was able

to increase purchasing – highlighting the inequalities in SA as >80% of the growth came from LSM 7-10.

LSM 7-10

Top 5 categories (by unit Growth vs. Prior wk)

LSM 1-6 LSM 7-10

Frozen Fish Frozen Fish

Frozen Vegetables Frozen Vegetables

Healthcare Fresh Poultry

Frozen Convenience Healthcare

Fresh Poultry Toiletries & Medicines


Panic buying and stock piling take hold of South Africans across retail


Containment

% Unit growth for w/e 22 March 2020

vs. Prior Week vs. Week Last Year

Shoppers are stocking up on Medicinal & Hygiene categories, as health concerns

and protecting their families take priority over beauty products

Toilet Paper

Wet Wipes

Medicinal

Household Cleaning

Pet Care

Oral Care

Hand Wash

Personal Care

Cosmetics

Hand SanitiserDeclining

Hand Sanitiser

Hand Wash

Wet Wipes

Medicinal

Toilet Paper

Household Cleaning

Pet Care

Oral Care

Personal Care

Cosmetics

+50% - 100%

+20% - 50%

+0% - 10%

> +100%

+20% - 50%

Declining

+0% - 10%

+50% - 100%


Cheese

Canned Food

Dry Pasta

Frozen Veg

Rice

Maize

Cereals

Ice-Cream

Frozen Meat & Fish

Biscuits

Snacks

Confectionery

Bread

Yoghurt

Containment



+20% - 50%

+0% - 10%

+50% - 100%

+10% - 20%

Yoghurt

Frozen Veg

Ice-Cream

Canned Food

Dry Pasta

Cereals

Rice

Cheese

Maize

Frozen Meat & Fish

Biscuits

Bread

Snacks

Confectionery

+20% - 50%

+0% - 10%

+50% - 100%

Within Grocery shelf staple foods experienced especially high growth, as well as

categories which meet the demands of families with children


Tea & Coffee

Milk

Juice

CSDs & Water

Containment



+20% - 50%

Declining

Milk

Tea & Coffee

CSDs & Water

Juice

Declining

+50% - 100%

Milk, Tea & Coffee appear to be considered as more essential than other beverages such as Juice

& Soft Drinks. How will this change after the announcement of no sales of alcohol during lockdown?


Wine

Tobacco

Spirits

FABs

Beer

Containment



Declining

+0% - 10%

Tobacco

Wine

Beer

Spirits

FABs

Declining

Liquor & Tobacco growth was normal, but this will change as SA moves into lockdown and

shoppers stock-up


During the current week out of stocks are apparent across Medicinal, Hygiene and long-lasting

edible staple categories

MaizeDry Pasta Convenience

Soup

Total Canned

FoodMedicinalBath Soaps Household Cleaning

Frozen Veg Frozen Protein

Substitutes

Wheat

Categories with the most out of stock instances

March 24th vs. March 15th (pre-State if Disaster announcement)

*IRI stock on hand data from 1 retailer


GLOBAL Consumer Response to Containment: Stock-Ups. Similar trends to South

Africa

From “Hamsterkäufe” (“Hamster Buying”) to Pantry Stocking, Consumers

Reacted to Increased Threat of COVID-19 by Purchasing Essential Products

.

Source: IRI data; % change vs. year-ago based on local currency

United States France U.K. New Zealand Italy

Hand Sanitizers 124.5% Hand Sanitizers 123.6% Flour 101.3% Disinfectants 154.5%Canned

Vegetables73.7%

Spray

Disinfectant44.9% Cheese 83.8%

Household

Cleaning100.8% Canned Meals 132.6% Canned Meat 51.4%

Personal

Thermometers42.6% Flour 58.5%

Rice, Pulses,

Cereals96.6% Rubber Gloves 69.4% Flour 40.6%

Sanitizing Wipes 27.6% Rice 47.8%Food

Supplements87.5% Rice 63.1% Rice 34.0%

Powdered Milk 22.3%Dried Beans /

Pulses48.2% Facial Tissues 72.5% Canned Soup 59.8% Canned Fish 26.4%

CONTAINMENT

LOCKDOWN


What are retailers doing in SA to provide for the nation?

Limits per customer Hygiene Community

Shoprite will pay a R102m bonus to

frontline shop floor and distribution

staff for continuing their work during

the outbreak

Online purchasing continues

PnP offered a Pensioners hour,

opening early to accommodate

elderly customers

Woolworths stopped food

demonstrations

Retailers have offered hand

sanitizer next to baskets and

trolleys to disinfect before use

Stores are being cleaned

more frequently

Retailers have requested

customers to shop

responsibly

Most stores have

implemented restrictions on

certain products

Stores were recently limiting

the number of shoppers in

store at one time


Implications for FMCG Manufacturers

Demand Planning / Supply Chain• Adjust production to consumer demand shocks and potential short term and long-term scenarios. • Account for potential of weak Easter season, as confinement takes hold. Seasonal meals might be off the

table, sales of seasonal confectionery treats may suffer.• Consider role in and demand for “fun” products and engagement strategies as consumers spend more time

at home and stress levels increase.• For impulse categories, determine ways to trigger demand online, as shoppers reduce in-store visits.• Review and plan for likely supply-chain impacts, especially for raw materials that originate in China and other highly

impacted countries. As the impact of shuttered facilities takes hold, shortages and logistical bottlenecks will become an issue.

Marketing• Consider shifting advertising to social and digital channels (vs. out of home) as consumers shift their

entertainment hours to sources they can access from home.• Keep a close pulse on consumer sentiment and adjust communications accordingly.• Assess long-term impact to consumer behavior and brand perceptions after crisis, e.g., potential negative

perceptions of brands brought during the pandemic, etc.

Channel / Distribution• Prepare for a dramatic increase in online demand, particularly within pure-play and home delivery,

but click & collect will also jump substantially; may have a lasting effect post-crisis.• Closely monitor impact to the Convenience channel, which will likely be negatively impacted by more

consumers working from home and less travel, as well as Foodservice, which will be challenged by “cocooning” but can partially combat with frictionless delivery.

Merchandising• Determine appropriate promotion and pricing strategy to balance consumer demand changes, perception

of brand during the crisis, and impact of increased supply costs.


Implications for FMCG Retailers

Inventory Planning• Closely plan inventory and monitor out-of-stocks in high-demand categories (e.g., cleaning, preventive

health, sports drinks) by geography by phase of COVID-19 impact.• Anticipate drop in sales of stock-up items as replenishment will take time.• Plan for potential weakness across Easter holiday categories, particularly holiday meal items as shoppers

may forgo large family celebrations.

Merchandising• Assure shoppers that the items they need are available, including placement of high-demand items in

front lobby displays and circulars.• Explore co-promotion and co-display opportunities across high-demand categories.• Plan for a potential economic downturn by altering promotions (e.g., more at the beginning of the month),

stocking more opening price point items, etc.• Consider value and pricing proposition vs. competition as some retailers may invest more in lower prices

to attract customers.

Shopping Experience• Communicate plans in place to ensure cleanliness of store (e.g., paid leave for sick workers, availability

of free hand sanitizer for shoppers etc.) and alleviate customer worries about visiting the store.• Ensure seamless online experience and ramped-up fulfillment capabilities as home delivery and click &

collect rapidly accelerate.

Be on the look-out for our ‘Lockdown Week Insights’

Edition next week!


THANKYOU!

For More Information, Contact Us…

IRI South Africa

1st Floor, Block D, Aintree Park, Doncaster Road, Kenilworth 7708

+ 27 21 700 7420

Follow us on Twitter: @IRI_INTL

covid-19: impact on cpg and retail za & global · 150 200 250 ‘pandemic’ (search term)...

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