The post-COVID consumer
by Katie Navarra
The coronavirus pandemic created a perfect storm for an economic, political and health crisis all at the same time, according to David McWilliams, an economist and professor at Trinity College Dublin. Prior to the COVID-19 outbreak, a strong recovery from the financial crisis of 2008 was likely to bust based on economist Hyman Minsky’s “Minsky Cycle” that says every cycle leads to boom and bust, McWilliams said.
“Every cycle comes to an end with calamity of some sort and starts again with a reset button,” McWilliams said.
Early in the pandemic there was a significant spike in beef and poultry prices, but those quickly came back down, according to Jack Bobo, futurist and CEO of Futurity. Prices for chicken and pork are less than they were one year ago in the U.S.
“The psychology of food availably is having an impact on other countries,” Bobo said. “Some countries have been putting export bans into place. We saw some of the same actions take place in 2008. It is quite possible that we have enough food in the world to feed everybody, but these export bans affect everybody.”
Friction in the food system isn’t coming from whether there is enough food in the supply to feed people; instead, it becomes problematic if it can’t reach the right people at the right time at the right price. Labor challenges, the closing of processing facilities, transportation, trucking and getting across borders can all interrupt the supply chain.
“In August 2019, a single beef processing plant had to shut down for a time. It was only 5% of the market but it led to an increase in price to consumer,” Bobo said. “Unfortunately, that meant fewer places for ranchers to send animals for processing. The consumers were paying more while producers were getting less money, which sends wrong message to the producer, leading them to believe that they may not need to be producing as much.”
So what happens next? McWilliams, Bobo and Jessica Adelman, the CEO of ESG Results, shared their ideas in the Alltech webinar “The Post-COVID Consumer.”
Shifts in the Food Industry
Adelman predicted that in the grocery industry, three significant shifts will occur. First, she anticipates this situation may be a tipping point where society permits science to get back into food.
“There is a reappreciation for experts in general and this might allow scientific experts to do more for food security, especially in plant-based products which was a hot trend before this,” she said. “We’ve started putting coatings on fruits and vegetables to promote shelf life. If you’d told me five years ago we’d be putting a scientific coating on products and that everybody was okay with that, I never would have believed it. But people were asking for them and these trends were already making inroads.”
The second change Adelman anticipates is that people will see food as medicine and supporting health. Before the pandemic, doctors were already writing prescriptions for diets because of diabetes, heart disease and hypertension, all of which are contributing and complicating factors if someone contracts COVID-19, according to Adleman.
“COVID brought back personal accountability to keeping one’s self healthy, exercising and cooking at home rather than eating out,” she said.
The trend of sustainability and environmental concerns related to food supply will continue to grow, Adelman said. This began before coronavirus and is apart from the current crisis. However, she believes people will care even more about the ethics of their food supply.
“Consumers will care about how foods are packaged, how waste contributes to greenhouse gases and how companies treat their people,” she said. “People will want to shop from, work for and partner with places that treat people well with values that match their own.”
Reviving Private Labels
Adleman predicts private label brands will enjoy a revival. Coming out of the Great Recession of 2008, there was a stigma associated with private label brands as being lower quality and second best to national brand labels. However, Gen X, Millennials and Gen Z are more comfortable with private labeled products.
“They view private labeling as intriguing, so we’ll likely see a resurgence in that too,” she said.
In the second quarter of 2020, the U.S. food and beverage industry was valued at about $6.2 trillion – nearly 12.5% of total nation’s retail total. “There was a $100 billion shift from restaurants back to grocery,” she said.
While many consumers have transitioned to shopping online, those visiting brick-and-mortar shops are changing their buying habits too. Thus far, Adleman said people are retreating to the center of the store for comfort foods, such as pasta and rice, rather than shopping along the perimeter of the store, which was typically more profitable with fresh produce and impulse buy products.
Economists and grocers alike are watching how the specialization of the food industry is going to play out. With an increasing focus on organic, celiac and other diet-specific foods before the pandemic, there is discussion around what will happen with purchases of these products.
“There used to be two choices of pasta sauce in the 1980s. Then, within two years, there were a dozen choices,” Bobo said. “It’s almost become decision fatigue with so many choices. There’s a possibility that we will come out of this, especially with younger people, less focused on having a huge amount of choices.”