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The Initial Impact of Covid-19 in the U.K.
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The Initial Impact of Covid-19 in the U.K.

U.K. consumers are actively stockpiling grocery and health and personal care items as concerns grow around COVID-19 becoming a worldwide pandemic. Stocks of hand sanitisers and toilet paper have already dried up in some stores, as the supply chains come under pressure to mitigate any delays to replenishments.

In doing so, the U.K. is following in the footsteps of many other countries including China, the U.S. and Italy, where Nielsen research found significant spikes in the hoarding of emergency and essential supplies as consumers rush to build “pandemic pantries.” They’re also following an early trend we’re seeing out of China and Australia to head online for the supplies they’re seeking.

Paul Walker, U.K. and Ireland Managing Director, said: “The uncertainty created by news of the spread of COVID-19 is having an effect here in the U.K. Shoppers are following the government’s health instructions, but they are also taking precautionary measures.”

A LOOK AT WEEKLY DEVELOPMENTS

The first two cases of COVID-19 were confirmed in the U.K. on 31 January. Following the government announcement at the end of February that the U.K. was close to end of the containment phase of the outbreak, we see shoppers stocking up with a sharp increase in sales of key cupboard staples, frozen food, toiletries and baby care, and household and pet care.

Super Category Growth: Weekly Sales Trends

WEEK OF 22 FEB –  29 FEB: CONSUMERS NOTICEABLY STOCKED UP

Looking at pandemic pantry items that consumers tend to stock up on during emergencies (e.g. cleaning products, pasta, rice and canned preserves in particular), we didn’t see significant stockpiling in the first eight weeks of the year. But corresponding to a moderate rise in cases in the U.K., shoppers began to prioritise items to prepare for a possible crisis situation.

“Shoppers began to stock up at the end of February on key items to prepare themselves for every eventuality. Alongside the cupboard staples, shoppers stocked up on medicines for the family, cleaning supplies, tissues and both fresh meat substitutes and canned meat. And it looks as though they purchased more than they intended, as sales of reusable shopping bags were up 177%,” says Walker.

Key Category Growth: 22 Feb - 29 Feb

WEEK OF 1 MARCH – 7 MARCH: PANTRY PREPARATION

We can see U.K. consumer behavior threshold levels change during the first week of March, directly linked to concerns around the development of  the COVID-19 outbreak.

“These thresholds offer early signals of spending patterns, particularly for grocery items and health supplies where shoppers are concerned about not running out should they be unable to visit shops “, says Walker. “We can see these patterns unfold in the U.K. at the beginning of March with a sharp increase in sales of key pantry items, emergency health and personal care products and shelf-stable foods.”

At the store level, sales increased by 8% over last year and this has been driven by big boosts in spending across the major supercategories. Household and pet (33%), ambient grocery and health and beauty (22% respectively) all saw significant sales growth.

In particular, shoppers stocked up on medicines, with sales of children’s medicines increasing by a massive +124%. We also saw more stockpiling of facial and toilet tissue, and pantry stables such as dry pasta and ambient soup. During this week shoppers also began to extend some of their stockpiling to frozen vegetables, pizza and chips, hot beverages, and colas, perhaps in anticipation of a forced quarantine.

Key Category Growth: 01 March - 07 March

SUPPLY CHAIN IMPACTS

The rush to stock up on certain goods has already had an immediate impact on supply chains for retailers and manufacturers. Out-of-stocks persist in many ambient categories, such as pasta, rice and paper products.

“While we expect that replenishment will eventually catch up in most categories, typically over a three to seven day period, especially where production is local, there are some instances where shortages could hang around—particularly for products manufactured in, or where packaging is sourced from China,” said Walker. “Products that come off factory lines or go through distribution systems in virus-impacted countries could also face logistical issues, and these supply side shocks will further disrupt the industry.”

It’s a fluid time, and retailers are balancing between keeping enough of the most sought-after supplies on their shelves while making contingency plans for longer-term gaps in their product portfolios. We are already seeing instances where retailers are rationing certain products to limit the amount of stockpiling per shopper. Managing stock levels will be critical as continuous out-of-stocks will result in shoppers switching stores to get the products they need. Additionally, brand loyalty could be tested as shoppers are forced to select items outside of their usual repertoire or manage their household budget to sacrifice impulse spending and non-essential items.

THINKING BEYOND THE BUG

In many instances, pantry stockpiling will simply bring forward future purchases (e.g, toilet paper, dry pasta, medical supplies), and there will be a mid-term sales trough in future months as these products are gradually consumed. However, other categories, such as fresh foods, chilled and prepared food products and drinks may experience expansion as households potentially consume more in-home than they usually would do, as they reduce visits and spend at restaurants, pubs, bars and other fast food establishments.

Online pantry stocking driven by fear of a country wide pandemic is likely to spur a new wave of growth for online grocery. With an easy shopping experience, competitive prices and convenient delivery and/or pickup options, consumers are turning to e-commerce in turbulent times and may be open to exploring alternate retailing options if stock is available.

The impact could be that online FMCG sales accelerate to double digit growth over the forthcoming weeks, provided retailers are able to cope with this change in demand.  If so, this would be a significant shift in U.K. shopping behaviour which may well continue for a while. Having an effective online strategy in place is now becoming critical for retailers and brands; and measuring the continued growth of this channel is key to understanding how it fits in within shoppers’ buying patterns and overall spending repertoire.