The COVID-19 pandemic has affected everything from travel to hometown economies, and consumer trends in the food system are no exception.
The Center for Food Integrity hosted a webinar, “CFI NOW: 2020 Epiphanies and Our Crystal Ball,” Dec. 4, bringing two members of its Consumer Trust Insights Council to the screen to discuss the insights they’ve already gleaned through the pandemic so far. Susan Schwallie, executive director of food and beverage consumption for the NPD Group, and Kevin Ryan, founder of Malachite Strategy and Research, shared how stay-at-home orders and travel restrictions affected consumer behaviors since March.
Waves of consumer trends
Schwallie said the NPD Group has been monitoring the waves of COVID-19 closures and stay-at-home orders and how those affected consumer purchases since March.
“We saw a giant spike in spending in March, when consumers started stockpiling toilet paper and food before those first lockdowns in April,” she said. Nearly $2 trillion in annual consumer spending started to trend down, as people shifted to online purchasing, she added. But then, as restrictions eased up, spending started to come back, she said. Overall, through October, Schwallie said consumer spending is still strong versus the same time last year.
However, the shift from food service to home dining created a 50% decline in traffic to food service, Schwallie said. Across the board, through October, grocery sales were up and are expected to pop back up as COVID-19 starts to rise again on the next wave. However, the share of online grocery sales leapt forward from what it was expected to be in 2020.
“Mid-November, we were up 12% in sales dollars, so the consumer is very strong,” she said. Unit sales are up 4%, she added. It’s a tale of two consumers—there are lots of Americans who are not seeing the financial pinch because they can still work from home. Meanwhile, the service workers are seeing more of a hard time because their jobs cannot be done at home. What we’re seeing, she said, is that people staying at home to work and still getting a paycheck are freeing up portions of their budget because they aren’t dining out and traveling as much as they would otherwise be doing. And so, they’re spending more on things that make their home lives better.
“Housewares are up 34%, and air fryers are the darling of this trend,” Schwallie said. “Small appliances are up 32%. Sports equipment sales are up 28%. Technology sales are up 23%, because we had to get our home offices and home schools up and running. Toy sales are up 24%.”
Restaurant spending versus in-home dining
Schwallie said restaurant transactions through the week ending Nov. 22 were down—quick service restaurants were down just 7% and full service restaurants a whopping decline of 27%.
“Clearly, COVID-19 impacted full service restaurants to a much greater degree,” she said. “Quick service has it figured out. They rolled out mobile ordering, they have drive-thru and delivery. Some are even doing quite better than they were a year ago because they have it figured out.” As for full service restaurants heading into the winter months, with COVID-19 cases still increasing and the vaccine rollout still lagging, these next waves of COVID-19 cases may be tough for them to overcome.
“Any of them hanging in there with outdoor dining, they lost that edge because of winter in the northern states,” she added. Illinois full service dining is down 59%, New Mexico is down 60% and California is down 50%. She added over the course of the pandemic, there’s been an estimated 45,000 restaurant closures across the nation, which might seem low, but considering that there have been other food service venues that have opened during the pandemic and lots of churn in the industry, it’s not that bad.
But even before COVID-19, Schwallie said there were starting to be a higher percentage of meals sourced from home.
“We know that there’s always about 80% of our meals that are from in-home, it’s been that way since the last recession,” she said. “It got up to about 87 to 88% of meals sourced from home at the peak, but it’s settled down a bit.” She said she suspects that over the long haul the restaurant industry gave up 2 to 3% of their business to in-home meals, which won’t likely come back even after COVID-19 is under control, because people took to their kitchens and learned new skills and re-discovered cooking.
In 2021, what will the food service industry look like? It depends on the vaccine rollout and how hard people roar back into dining out with friends and family they’ve missed over the past year, she said. That could mean opportunity in the first half of the year.
Food industry forecast
Ryan said Malachite Strategy and Research has been tracking food industry trends during the pandemic and if there’s one that outshines the others it might be the health consciousness of consumers. Concerns about COVID-19 spread and uncertainties about the pandemic caused consumers to look to what they could control—their diets.
“There’s been a lot of interest in health and wellness,” Ryan said. Cargill has been looking into the health arena, and plans to do at least $1 billion in microbiome sales, probiotics, prebiotics and more.
Ryan said there was a bump in demand for alternative meats and milks during the pandemic. Oat milk demand was up significantly, for example. The demand pull has a number of businesses speeding up their production lines to get out more products in 2021. Products will address the sodium and fat challenges from the initial alternative offerings.
“McDonald’s announced the McPlant, its veggie-based alternative burger,” Ryan said. Now that the consumer demand has been created, you’ll likely see more companies trying to capture this new market. Unilever, for example, has spent $1.2 billion in plant based alternative food development for the next four to five years. So, look for a fight for dominance in the alternative sector, he advised.
However, alternatives aren’t likely to go mainstream anytime soon. It’s mostly those people who are flexitarian, Ryan said, who want something plant-based once in a while.
“86% of the people who tried the Burger King plant-based burger offering were meat eaters,” Ryan said. “Price parity or below will really open up demand.”
There are also trends in companies moving to the mood food arena—research into adding CBD oil in the food manufacturing process is already happening in everything from beer to energy bars to more. It’s one way to capitalize on the consumer’s need to find some sort of comfort and normalcy during the pandemic.
If there was another trend that COVID-19 heighted, it’s meeting the consumer’s demand for personal preferences in their shopping and dining experiences. From GrubHub to Uber Eats, consumers can tailor their menus.
“NatureBox now has a new program called Zoom Snack Boxes, where companies send their employees working at home snacks in place of the break room experience,” Ryan said. “Gerber is pushing a subscription for organic baby food. And it allows you to feed your child from the baby through the toddler stages through a subscription box that changes as they age. You may never have to go to the grocery store again if you don’t want to. You can carve out a certain segment of your life and it can be delivered to you without interacting with grocers.”
Ryan said there’s also flip side to the COVID-19 pandemic, and food manufacturers and grocers are working to meet the needs of the 40% of people who said they were food insecure at one point or another during the pandemic.
“Aldi is partnering with Instacart to deliver for EBT and SNAP,” he said. It’s not sexy, he added, and the margins aren’t great. But, there is a huge need for a value answer from manufacturers and companies are trying to reach this large part of the consumer base.
Jennifer M. Latzke can be reached at 620-227-1807 or [email protected].
