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CPG Stockpiling: What to Expect Now and When It’s Over

By Ray Florio, Growth Consulting, IRI

 

As the COVID-19 crisis has swept across both the nation and the world, one of the biggest ongoing stories has been the widespread out-of-stock problems, as consumers have rushed into stores to stockpile goods in the midst of the pandemic. News reports and social media posts showing empty shelves have exacerbated the issue, and CPG manufacturers and retailers are challenged in keeping up with demand, especially as the effects of the coronavirus become more wide-reaching.

For many, the increased demand has been welcome, especially at a time when much of the economy is shut down and because the CPG industry typically sees much more modest growth—that has changed, at least for now.  

But meeting consumer demand—and managing it—has its own set of challenges. And projecting how long that demand will continue has become a far more complex problem. With unforecastable, unpredictable consumer buying, carefully tuned forecasting models and inventory planning algorithms based on historical consumer behaviors are essentially rendered useless during a pandemic.

So how can CPG manufacturers best navigate this crisis? What should they be doing now and in the future to manage demand? And how is this different based on brand penetration? At IRI, we’re setting out to answer those questions across a three-part blog series. Here, we’re going to take a look at consumer behavior, itself, to help CPGs understand what’s likely to happen after the initial stockpiling run. In the next blogs in the series, we’ll provide actionable recommendations to manufacturers, large and small.

Short- and Long-Term Effects of Stockpiling Behavior

Obviously this moment is without precedent. The level of stockpiling around the world is unique in scope and scale, and it’s coupled with a broad disruption in global supply chains and manufacturing capacity. We’ve never seen anything like this in modern times.

But stockpiling behavior and its aftermath are actually something we understand quite well. This kind of behavior often coincides with localized disasters, so it’s been studied thoroughly. Recent examples include the 2017 cases of Hurricane Harvey in Texas and Hurricane Irma in Florida, both of which offer useful insights for our current moment.

Across both of these events, stockpiling occurred across three different types of products:

  1. Normal purchases that lend themselves well to stockpiling (e.g., canned meat, canned vegetables, canned soups, toilet paper)
  2. New purchases well suited for stockpiling (e.g., canned citrus fruit)
  3. Longer-shelf-life indulgences to maintain variety and enjoyment (e.g., packaged cookies and other snacks)

In all three cases, clear stockpiling demand spikes occurred across the categories, followed by a trail-off of shoppers preparing for the next crisis and, finally, a longer-term decline.



What we see after the initial stockpiling run, and increasingly once the crisis is over, is quite logical: Shoppers who did stockpile will have excess product on hand and won’t need to purchase it again for the foreseeable future.

For market leaders, this can have unfortunate negative effects. Shoppers who increase their consumption to exhaust the product may grow tired of it, or even subconsciously associate the product with the crisis. Both situations could lead to lower long-term consumption and lower penetration.

The opposite may be true for private labels and smaller brands, however. Lower-priced products, or those with lower penetration, will experience expanded trial during the stockpiling event, with the potential for long-term growth outweighing the potential losses from their niche set of current consumers.

Simply put, brand characteristics matter a great deal both during and after a crisis. How should market leaders manage that challenge? How can smaller manufacturers seize the opportunity for greater brand recognition? Check out my next blog in this series to find out.


For a deeper look into how stockpiling during COVID-19 will impact your brand, contact me at
Ray.Florio@IRIworldwide.com.

Other Articles in the Series:
Four Ways Larger CPGs Can Best Manage a Grocery Stockpiling Event
Five Ways Smaller Brands Can Manage a Stockpiling Event

 

 

 



 

 
 

 



 

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