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Past Recessions Meet Current Health Crisis to Shape New Market

Kathryn Peters, Executive Vice President of Business Development, SPINS

 

By now you’ve likely lost track of how many times you’ve heard “unprecedented” used to describe life during COVID-19. While we haven’t experienced a pandemic like this in our lifetimes — and hopefully won’t again — we have experienced economic recession. A little more than a decade ago, the financial crisis that began in 2007 kicked off a domino effect that paved the way for the Great Recession. It disrupted economies around the world and left manufacturers and retailers wondering what the future held and if they could weather it.

Similarly, today’s businesses are wondering how to navigate the Great Lockdown, which shows few signs of easing. Dramatically curbed city activities, modified business practices, and social and physical distancing have already shaken up nearly every industry, and we will be seeing the long-term effects for years. To help navigate the months and years to come, we can look to the Great Recession to see how parts of our industry not only survived but grew during that challenging period.

One major difference between the Great Recession and the Great Lockdown is our current focus on health and wellness. What we’re experiencing today is directly related to a health crisis, and that means food and wellness are fundamental to the situation, not incidental. As we look at three lessons we learned from the last recession, we can also see how the emphasis on health is going to shape the market.


Natural Will Remain Strong

A decade ago, the natural channel had 800 natural stores vs. 64,000 conventional stores. Throughout the recession, product availability drove natural grocery’s growth and ultimately converted customers into long-term buyers. Shoppers were committed to selecting natural products in whichever outlet they could find them, even branching out into natural body care. The Great Recession taught us that natural was not going away.

Considering that good health is one of the best defenses against the pandemic, shoppers are not going to turn their backs on nutritious, healthy options — particularly not when there’s a wider variety than ever before. Natural foods, beverages, vitamins and supplements saw significant sales spikes in the early stages of the pandemic with March sales of vitamin C and elderberry hitting $83 million and $49.5 million respectively. In the months since, these items have stayed strong as people continue to focus on boosting their immune system and relying on food as medicine. Shoppers are also thinking bigger — choosing functional ingredients, enhanced beverages and plant-based options that bring added benefits to their existing go-to items. Now is when you can expect shoppers to double down on healthier options.


At-Home Meals Create Opportunity

During the Great Recession, consumers reduced their spend on meals away from home because of their financial uncertainty. While that’s certainly a factor in today’s climate, local ordinances and health concerns also actively prevent shoppers from spending in a pre-COVID-19 fashion. Restaurants remain closed or serve customers at reduced capacity, fewer students will be attending classes in person, and customers won’t have sporting events, theaters and other entertainment venues to dine at. Eating at home will continue to be the primary way of life for customers who will ultimately spend more time making meals at home and trying new recipes, increasing grocery spend across the board.

For some shoppers, the rise in at-home meals alongside growing financial concerns will create the need for affordable options. In 2008, this similar combination of factors drove more shoppers to private label products. Between 2006 and 2009, private label grew in unit share and dollar share as shoppers stretched their food budget. Today’s shopper is not going to deviate from their diet and lifestyle — especially not during a health crisis — and the extensive options for private label natural and wellness products make remaining wellness-focused even easier.


E-commerce Is Here to Stay

Shoppers have been increasingly shopping online and via apps for years, but the pandemic has accelerated adoption for many shoppers. With social distance guidelines in place and concerns of in-person interactions on the rise, many retailers began to offer curbside pickup, contactless delivery, and online ordering. In fact, in April, e-commerce unit sales grew at five times the rate of brick and mortar sales year over year as consumers quickly shifted their habits. While contactless pickup might not have come about without COVID-19, easy pickup and home delivery were already on the rise — and will continue post pandemic.

Even when normalcy emerges for shopping behaviors, these options bring one of the most important qualities to consumers: convenience. E-commerce enables retailers to attract and retain shoppers by providing them the convenience they’re accustomed to.

What’s Next?

For the foreseeable future, the majority of consumers will continue to be hyper-focused on health, safety and value, both with their shopping experiences and the products they choose to help them meet their personal needs. To win with natural consumers, we recommend that CPGs focus on three key areas:

  1. Understand consumers’ engagement with natural foods. By designing strategies for your core natural shoppers, you will be able to better maintain and grow their buy rates. Also, focus on value strategies that can help you hold onto your less engaged shoppers.
  2. Identify new buyers to your brands along with their behaviors, build conversion strategies and actively engage them through targeted marketing and communications. Leverage lifestyle and ingredient-based product attributes and customer segmentation to effectively navigate the underlying dynamics of today’s natural marketplace, identify emerging trends and build personalized conversations.
  3. Refine and have a fluid channel strategy to support the new normal. Build effective sales strategies for both brick and mortar and e-commerce and create experiences that support the natural consumer’s desire for detailed product information and transparency. Also, leverage pricing and promotion analytics to best fit pricing and promotions by channel, and ensure brands have the appropriate price pack architecture to meet future needs.

The CPG demand curve will continue to change. Understanding natural consumers’ behaviors and priorities will help you stay ahead of it.

For more information, reach out to me directly at kpeters@spins.com, to your IRI representative or to IRI@IRIworldwide.com.


RESOURCES

Report – Supporting the Natural Products Consumer
Webinar – Supporting Natural Products Consumers Through COVID-19 and Beyond
Report Series – Recession-Proof Your Business

 

 



 

 
 

 



 

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