Procurement pandemic: Nestlé, Unilever and Procter & Gamble are competing to adapt

“We need to be very close to consumers and their habits, needs and wants, more now than ever,” said the company’s chief financial officer, Jon Moeller, during an earnings call last month.

Preliminary evidence suggests that the shift to online shopping is accelerating, consumers are buying more products for their health and home, and are becoming more cost conscious as they choose to save more.

In a call with analysts last month, Nestle (NSRGY) CEO Mark Schneider said the company is “working overtime” to understand what the economic crisis means for each of its product categories. Nestlé is the world’s largest food and beverage company, making everything from breakfast cereals like Cheerios to instant Maggi noodles, Häagen-Dazs ice cream, Nescafé coffee, and San Pellegrino water.

“For me, that is a super interesting job because clearly this will not be a quick recovery,” said Schneider. “This will be a multi-quarter, if not multi-year, process in which it is safe to expect some changed category dynamics.”

In an environment where almost everything changed overnight, consumer goods companies need to discover what new buying patterns are temporary, likely to end up with blockages or the arrival of a vaccine, and which ones will persist, changing the how consumers spend their money for years. come.

“We are evaluating market by market if we need to make changes to our core products, prices and packaging sizes,” said Hanneke Faber, president of food and soda at Unilever (UL), that makes Lipton tea, dove soap, Hellmann’s mayonnaise and Ben & Jerry’s ice cream.

There is no “playbook” for this recession, he told CNN Business. “It will require us to be extremely agile and flexible for the foreseeable future.”

Hanneke Faber, president of food and soda at Unilever.

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While much is still unknown, it is clear that some lifestyle changes and changes in spending patterns will last longer than social distancing measures. For example, some consumers opted for online store Because the physical stores were closed or to avoid crowds, and now that they’ve made the leap, they are unlikely to go back to their old ways entirely.

“China’s first lessons suggest that three to six percentage points of online market share will be ‘rigid’, driven by older generations who are comfortable with digital channels and by new consumer segments,” wrote the partners of the McKinsey consulting firm research work.

Their research found that the UK’s three largest grocery stores added more than 500,000 new delivery spaces in the space of a few weeks, an increase of more than 30%.

With so many consumers staying home, Nestlé has seen increased demand for Nescafé coffee during the pandemic.

Nestlé’s e-commerce sales worldwide increased by 30% in the first three months of the year, while Procter & Gamble reported 35% growth in online sales during the same period.

The coronavirus crisis is likely to be a “watershed event” for Online sales of food and beverages, as people who previously wouldn’t have bought groceries online find out how convenient it is, said Schneider, CEO of Nestlé.

E-commerce is unlikely to remain at a very high level at the moment, but “we have reached a higher plateau to grow,” said Jack Neele, portfolio manager at Dutch financial services firm Robeco.

Health and hygiene

As with online shopping, health and wellness were a growing lifestyle trend long before the coronavirus hit, and it only gained momentum during the pandemic. Consumers clean surfaces and wash their hands more than ever before, while sales of orange juice, considered beneficial to health because it is rich in vitamin C, have it shot itself.

“We are pretty sure that anything in the health and wellness arena will enjoy sustained force,” Alan Jope, CEO of Unilever, said last month.

Unilever has seen increased sales of products like Lipton Immune Support, as well as drinks that contain zinc and vitamin C, Faber said. The company is moving rapidly to deploy them worldwide, and health will continue to be a priority for product innovation, he added.

“We will serve what is likely to become a forever-altered approach to health, hygiene and cleanliness,” said Mocter of Procter & Gamble, noting that American consumers wash their clothes more frequently, which adds up to more loads of clothes per month. .

Procter & amp; Gamble has noticed an increase in the number of weekly laundry loads in the United States.

Nesting at home

Even when closings are lifted and restaurants, bars, and movie theaters reopened, there is a sense that people will be in no rush to go out again.

“There may be a greater focus at home: more time at home, more meals at home, more cleaning at home,” said Moeller.

With unemployment in high levels of heavenMany consumers will simply have smaller budgets for leisure. They may also decide to keep saving more money to weather the recession. Recent data from the Bank of England and the European Central Bank show that household savings rates soared in some of Europe’s largest economies in March. The same was true in the United States, where savings rates increased highest level since 1981

For others who have spent time and money to improve their homes and gardens, or have acquired new hobbies, the possibility of staying is more attractive than it was before.

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“Staying is new,” according to the McKinsey report. “Once the restrictions are lifted, we expect consumers to continue to spend more time at home, fueled by a desire to save money, lingering security concerns and a newly discovered pleasure in nesting.”

The growth of online sales of bread machines in the United States It ranked second after disposable gloves in March, up 652% compared to the previous year, according to data compiled by retail tech company Stackline. Online sales of weight training equipment (+ 307%), kits and craft projects (+ 117%), and ping pong tables (+ 89%) reflect that many consumers were finding new ways to entertain themselves at home.

In a nod to this trend, Nestlé USA launched a new range of ready-to-eat foods last week. Faber, the Unilever executive, described the trend as “cocoon.”

Unilever estimates that 15% of restaurants that filed for bankruptcy in China during the crisis will never reopen. This is likely to be repeated elsewhere if the rules of social estrangement remain in place, and restaurant and bar owners tell their business models. just don’t work no volume and traffic.

Courage and confidence

the coronavirus recession It is forecast to be the worst in decades, meaning that businesses and consumers will have cash problems for the foreseeable future.

Even in rich countries, value and affordability will become increasingly important, said Jope of Unilever. He noted the company’s ability to offer products at the “incredible low price” that it can in countries like India as a “gigantic force.”

“In Europe, we can count on negative price pressure as economies … fall into crisis,” he said.

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Along the same lines, Procter & Gamble said it is in a better position to weather the economic downturn because its portfolio focuses on everyday items. “We have never faced the level of unemployment that we like to see in this country [the United States] and potentially others, and we don’t know how long that will happen, “Moeller said.

There are already indications that consumers are negotiating, favoring cheaper private label products for the benefit of retailers such as Costco (COST), Walgreens (AMB) and CVS (CVS). Sales in discount stores, how General dollar (DG) and Aldi are also enjoying an elevator.

But, for now at least, Nestlé, Unilever and Procter & Gamble are confident that consumers will balance price with value, choosing established brands with which they are familiar and experiencing less.

“People will go back to the big, trusted brands,” said Faber of Unilever. “They simply cannot afford to spend money on products that they are unsure about.”