One third of the market is at stake: shift from out-of-home consumption to retailers, shift between channels, brands and products
New patterns of food consumption that will mark the transition to the new normality: greater consumption in the home, the search for price and value and the growth of e-commerce
In this context, the winners in distribution will be those who take quick and decisive action to take advantage of this window of opportunity
Spanish consumers will change their consumption habits in the food sector as a result of the transition to the "new normal", as highlighted in Covid-19: How can Grocery Retailers win in the new normal? a new analysis from Boston Consulting Group that looks at how Covid-19 has impacted the food channel, what the consequences are and how it is expected to evolve in Spain, and how consumer habits will change.
According to the research data, which analyses four different phases (first cases, lock-down, adaptation and "new normality"), food will experience a drop in sales in June compared to the "boom" we have seen in recent weeks when the disposable income of Spaniards begins to feel the effects of the economic downturn and the drop in foreign tourism. The 'new normality' will also bring changes in consumption patterns, with greater consumption in the home, the search for price and the value and growth of electronic commerce.
According to Patricio Ramos, Managing Director and Partner, "the study of past crises sheds light on the scenario before us. Although the Spanish food sector is resilient, in the face of very significant falls in the economy, we see a clear correlation between the behaviour of disposable income and food consumption. We have also seen how some of the changes in consumer behaviour become permanent once the crisis is over, as happened in Spain with the private label".
How companies can act
The analysis determines that up to 35% of the total food market share is at stake, with changes in consumption occasions, channels and brands. Between 18% and 25% directly refers to consumption outside the home, which will reverse this trend as de-escalation progresses. However, there is a very representative percentage of consumers who have already switched to the new channels and whose consumption trend is eminently digital.
According to Adriana de José, Partner, "retailers are faced with an unparalleled window of opportunity to conquer and build loyalty to the vacant space left by restaurants and meals in the workplace, through an evolved offer of prepared food and consumer solutions in the retailer".
The research establishes how companies should act to gain share. In this sense, they have to lead three lines of action in parallel: stabilizing the business, preparing for the resurgence and adapting to the 'new normal'. Only in this way, which replaces inactive and sequential behaviour, will they be able to attract more attractive customers through new products and services, develop an advantageous position to maintain and improve their market share and, finally, buy strategic assets at favourable prices to accelerate growth capacity and acquire new capabilities.
The 'new normality' in Spain
The impact of Covid-19 has meant that the situation of consumption outside the home is much lower than in 2019 and that this share is shifted to domestic consumption (in which products related to health or household cleaning have experienced a great deal of growth). In addition, we are seeing selective price inflation and a reduction in promotions as demand has exceeded supply.
The report estimates that e-commerce and click-and-collect services, which have grown by more than 50% during the first weeks of the crisis, will maintain a progressive growth trend over the next 24 months.
In the medium term, there will also be a permanent shift towards home consumption, boosting cooking habits and increasing the number of meals prepared at home. In addition, consumers will be more willing to save and will invest more in their own brands.
All of this will create a new competitive environment in which:
- E-commerce will become more relevant.
- The category mix will change to reflect the increase in activities that are already customary (e.g. cooking) and categories made impossible by the competitive situation (e.g. out-of-home consumption), with retailers playing a greater role in home meals.
- Private labels will have a significant share driven by a shift towards value and a more innovative model.
- The effort to maximize share of wallet will drive retailers to leverage advanced analytical capabilities.
- The immediate pressure of the crisis will be the catalyst for longer-term goals for supply chains to shift to more localised, flexible and sustainable alternatives.
- The competitive landscape will be consolidated with fewer, larger and more diverse players, providing a greater advantage for those with the ability to scale their model.
- Partnerships with government and society will be strengthened to responsibly use the growing institutional power, role and visibility that retailers have gained during the crisis.
Joan Sol, Managing Director and Partner, points out that "those retailers who act decisively and quickly can emerge as winners. In particular, those who lead the way in the use of advanced analytics, strengthening ties with their customers through customisation, ensuring better demand forecasting and improving supply chains, will emerge stronger.
Boston Consulting Group (BCG) is a multinational management consulting firm, leader in business strategy. We collaborate with clients in all sectors and geographic areas to identify the highest value opportunities, address the most relevant challenges, and transform businesses. Our tailored approach to each client combines in-depth knowledge of business dynamics and markets with close collaboration with all levels of the organisation. This guarantees our clients the achievement of sustainable competitive advantages, the construction of more capable organizations and the achievement of lasting results. Founded in 1963, BCG is a limited company with 90 offices in 50 countries.