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A curated content platform of COVID-19 news stories with a supplier-retailer lens by Advantage Group.

Edition 2 – April 15, 2020

FEATURED STORY

Online Grocery

Bricks and Clicks Retailers Shape-shift to Meet Surging Demand for Home Delivery

Summary: Abiding by guidelines to stay-at-home and minimize close public contact, consumers are opting to avoid physical store visits and instead shop online.

In markets where grocery e-commerce demand has historically lagged, grocery retailers have chosen not to make significant investments in e-commerce capability. In this crisis, however, these markets are seeing first-time shoppers sign up for online delivery, and offline grocery retailers are scrambling to handle more orders via telephone or online.

Even in the US, where e-commerce infrastructure is well established and online grocery delivery is fairly commonplace, e-commerce giants such as Amazon are being pushed to the breaking point of fulfillment and delivery capacity and capability, and are deploying new strategies on the fly to manage both the demand and supply sides of the equation.

Advantage Perspective: In reviewing some of the measures being taken by retailers across the globe to meet the surge in demand for online grocery, we have identified three broad strategies that some are pursuing.

1. Demand Management: Placing a freeze on accepting new customers, and prioritizing orders for essential grocery items over non-discretionary categories such as apparel and consumer electronics

2. Promoting and encouraging “click and collect” over home delivery

3. Resourcing: Hiring additional staff and re-allocating and re-assigning offline staff into warehouse and distribution centres, and order fulfillment functions

Amazon has enacted several measures to try and cope with the new demand. As a starting point, it has announced that in the US, as of April 13th, newly registering customers will be put on a waitlist as the e-commerce giant attempts to add new capacity each week.

 

Amazon has been delaying the delivery of non-essential items in many markets where it operates as it places a slowdown on new inventory shipments in categories such as apparel and consumer electronics. In markets such as Italy and France, it has not been accepting any orders at all for some non-essential categories.

 

Omnichannel retailer Waitrose in the UK, to ensure that the most needed products reach the most deserving of its customer base, reserves 25% of products allocated for home delivery for the elderly and other vulnerable consumers who face stricter self-isolation requirements.

Following a $13.7bn acquisition in 2017, Amazon in the US operates 487 Whole Foods stores under its portfolio.

 

As a measure aimed at offloading some burden on its stretched delivery capacity, the number of Whole Foods store locations offering online grocery pickup ​has been expanded from 80 to 150 in recent weeks. Customers are encouraged to collect their items on-premise and are assured that available pick-up windows will be more immediate than the estimated home delivery time committed for the same order.

 

In Canada, Loblaws, the country’s largest supermarket chain, is considering closing some stores to customers, converting them into fulfilment centres for online orders and curbside pickups.

In the US, shopping hours at some Amazon-owned Whole Foods stores are being shortened so that in-store employees can instead focus their efforts on fulfilling online orders from existing customers. The company is also offering higher pay to motivate warehouse staff to work for its grocery delivery service instead of in the warehouse.


In India, a market where e-grocery is nascent, Flipkart, a Walmart-owned e-commerce player has announced that it will be hiring for 4,000 new roles as it expands its grocery delivery capacity from five to 300 cities. Historically, FMCG sales accounted for 3-4% of the e-retailers sales, a figure that industry analysts expect to rise given the ongoing investments in its food delivery footprint.

Emerging Channels

Restaurants Go Grocery During the Pandemic

Summary: COVID-19 will go down in history as a marker of change in the world. The pandemic effect has hit virtually every individual and enterprise creating a turbulence that is displacing current business practices and structures and scripting retailer and supplier playbooks in real-time. As one large US retailer puts it, “We are rewriting the playbook and we are changing the rules and our path day-to-day.” This includes yet another segment of the food business: full-service restaurants who are now offering grocery service to their customers. This further stirs the proverbial pot and adds new complexity to pandemic adaptations.

Restaurants have been ordered closed for sit-down guests everywhere. Struggling to make rent payments, payroll and ultimately, to fight for survival – some outlets have shuttered, and others have boldly tried to grab a share of wallet to close gaps in revenue and avoid closing shop entirely. Many have tried take-out or delivery options, but these can be expensive and rely on third party services. Menus for some may also require full re-creation to maintain their integrity from restaurant kitchen to home table.

Enter: ‘Restaurants as Grocers’. Savvy restaurant groups and independent restauranteurs are leveraging their resources to stay afloat and to support consumers in their local communities. Restaurants typically buy in bulk from wholesalers and receive goods multiple times a week at vastly reduced prices from retail. Recognizing the need for food staples as grocery content on shelves thin, restaurants have used their own supply chains to purchase inventory that consumers need and have opened their doors and parking lots as grocers, either walk-in or on-line; and consumers are finding them.

Restaurants, through their distributors can access food and other essentials like toilet paper, paper towels and cleaning supplies that are out of stock in traditional grocers. This new channel of business is relieving some of the pressure from the traditional grocery channel and supports the wholesalers who have surplus stock due to halted commercial activity (e.g. restaurants, bars, sports venues, workplaces, schools, etc.). Restaurants are creating some new niches, such as selling meal kits and grocery bags full of basic staples like butter, cheese, bread and potatoes, while others are offering the ingredients to their own recipes to make meals. Still, others offer whatever surplus they have on hand to avoid food waste, or that they can order from their distributors to fill gaps in consumer needs.

Advantage Perspective: One cannot be sure how this new channel will take shape as the threat of Coronavirus subsides but one thing is for sure, their do or die attitude is firing up restaurant staffs and kitchens and they are helping consumers on the brink as they fight to put food and other essentials into their pantries during the pandemic. Ultimately, as the dust settles, restaurants will likely find a niche in the ‘new normal’.

Voices on the Ground

This week we speak with Clem Chan*, Advantage’s Managing Director for Southeast Asia to understand how COVID-19 is impacting life and retail in Thailand, Malaysia, Indonesia and the Philippines.
*with contributions from Apisara Chiambanchong (Thailand), Mark Payne and Areisa Djapri (Indonesia), Nantha K Vaithilingam (Malaysia) and Alex and Anne von Behr (Philippines)

What is the prevalence of COVID-19, and what are the major measures being taken at a government level?

 

Thailand and its people are very resilient, having dealt with several crises in recent years ranging from natural disasters such as flooding to political unrest in the form of coups and mass demonstrations. We are also fortunate to have some of the best medical facilities in the South East Asian region.

 

Thailand is into week five of “Restricted Living”. Major events and holidays, including Songkran (the Thai New Year), have been cancelled. There is a nation-wide curfew in place from 10 pm - 4 am and only essential travel (e.g. for delivery of food and medical supplies) is allowed throughout the country. 10 of the 77 provinces have stricter measures in place and are not allowing residents to enter or leave. Major COVID hotspots, the latest of which is Phuket, have implemented full-on lockdowns that restrict local movement all together.

 

At entry and exit points to public venues such as supermarkets and condos, people are being checked for temperatures, mandated to wear facial masks, and are provided with free hand sanitizer. Overall, the pace of the spread seems to be kept in check.

 

How is this impacting retail, and how have manufacturers and retailers reacted?

 

7-Eleven, Family Mart and other convenience stores are no longer operating 24hrs/day to comply with the curfew. Major supermarkets have installed plastic shielding at their check-outs and have footprint markers on the floor so that customers can keep a safe distance from each other when in check-out lines.

 

Overall, things seem to be settling as suppliers and retailers adjust to the new “business as usual”. The government is monitoring the retail prices of eggs, rice, personal hygiene products and other staples to rein in on price gouging. Tissue and toilet paper seem to be back on shelves with only hand sanitizer and rubbing/spraying alcohol remaining in short supply. Suppliers we speak to don’t cite any major issues with their supply chains and raw materials sourcing. Kimberly Clark, however, has mentioned some disruption in sourcing pulp from Malaysia.

 

How are manufacturers and retailers stepping up to support the country?

 

1. Coca-Cola bottlers (ThaiNamthip and Haad Thip) is diverting 25m Thai baht (approx. US$800kD) of advertising budget towards donations to COVID-19 related health foundations

 

2. Boonrawd (Singha Beer) is donating 50m THB (approx $1.6m) for hospitals to purchase equipment and PPE’s

 

3. Unilever Thailand has donated 150,000 pieces of soaps and hand sanitizers to UNICEF’s efforts to help children in the wake of COVID-19

 

4. CP Group is a huge Thai conglomerate with a significant presence in food, retail and distribution. They are investing 100m THB (3.3 million USD) to build a mask factory that will later be donated to one of the hospitals. 7-Eleven Thailand, which they own, is donating 77 million THB ($2.5mnUSD) to 77 hospitals throughout the country. While their food manufacturing division CP Foods will be donating ready meals free to 79 hospitals

What is the prevalence of COVID-19, and what are the major measures being taken at a government level 

 

The government issued Movement Control Order (MCO), implemented on March 18th and originally intended to last until the 31st March, has been extended until April 28th. There are indications that this will likely be further extended into May. The “stay at home” order has been largely complied with and authorities have escalated enforcement with heightened numbers of patrols and roadblocks.  

 

How is this impacting retail, and how have manufacturers and retailers reacted?  

Only established food outlets within malls, as well as stand-alone restaurants, are allowed to operate under the MCO between the hours of 8 am - 8 pm by offering only take-out and deliveries. 

 

Grocery and pharmacy store trading hours are also limited to 8 am - 8 pm. Only one person per household is allowed to travel to make grocery purchases. This is enforced quite strictly, as there are roadblocks along the streets. If there is more than one person in a car, the driver is penalized 

 

Initially, there was quite a lot of “panic buying” and in most stores, the shelves were depleted within the first few hours of opening. Replenishing stock then got challenged further when the MCO was imposed on March 18th, as there was a huge disruption to transportation logistics which affected supply chains. Things have now settled thanks to some improved and clearer communication from the government and most outlets are reasonably well-stocked except for bread, eggs, toilet paper, and instant noodles that tend to sell out by the end of each day.  

 

Shoppers are required to practice social distancing and must wear face masks when entering stores. Many stores control the number of shoppers permitted inside at any one time. Checkout counters apply a 1-meter distance for shoppers to stand apart as they queue. 

 

There is no data yet as to how many shoppers have shifted to online purchases of grocery items, although general market feedback is that there is increased traffic of online purchases. Many of the grocery chains that have invested in online infrastructure, especially TESCO and Jaya Grocer, will benefit from this shiftThe main online shopping platforms in Malaysia, Lazada and Shopee, have reported increased volumes of purchases. Shopee, in particular, is popular amongst shoppers for grocery as well as health and beauty products. 

 

How are manufacturers and retailers stepping up to support the country?  

 

  • Sunway Berhadwhich owns and manages a chain of shopping malls - each housing one or more substantial grocery retailer – is granting these retailers rent-free for the duration of the MCO 

 

  • TESCO has further enhanced the sanitization controls in its home delivery service related to its online business. This includes ensuring all products are individually packed in special plastic material. Each of these are further treated with sanitizers. All delivery personnel are provided with extra protection material, including gloves, masks, and sanitizer sprays, to ensure interaction with customers is mutually risk-free  

 

  • The Food Purveyor Sdn Bhd, which operates grocery chains, Village GrocerBIG and OTK stores, has implemented priority shopping hours exclusively dedicated to frontline healthcare personnel. Shoppers who are front line health care personnel are also offered a special 10% discount at the stores every Sunday, during the MCO  

 

  • Jaya Grocer chain provides an exclusive 30-minute pre-opening shopping time for senior citizens aged over 60 to support this category of shoppers who are more vulnerable to the COVID-19 virus  

 

  • Watsons Malaysia has donated a stock of essential protection supplies to a network of 17 public hospitals. The items donated are for use by the frontline team at the hospitals. The items include antibacterial wipes, Vitamin C, hand sanitizers, thermometer scans, and raincoats 

What is the prevalence of COVID-19, and what are the major measures being taken at a government level 

 

Schools, non-essential workplaces, malls and other public places are closed officially until April 19th, though indications show that this will likely be extended until the end of May.  

 

With a large population and many densely populated cities, social distancing is a significant challenge. The government recognizes the public health and economic impact and is allocating IDR405.1 trillion (US$24.6bn) to fight COVID-19 that will be split between direct healthcare spending and economic recovery efforts 

 

How is this impacting retail, and how have manufacturers and retailers reacted?  

 

Cooking oil, instant noodles, rice, sugar and cooking seasoning are food categories experiencing high demand. Soap, detergents and vitamin supplements are non-food categories being purchased in high volumes. To control panic buying, many retailers are limiting the amount of these items that can be purchased at any one timeRetailers are securing supplies of basic food and cleaning products as a first priority, and manufacturers are starting to ramp up late night and weekend deliveries as well as increase the amount of Direct-to-Store deliveries. 

 

“Business goes on of course, but the discussions we are having with our retailers are mostly restricted to certain categories. Household cleaning and anything to do with sanitization (demand) has at least doubled. We are fortunate in that we have government exemptions to keep producing as we are considered an essential producer. This means there are no restrictions on production, supply lines or logistics”. Indonesian manufacturer  

 

Ramadan, which will take place for a month starting on April 24th is the biggest trading period of the year as there are large family celebrations once the fasting month is over. Even though travel restrictions and prohibitions on large gatherings could limit the ability of many Indonesians to celebrate the same as they would in other years, suppliers and retailers are nonetheless bracing themselves for an uptick in demand for festive shopping. “It is really unfortunate that the impact of COVID-19 is going to be felt during our largest shopping season. This impacts our industry more than in other places”Indonesian retailer  

 

In terms of health and safety measures, most retailers are checking their staff’s body temperatures and capping the number of shoppers that can be in the store at any one time as well as ensuring that they maintain a wide distance while lining up to pay. There is increased traffic for online delivery sites and some bricks and mortar retailers such as Foodhall are allowing shoppers to phone in orders with delivery taking place 4-5 days later.   

 

“Overall, modern trade is experiencing growth, but it is not consistent across the board. Some cities are seeing small format/convenience growing tremendously, and yet in others we are seeing reduced traffic. About 30% of supermarket and small format businesses are choosing to shut down rather than trade because they are concerned about safety and the real potential of looting. There are also others, in particular those within shopping centres, that have significantly reduced traffic because shoppers are avoiding incidences where they have to be exposed to a lot of other shoppers”. Indonesian supplier  

 

How are manufacturers and retailers stepping up to support the country?  

 

  • Frisian FlagIs  is distributing more than 500,000 thousand dairy products to frontline workers  

 

  • Wings Group has distributed various health care supplies to eight different hospitals which have been appointed by the Government to treat COVID-19 patients. In addition, they also provide free masks for people who are using MRT and other public transportation to commute around the city. The group has also donated 25,000 sets of personal protective equipment (PPE) and breathing aids (ventilators) which are urgently needed by medical personnel, along with hand sanitizers, hand wash, disinfectant liquid, detergent, shampoo, and basic foods 

 

  • Mayora Group will donate one million masks, one million bottles of mineral water, and one million packs of biscuits  
  • Danone Indonesia through its two core businesses, water and special nutritionis committed to donating more than IDR15bn to overcome the COVID-19 virus. Assistance is carried out in the form of cash and Danone products which will be sent to a number of COVID-19 referral hospitals in Indonesia 

 

  • Lion Superindo has provided assistance to the Friendship Hospital and PT. Jakarta Tourisindo in the form of 24,000 medical gloves made from latex and 12,000 UHT ready to drink milk for medical personnel working in a referral hospital handling COVID-19 in Jakarta  

 

  • Alfamart has provided 20,000 masks through the Ministry of Transportation Care and has also partnered with LazisMu spraying public facilities disinfectants 

 

  • Indomaret has donated masks and hand sanitizers in several cities/areas across Indonesia. They also provide food for medical personnel handling COVID-19 in Jakarta 

 

  • Shopee (e-commerce player) has donated IDR1bn to the Indonesian Red Cross (PMI) through the BenihBaik Foundation to help tackle the spread of  COVID-19 in Indonesia 

What is the prevalence of COVID-19, and what are the major measures being taken at a government level 

 

The spread has been mostly concentrated in Manila and the island of Luzon, though there are starting to be cases reported in other parts of the country. Testing is very limited, so it is highly likely that the number of cases is vastly underreported. Hospitals in Manila are overwhelmed and face major equipment shortages.  

 

A national lockdown is officially in place until April 13th, and there is a lot of debate as to whether it will be extended or left up to district governments to decide as there are major economic and social pressures clashing with public health interests.  

 

How is this impacting retail, and how have manufacturers and retailers reacted?  

 

Retailers have been scrambling to source stock to fulfill the demands of panic buying of certain items and are also dealing with shortages of non-essential items that the government has placed production and import restrictions on. With a lot of public transportation halted, the production of essentials is impacted by the inability of workers to get to production and distribution facilities unless they live within walking distance. 

 

Food and pharmacy stores are open and for the most part queuing seems to be quite orderly. Those consumers who can afford it are moving towards ordering items online.  

A Pulse on Big Brands

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