Snacking is one of the ways that the world eats. Virtually, every country and ethnic group has a snack component, whether it be sweet or savoury, pre-packaged or fresh, on a stick or in a pocket, served in a box, from a food truck, a market, a drive-thru or walk-up window, or on the street. Snacking is culture, snacking is sustenance, snacking is a way of life.
Pre-pandemic snacking was the way that people made it from one meal to another. Snacking was about convenience; grab-n-go, small or individual serve packs. Impulse purchases drove the front end of many retailers and were a stronghold for the convenience channel. For many, snacking served as a meal replacement as they sped through busy days. Snacks were comfort food, and some reserved indulgent snacks for cravings or where a splurge was needed to improve one’s emotional well-being. We have all heard of the college student stressing about their exam who downs a pizza, or the individual who splurges on a carton of ice-cream upon breaking up with their partner. While snacking is often portrayed as indulgent and not good for you, pre-pandemic trends were on the rise to improve the nutritionals of many snacks as well as to educate the public on healthy snacking habits. Words like lite, low sugar, and low carbohydrates were called out on package labels to appease and draw in ‘snackers’ who had a desire to limit the negative attributes associated with traditional snack foods or to make them available for those with special dietary needs.
What markets experienced during COVID was a see-saw effect, as the scales tipped toward people eating their favourite snack foods and indulging in more of them. People bought comfort foods and nostalgic brands that resonated with them. Families snacked to busy themselves, assuage boredom, keep children occupied as parents worked from home, and as a form of escape from an inability to control the anxieties caused by COVID. IRI research showed a snack food sales spike of 35-40% compared to 2019 in the US for the weeks ending March 15 and 22. Volume has continued with gradual increases in trailing weeks. PepsiCo sales for their Frito-Lay and Quaker brands improved as people were eating at home. Mondelēz International Chief Executive, Dirk Van de Put, indicates in a recent Bloomberg interview that they “have seen demand spikes for comfort foods like cookies and chocolate during Covid; Nutter Butters are one of the products that people want right-now while on-the-go products have seen a decline”. The phenomenon makes sense. People were confined to their homes with their families, many furloughed or unemployed. On top of that, the added intensity of stressors created by working and educating their children at home and the general unrest caused by the pandemic drove them to snack!
Once people adjusted to the new norm of work, school, and socializing in their homes, an opposing shift occurred. Families refocused on their waistlines and the fundamental need to keep their families safe and healthy. According to a CNBC study by FMCG Gurus, 80% of 23,000 people surveyed across 18 countries indicated that they were planning to go for a healthier diet because of COVID-19. Retailers have seen consumers turn to better-for-you snacks for both adults and children as COVID has progressed. While pre-packaged goods have been a priority as parents try to protect their families from the virus, fresh foods, and purchases of bulk snack items like dried fruit and nuts have grown in favour. One other telling piece of research conducted by The Hartman Group notes that while people continue to work from their homes, there may also be demand for products that assist in helping them to control portion size. This acknowledges that even when eating healthier options, it is difficult to stop eating something when a bag is open and in front of you. Emmanuel Faber, CEO of Danone, is banking on this trend [healthy] to continue. He believes, “People will move to healthier versions of comfort foods and rebalance their diets as the pandemic continues.”
Not surprisingly, immunity has emerged as a focus area during the pandemic. Consumers are seeking a holistic approach to their diets that boosts their immunity and helps with digestion, sleep, and stress. Products are being sought with functional properties which include ingredients or supplements such as probiotics, herbs and spices (e.g. ginseng, turmeric), antioxidants and more. PepsiCo’s CEO, Ramon Laguarta notes a boom in their juice business as the immunity craze takes hold. “We are seeing that consumers are looking for immunity more,” adding that brands like Naked and Tropicana can “come up with other beverages and even snacks that go against that need.” Tea, the original plant-based beverage, has also continued to show strong results with a halo of health benefits such as natural caffeine, antioxidants and probiotics, which typifies the latest consumer motivation for longevity and wellness.
Studies around the world indicate a turbo-charged trend toward health, wellness and immunity fueled by the effects of COVID. Consumers want to be in control of what they put in their bodies, and this is compounded since they lack control in other areas of their lives. A study among 10,000 Indian consumers over the past 100 days indicates that over 50% of consumers are looking to increase their spend on health-related categories with immunity boosters and preventatives putting these at an all-time high. Singapore based Ai Palette research indicates that a focus on health and wellness has grown in Asia. During COVID, nuts and seeds grew in popularity in the Philippines. Oat-based snacks and dark chocolate gained traction in Singapore and China saw increases in cereal and protein bars. A recent market research study in Germany conducted by Innova Market Insights indicates that more than 25% of German consumers polled would still choose an indulgent snack over a one that is natural or nutritional. However, plant-based and high protein snacks are on the rise and will likely continue to trend. In Spain, research conducted among 7,500 people showed the adoption of better eating habits in the early stages of lockdown. Mediterranean diet foods such as olive oil, vegetables, fruits, and legumes were consumed more than ever before as people cooked at home. While results did not measure longer-term habits throughout the term of the virus, it is believed that this trend will promote awareness of positive eating habits in the longer-term.
As we focus on market demands for snack foods and the appetite for healthier options, there is substantial evidence that healthy and affordable snack options are not readily available to many. According to Maximo Torero, chief economist of the U.N.’s Food and Agriculture Organization, “The pandemic is creating a problem not of food availability, but of food access, because people will have less income because of the recession.” In April, the U.S. Bureau of Labor Statistics reported that grocery store prices saw the largest monthly rise since 1974. In Europe, food prices also crept up during lockdowns. In Germany, for example, food prices rose nearly 10% year-over-year in April, according to one noted consumer association.
India and other markets have seen the importance of smaller or single-serve package sizes skyrocket as budgets are cut due to COVID driven unemployment. A BBC study on U.K. youth and their perceptions of food during COVID identified a widening social disparity in healthy and unhealthy eating. “Young people in poorer families were more likely to snack, less likely to eat fresh fruit and vegetables than their wealthier counterparts.” Families in the US are looking for larger pack sizes of shelf-stable foods that are more affordable as they continue to shelter in place and try to make their dollar go further. Often, what is affordable is not the most nutritious option in today’s food landscape. This is where CPG manufacturers and retailers are needed to support and empower consumers in their quest to find healthy snacks and other menu options to sustain their families.
As mentioned earlier, there is already a movement underway to promote health and wellness in the CPG industry, and post-COVID is the time to reset and rationalize portfolios in favour of better-for-you options that pack products with fundamental benefits and healthy ingredients. Stacking the deck in a way that these options are affordable, promoted and marketed in ways that make them accessible will fuel healthy lifestyles and create habits to sustain future generations. Danone has already taken a stance to develop more affordable and nutritionally balanced options in response to consumer needs around the world. They have invested heavily in probiotics, plant-based and GMO-free products to encourage healthier lifestyles through sustainable eating and drinking habits. Other companies are following suit by investing in partnerships and innovation to bring their trusted brands closer to consumers around the world.
Mondelēz has launched a “snacking made right” campaign to reinforce their efforts to lower sugar, salt and saturated fat content in their products and have added an education component on mindful snacking and portion control. Mars Global Emerging Markets President, Blas Maquivar, indicates that their snack business remains strong. Mars believes that their portfolio has a place in any well-balanced diet, but the awareness of healthy habits has guided a shift in their portfolio toward good-for-you items. Through their partnership with Kind, and their own innovation in size variations, Mars is invigorating their business with health and wellness in mind. Krave, a meat snack brand, recently spun off by Hershey is staying relevant with younger and more fitness-minded shoppers. They are also in development on a plant-based meat snack to broaden their appeal among those who are looking for sustainable options. Conagra has also recently launched new items and snacks that appeal to healthy lifestyles using gluten-free and plant-based ingredients.
Retailers are also taking the lead in helping consumers navigate through COVID and in making healthier food choices. One US-based retailer, Coborn’s is promoting healthy shelf-stable and fresh snack ideas through its Dietitian Corner page and other social media platforms. Stop & Shop, an Ahold Delhaize company, has also turned to educating consumers on making healthier food choices. Their free online dietician program provides one-on-one consultation and avail shoppers to webinars and discussions on weight loss, meals on a budget and other health related topics. These retailers are also promoting the purchase of lower-priced and healthy snacks to respond to their shoppers’ desires and others are following suit.
Federal, State and Provincial governments too are supporting organizations that promote healthy options to consumers. Pennsylvania’s government will direct $10 million in grants to retailers and other for profit and non-profit organizations who have worked to provide access to healthy foods throughout the pandemic. Organizations must avail affordable, high-quality fresh produce, meat, dairy and other healthy products to low and moderate-income shoppers. A new benefit of this program is the ability for consumers to benefit from these programs online as the rate of e-commerce purchases has increased during COVID. While programs like these have been available in the past, there is wide recognition that they will continue to be relevant given the economic instability caused by the pandemic. In another approach, Indian Prime Minister, Nadenda Modi has publically promoted the importance of garlic, turmeric, cinnamon and other herbs and spices to strengthen immunity and protect people from harm’s way.
As consumer desires and economic uncertainty continue to pervade societies, snacking will remain an essential part of life. It is unlikely that the demand will decline for comfort foods such as chips and chocolate, however, consumers will also continue to push for products that will allow them to lead a healthy lifestyle and strengthen their ability to fight infection and disease. Trends show that while consumers love indulgent snacking experiences, there is a shift toward healthier and better-for-you ingredients and offerings. This is reshaping the way that suppliers and retailers will need to think about the products that they produce and put on their shelves. This evolution is only beginning, and the world is waiting for businesses to guide, innovate and provide options that fulfill this growing set of consumer needs around health and wellness immunity. As retailers and suppliers do what is right to support the needs and desires of consumers, their actions will increase consumer loyalty in the brands they trust and it will help to future proof our world as it moves into the future and beyond the pandemic.
This week we speak with Jaime Navarro Rous, Country Manager for Spain and Portugal, to understand how COVID-19 is impacting life and retail in Iberia.
After the 2008 economic crisis, unemployment figures in Spain reached 25% of the active population. As a result of the lack of consumer purchasing power, discounters and private label grew to capture 50% of total retail ACV (all-commodity volume). The growth of this channel was driven by four leading retailers, two local (Mercadona and Dia) and two from Germany (Aldi and Lidl).
Under the COVID-19 crisis, proximity stores and small supermarkets have captured the largest share of consumer sales, while larger stores have seen less shopper traffic as most of them are located outside the city centres where people could not travel to because of the lockdown. Once again, the four leading discounters have been in the right place at the right time, a credit to their store formats (small to medium-size stores in city centers) and have seen strong results in Q1 and Q2 this year.
As a consequence of the severe lockdown we have had, we are expecting a new and very strong economic crisis to take place as of September, with a massive loss of jobs and a GDP decrease of more than 13% for the year. Discounters will once again stand to gain, leading to reduced space for branded products.
Tourism in Spain is a critical sector, accounting for around 20% of GDP and responsible for around 5 million direct jobs. If you bear in mind that Spain has a population of about 45 million and receives more than 70 million visitors each year, you can see how vital tourism is to our economy. Most visitors come during the summertime, and the 2020 summer tourism season has for the most part, passed and been lost.
Many hotels, bars, and restaurants are unlikely to recover and are not likely to be at a minimum profitable capacity until at least the Easter holidays in March of next year. So many have decided not to remain open at all, which is logical when you consider that they have to bear the expenses of people, supplies, taxes, and other running costs if they stay open at sub-optimal revenue levels. Of the approximately 175,000 bars, hotels, and restaurants in the country, more than 50,000 of them are expected to close for good. The impact on the grocery industry will vary by region and food category. In the Balearic, Mediterranean coast, or Canary Islands that rely on tourism, for example, the impact is huge. However, the overall impact can be partially offset by grocery stores capturing back some of the Horeca (Hotel/Restaurant/Café) sales that have evaporated during the lockdown.
The rapid development of e-commerce is one of the most evident impacts of the COVID crisis on retail. Brick and Mortar retailers are adapting fast so as not to be overtaken by pure players such as Amazon. New logistics platforms are being created to support this growth, with retailers at very different levels of development in these initiatives. Interestingly, the largest retailers have been slower to respond than the smaller ones due to their “inertia” to change being much more significant. The fastest ones to adapt to e-commerce have been the locally owned regional supermarket chains.
In Spain, we had a newly appointed and inexperienced government in place just when the crisis started. In Portugal, they had an experienced one in place. Portugal reacted very quickly in early March by implementing border closures and restrictions for travellers, while in Spain, the government opted not to cancel large public gatherings and events that were politically important to them. When the Spanish government eventually realized the degree to which the pandemic was spreading uncontrollably, they had to react with one of the most severe lockdowns of all EU countries. This led to the country being completely paralyzed for three months across all sectors except for food retail. In Portugal, they avoided the need for a severe lockdown as the virus has been kept under greater control from day one.
Spain’s new government is represented by a collage of people coming from the Socialist and Communist political wings. Thus, there were differing ideas of how the crisis should be managed. Key cabinet positions were filled by individuals who were not necessarily specialists in the areas that they were overseeing. In contrast, Portugal’s Health Minister is a well-known surgeon as with other Portuguese leaders who were also well-known professionals in their respective sectors.