Part of the lockdown restrictions have included no sales of alcohol, as well as limitations on what can be sold via retail channels. For the grocery sector, only government allocated “essential items” could be sold to shoppers, which meant that many shelves were cordoned off as non-essential goods. The impact of this was significant for both suppliers and retailers as they tried to manage supply chains and sales expectations given these restrictions.
For example, the initial lockdown created panic buying from consumers generating unprecedented demand for specific goods such as toilet paper and baking items. The challenges for category sales have impacted some FMCG players to the extent that they have realized less than 20% of projected revenues for this period. The closing of schools, restaurants and leisure facilities has adversely effected beverage sales. For alcoholic beverage suppliers, the export market was also initially closed due to road transport safety concerns, so alcoholic beverage suppliers lost both retail and on-trade sales. Talking to a large retailer recently, they expressed how fruit juice sales have been disappointing as they have no “lunch-boxes” to fill. With fewer shoppers, restrictions on the number of people in a store at any time, and social distancing protocols implemented in checkout queues, impulse buying has dropped with the hardest hit being the chocolate and snack suppliers.
The CPG industry response has taken a human-centred and people-first approach. As a result, improved safety measures for staff have been paramount. These have been followed by adjustments to specific category fulfillment focus. The latter has led to interesting developments in supply chain innovation in attempts to find pockets of value through efficiencies.
As we pivot (as of 1 June) into a lowering of the restrictions, alcoholic beverages are now allowed to be sold, however, bars, restaurant and entertainment venues remain closed. All retail items can be sold in-store without restrictions. One might think that this means business as usual – however, the impact of supply chain adjustments has garnered learnings that have accelerated digital transformation of process, planning and delivery as well as investments in logistics-as-a-service.
The severity of lockdown in South Africa meant that there was no time for suppliers to adjust to try and eck out as much revenue as possible. The luck of the draw being which category you play in – with home, personal and baby care seeing some of the best results, along with bakery goods. The ramifications on CPG business from nine weeks of hard lockdown mean that significant rationalizations have taken place – what this means for the mid to longer-term for capacity to fulfill and serve customer expectations remains to be seen.