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This week we speak with Ana Fioratti, Managing Director for Advantage Brazil to understand how COVID-19 is impacting life and retail in the country.

Q1 - What is the prevalence of COVID-19, and what are the major measures being taken at a government level?

COVID-19 has had a disruptive impact all over the world, officially arriving in Brazil in mid-March, when the first cases were confirmed, while we were overwhelmed with terrifying news from Asia and Europe during the previous few weeks.  

The impact on shopper behaviour was immediate. Customers were frantically buying essential items for a long period of confinement. While these items were still available on retailers’ and wholesalers’ shelves, most were not prepared for this peak in demand that hit the entire supply chain.  

Q2 - How is this impacting retail, and how have manufacturers and retailers reacted?

March 12th was registered by most companies as the starting point of exponential growth on demand for a “war basket” of products, including mostly non-perishable items such as beverages, frozen foods, grains (rice, beans, flour, pasta, etc.), HPC, home cleaning with an emphasis on disinfectants and alcohol, and at drugstores masks, gloves, prescription drugs of continued use and some OTC basic items. During the first week, the average increase in sales for most ranged from 30% to 50% (with some items up more than five times) while other items of the regular basket suffered a sharp decline in demand.  During the second week, demand hit even higher peaks at some companies, leading to massive out of stocks.  

The beginning of April has already shown increasing declines in demand in addition to a change in the basket content, now with more items of weekly purchase, such as fresh fruit, vegetables, bread, some beverages, dairy, and proteins.

The hypothesis of retailers from the supermarket channel is that the purchase of items for storage during a long period has already been made, and now shoppers are focusing on items that cannot be stored more than a few days as well as replenishing the already stored items as they are consumed.  

Cash & Carry’s were severely impacted by the closure of bars, restaurants and all sorts of foodservice operations and other businesses that used to buy their supplies from this channel. In drugstores, the most requested items – masks, gloves, and alcohol – were sold out and drugs of regular use were already piled up at consumers’ homes. A similar impact was suffered by stores in shopping malls (that were closed except for supermarkets and drugstores, but the usual traffic of clients of the mall ebbed down) as well as on streets (empty after the restriction rules were implemented).  

The problems for consumers augmented, with increasingly longer home-delivery delays, chronic out of stocks, errors in delivery, problems with payments (several companies did not have a solution for payment without contact with the person who delivers, which did not meet the requirements of consumers in isolation to avoid any contact), as well as packages that did not reduce the risk of contamination along the process from picking to delivery.  

Q3 - How are manufacturers and retailers stepping up to support the country?

Stores increasingly implemented safety measures for their staff, suppliers and clients, including hand sanitizers in different strategic points, and instructions about personal conduct and distances to be kept from others. In some cases, they provided masks for staff in contact with clients as well as acrylic panels to reduce the risk of contamination of cashiers by clients. Cleaning and disinfecting routines were implemented more frequently in all areas, as were other measures such as restrictions to the number of clients allowed inside the store and disinfection of handles of shopping trolleys, baskets, and other items after each client touched them, etc. 

All team members whose functions were compatible with remote work began working from home in all companies, and the contact with business partners was restricted to teleconference and/or phone. Planning at most companies is weekly, with operational issues being prioritized over strategic.  

Some international manufacturers have been sharing their experience in markets where the pandemic started earlier with local clients, providing insights on the impact on business. The manufacturers of high demand items during this period experimented with a strategy of strongly increased collaboration, all focusing on maintaining sufficient supply to face the demand at each moment. 

On the other hand, manufacturers of products or categories whose demand sharply declined had difficulties in keeping the closeness of contact and collaboration, and are very concerned with the current negative impact on their cash flow as well as with their ability to recover their production capacity when the market returns to normality, including the potential requirement to offer different products to meet the needs of impoverished shoppers and the required investments to attract them to stores and keep their established brand image.  

Overall collaboration seems to have gained in value and the digital relationship models have overcome doubts and barriers regarding their potential of effectiveness, time and costs. 

The majority of companies in all segments are doing some type of community support initiative, often jointly with the local public administration offices or ONG’s, aimed at helping those in greater need and sometimes also the health care institutions and professionals.