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Published: July 15, 2020

In an effort to spur economic activity and invigorate local businesses in the face of globalization, governments and industry have been collaborating on “buy local” campaigns in recent years. When it comes to grocery purchases, this has been a cause that consumers, for the most part, have been willing to oblige.

In addition to showing support for one’s community and displaying regional and national pride, locally sourced food products are perceived as being fresher and healthier. They are also viewed by the environmentally-conscious as being more ecologically friendly due to the reduced carbon footprint compared with products that have been shipped and transported from afar.

The arrival of COVID-19 has introduced added factors on the supply and demand side of the equation that point to the purchase of local products gaining further popularity. On the supply side, border closures and logistics disruptions are motivating suppliers and retailers to reduce their reliance on imported materials as a means of strengthening supply chain resiliency. On the demand side, concerns over product hygiene and contamination are leading to consumers placing greater trust on locally sourced products over ones that have travelled longer distances and have been handled by multiple human touchpoints.

Hygiene factors aside, the pandemic has also strengthened many consumers’ sense of community, prompting them to support local independent brands and businesses more so than in the past.

Buying Local

Especially when it comes to fresher foods, today’s shopper demands greater visibility into where their products have come from along with the processes taken to ensure their hygiene and non-contamination along the way. This is putting supply chain transparency under the microscope and is placing mass-producing multinational brands that rely on sophisticated distribution networks at a disadvantage over smaller manufacturers that can market themselves with local credentials.

McKinsey recently conducted a study with 5,000 Asian consumers to gauge how COVID-19 is affecting their shopping behaviour and expectations. Across the seven countries surveyed and across multiple categories, respondents expressed strong preferences for local brands over international ones. 80% of Australians indicated that this preference had increased since the pandemic began: a trend that has prompted supermarket chain IGA to add shelf labels identifying those products that are Australian owned. In China, where foreign brands have historically enjoyed a more favourable reputation, the pendulum has swung in recent months, with 57% of Chinese respondents indicating a preference for local brands today.

The momentum for buying local also reveals itself in consumer studies conducted in Europe and North America. Research from Consumer Intelligence found that 65% of British consumers were more likely to purchase British produce as a result of COVID-19. In a report issued by Goldbeck Recruiting in late June, 82% of Canadians polled expressed that purchasing locally produced goods had become a bigger priority due to the pandemic.

While assurances around products that are deemed healthy and minimize unnecessary risks are arguably the most significant contributor to the gaining popularity of “buying local,” other COVID-19 related factors are providing further tailwinds. Locally sourced products are considered by many to be more environmentally friendly and also play into one’s desire to support their immediate community and society at large.

Since the pandemic took hold, Ernst and Young has been publishing a monthly survey tracking the sentiment and behavior of 14,000 people across 18 countries. Over the course of June, 42% of consumers said that the way they shop will fundamentally change as a result of COVID-19, with 34% indicating that they would be willing to pay more for local products. When digging deeper into the attributes that have the most influence in a buying decision, 26% cite “health” as their top concern. Next on the priority list was the “planet,” with 17% of the panellists revealing that they would pay higher prices for ethically sourced and sustainable products. “Planet” was followed closely by “society” (17%).

Over and above their sustainability credentials, smaller, locally based manufacturers are able to adapt faster to emerging trends and needs. As an example, many independent spirit distillers and craft breweries were able to shift their operations to produce hand sanitizer faster than their multinational counterparts once the pandemic took hold. Whether the hand sanitizer output was sold as an additional revenue stream or donated to front line workers generating positive PR, they were able to gain local relevancy over their larger competitors who might have been inhibited by less flexible operations and/or reliance on imports.

Sourcing Local

The Coronavirus has exposed the degree to which a significant portion of products that make it onto retailers’ shelves rely on globally interconnected supply chains. This is prompting manufacturers and retailers to reconsider the degree to which they rely on imports for raw materials and finished goods.

International logistics networks are set for bumpy roads ahead even after the full extent of the crisis subsides and travel restrictions and border controls are fully lifted. It is anticipated that the travel and tourism sector could take years to recover fully, and freight logistics capacity is tightly linked with passenger transport as airlines and rail carry a mix of cargo. Prevailing economic uncertainty will also add volatility to exchange rates and global commodity prices, providing further impetus for reduced reliance on sourcing from abroad.

Aside from adding a layer of supply chain resiliency, stocking more locally sourced products also caters to consumers’ growing expectations around sustainability. In today’s era of social media and public scrutiny, manufacturers and retailers are being held accountable for implementing environmental and ethically sound sourcing practices. Procuring locally, reduces one’s carbon footprint and decreases the likelihood of human rights and animal abuse violations occurring somewhere along the production and transport chain.

An Accenture study published in May revealed that 80% of consumers feel more connected to their communities as a result of the pandemic. In a May survey of US consumers conducted by ZypMediaMay, 53% of respondents indicated that they are more likely to buy from a local business instead of a national retailer during the COVID-19 crisis.

In the UK, market data released by Kantar reveals that small independent stores captured 69% more sales in the three-month period leading to June 20th. National retailers will always find themselves at a disadvantage versus local independents when it comes to their perceived connection with the community. By supporting local businesses through stocking and promoting their products, national retail chains can demonstrate to the local communities in which they operate stores that they are an important and valued stakeholder.

In Australia, Coles Liquor has added 24 small independent brewers into the retail group’s national supply networks and will be listing their beers in the 900 stores they operate across the country. Most independent breweries rely on bars and restaurants for between 40-60% of their sales, and the initiative is aimed at helping these businesses make up for the losses of this channel, having been closed for extended periods.


Advantage Perspective

With both retailers and consumers placing more attention on where and how their products are sourced, CPG brands will need to find ways to demonstrate local relevance and provide assurances around health, safety, and sustainability. Those that have invested in local sourcing or manufacturing operations should tout these credentials in order to make shoppers aware. While those unable to market the localization of their procurement should utilize industry body and verifiable, third-party accreditations and endorsements to assure shoppers that they still practice ethical and sustainable sourcing. They can also look at other ways to demonstrate community support by donating products or funds to local causes, or by supporting and partnering with small business and NGO’s.

Irrespective of the heightened public attention COVID-19 is placing on distribution chains, joint partnerships between suppliers and retailers can reduce waste, yield efficiency gains, and lower the overall environmental footprint. Sharing of logistics vehicles and partnering on “last mile” delivery, for example, are tangible ways that suppliers and retailers can minimize their carbon footprint.

COVID-19 and major crises have a unique way of instilling in people and businesses a collective sense that “we are all in this together.” Big businesses supporting and propping up small businesses, even if they compete in the same space, should not be perceived as a zero-sum game. Multinational brands and national retailers offer size, financial muscle, and know-how that their smaller, independent counterparts lack. Conversely, these smaller independents offer a community connectedness and local focus that larger sized enterprises cannot naturally replicate. With many smaller businesses suffering and multinationals looking to further engage the communities in which they operate, now is the perfect opportunity for fruitful partnerships to take shape.