Food and environmental affairs writer, Nick Hughes, talks about the impact of lockdown on the UK food and drink sector:
If you’re looking for a pandemic-proof industry look no further than food and drink. Data across almost every grocery category – from fresh meats to frozen veg – has shown the kind of stellar sales growth since March 2020 that FMCG suppliers could only dream of before Covid-19 struck.
The figures looks great on paper but they mask a simple truth: the closure of the hospitality sector for much of the past year has seen millions of people eat three square meals a day at home on a daily basis for the first time most of us can remember. Little wonder it’s been boom time for those businesses supplying our breakfast jam, lunchtime bread and chicken dinner.
But the sales surge has come at a price. Grocery operating costs have soared as businesses have been forced to transform the way they work to support the shift to online sales. This has meant recruiting thousands more people in logistics roles while spending millions on supply chain infrastructure and making stores and distribution centres Covid-safe.
So what will be the lasting legacy of the pandemic on the UK food sector?
Most significantly, the shift to shopping online is likely to sustain, if not quite at lockdown levels then far higher than before the pandemic. This has implications for food suppliers as well as retailers. A notable trend during 2020 was for household name brands to follow start-ups in launching direct-to-consumer (D2C) subscription services. One example is Heinz-to-Home, which offers bundles of favourite Heinz products delivered direct to customers’ doors. The way Heinz to Home is priced doesn’t make it especially competitive versus buying the same products from a mainstream supermarket but it ticks the all-important consumer box of convenience. For Heinz, meanwhile, although the margin on the product might not be hugely more attractive than selling via a multiple retailer when you factor in the cost of delivery, of far more value is the ability to hold direct relationships with its customers which means richer data can be collected and products and bundles can be personalised. Expect to see more brands dabble in D2C in the months ahead.
It’s also been a favourable environment for brands wanting to test new products and concepts in the UK market thanks to a captive audience, stuck at home looking to bring some excitement into their lives. In the beer, wine and spirits category, products that would normally be tested first in pubs and restaurants have been fast-tracked onto supermarket shelves. Hard seltzers have been one of the most eye-catching successes of the past 12 months. Originating in the USA as a ready-to-drink version of a vodka soda, Smirnoff, Koppaberg, Coca-Cola and Brewdog are among the big name brands capitalising on our growing taste for tipples that ticks the health box with their low calorie, sugar and alcohol content.
Which brings me onto a final key trend. Health and sustainability concerns have continued to grow during the pandemic with surveys consistently showing people care more than ever about the impact brands have on the environment. From a product perspective this is reflected in the growth in plant-based launches with meat and dairy alternatives in particular flooding the grocery market. Tesco has committed to a 300% increase in sales of meat alternatives by 2025 as part of its aim to halve the environmental impact of the average UK shopping basket. It’s a huge statement of intent from Britain’s biggest grocer.
Brands are understandably looking to capitalise on shoppers’ growing sense of social responsibility through innovation in new sustainable products. But those that talk up their ‘green’ values need to ensure they are speaking with an authentic voice. Both consumers and campaigners alike are more attuned than ever to signs of greenwashing – where brands’ ethical claims do not stand up to close scrutiny.
Businesses that talk the language of ethics and sustainability need to back that up with transparent reporting of their policies and achievements in areas such as plastic pollution, food waste, climate change and diversity or face a potential backlash.
At a time of great change and opportunity for the food and drink sector, it is innovative, agile businesses with a purpose beyond short-term profit that look set to win the battle for our hearts… and wallets.
Nick Hughes is a freelance writer and editor specialising in food and environmental affairs. He contributes regular articles to leading business titles including The Grocer and Retail Week and is associate editor of Footprint magazine.