How COVID-19 is transforming retail
Looking back at the last decade, there have been many changes within the retail sector that one may not have predicted:
- The rapid advance of the discounters, Aldi and Lidl, who now have a combined share of 13.6% (Kantar Worldpanel to 17th May 2020)
- The UK leading the global increase in online food shopping, now accounting for approx. 12.5% share of total grocery market
- The steady ‘and perhaps un-guaranteed’ rise in organic sales, which has been positive for nine of the last ten years
In 2010, baby food was the only category of organic that enjoyed growth: supermarket sales of organic accounted for approximately 73% of the total, whereas online and box scheme sales were just 9%.
Move forward to 2020, and see how the structure and success of the organic market has changed. Growth of sales through supermarkets is at +4.2%, (Nielsen 52 weeks to 28th March 2020), with 8 out of 10 product categories experiencing healthy growth.
There has been a major shift in the breakdown of sales by market channels:
Savvy organic shoppers have gradually transitioned to the outlets where the organic range is broadest and choice, and specialist knowledge is available i.e. home delivery/online and independent retail, which together now have a 31.4% share of total sales, versus 24% in 2010.
New opportunity for online and convenience sales
The unexpected crisis of the last three months has had a major impact on the structure of the grocery industry, and the question is whether these new habits and behaviours are here to stay.
Fraser McKevitt, Head of Retail and Consumer Insight at Kantar, recently commented that the most recent three-month period - which includes both the pre-lockdown rush to the shops in March, and eight weeks of stay-at-home - resulted in the fastest growth in take-home grocery sales for over 25 years. He said that more shoppers – 1.6 million – had switched to buying groceries online so far this year than in the previous five years.
Soil Association Certification organic client, Matt Godfroy - Founder of Sunfresh and Pikt organic produce boxes - comments:
“Pikt launched six months before COVID, with a steady weekly customer base. Overnight, lockdown stopped shopping habits as we knew them; Pikt went from gradual incline of orders to multiple digit growth within two weeks.
We've read and heard the future of grocery sales will be online - not until a pandemic occurs does it make you realise it can be a smooth transition and hassle-free shopping experience. Demand for organic fresh produce is more relevant and present than ever before.”
There is every possibility that by 2023, 1 in 3 organic items purchased will be through online shopping, if the current trend continues. It’s a perfect opportunity for organic brands to represent themselves confidently and clearly online, and through the right online operators, if not their own websites.
A reconnection with local shops
In addition, corner shops and independent grocery stores reported a 63% surge in trade in 3 months to 17th May, according to Kantar. Sales of independently owned retailers soared by more than double the pace of fastest growing grocery chain, the Co-Op.
Al Overton, Head of Buying at Planet Organic comments:
"In our neighbourhood community stores, we've seen an increase in local shopping, as well as increased sales in organic commodities – fruit and veg, eggs, and grocery items. Shopping visits have become more targeted, as customers come in to buy essentials, rather than browse and enjoy the experience.
We're also having to manage the safe experience for our teams and customers by restricting the number of customers in the store, ensure safe distancing etc. On the flip side, we do a fair amount of food service in all our stores, and this being closed has severely affected the frequency of visit."
There has been a reconnection with local shops and local food supply. As many as 52% of consumers believe their local convenience store has become more important to them since lockdown measures were introduced, with 59% of consumers saying convenience stores have become more important to their communities as a whole, according to a new study by research organisation, TWC.
Fortunately, organic has always sold well through these channels, and the shift should bode well for future sales, as well as giving organic products more opportunity to showcase their unique values.
A changing consumer
It’s clear, after 3 months of lockdown, that shopper habits are being reshaped as they adapt to the new restrictions. Where we shop and what we buy will continue to change, and new habits may stay: scratch cooking and baking have been revitalised, as we spend more time at home. Supermarkets are predicted to grow by approximately 12% in 2020, due to the increased sales resulting from more food being produced and consumed at home.
Ready prepared products with shorter shelf life are being substituted with scratch ingredients that last longer, and can be more versatile over a longer period.
Shopping trips are less frequent, and being planned with more menu preparation in mind. Kantar data shows households would typically have shopped for groceries 17 times per month, but are now doing a ‘big shop’ 14 times: a record low.
During the height of the pandemic, many larger retailers reduced choice within their ranges to simplify operations for both manufacturers and store staff. Although many lines have been reinstated, organic may still have to fight to maintain listings, particularly if the major retailers decide to adopt a ‘less is more’ approach in the future.
Yet, organic still has a unique opportunity to ‘stand out,’ highlighting benefits of transparency and integrity, at a time when quality and safety are of increasing importance for consumers.
A recent online opinion poll by the OTA in the US reported on three interesting themes when considering the future potential for organic. Shopper feedback showed:
- Organic is more important than ever – it sits at the intersection with health and safety, and as with all food or health scares, attention to organic rises as a consequence
- 93% of shoppers were prioritising organic when buying fresh produce, due to there being less time in store and less range
- 82% were experimenting with new products or brands, which could be organic
Opportunity for organic
The resilience of the organic sector is as important now as it was at the start of the last decade. According to a recent Mc Kinsey survey, reported in the Grocer, confidence in the economy is dipping, with almost a quarter (24%) of respondents believing that COVID-19 would have a long lasting impact on the economy.
However, food is a ‘necessity’ purchase, and with the likelihood that more people will be working from home ongoing - and therefore, eating at home - the potential for increasing sales will continue. Organic has a perfect opportunity to get its slice of this pie.
Consumers will look to trusted brands, and assurance of labels, when they’re feeling anxious about the world around them. Organic is perfectly placed to reinforce its image as a solution for personal health and wellbeing, while also shouting about high quality care and attention taken throughout the end-to-end supply chain.
The post COVID-19 shopper may be more cautious about safety routines in stores, and this is likely to extend to their product and channel choices, with quality assurance being of upmost importance. Transparency of supply chains will become a key motivator when shopping, labels and descriptions will need to communicate their story well.
The time to broadcast organic is now
Despite the likelihood of tighter budgets, many shoppers will still want to choose quality, good taste and ethical options for home cooking. Sustainability remains high on their wish list, while citizens have had more time to think during the crisis and research their shopping options, so as to make planet-centric choices.
Organic brands, retailers and businesses have a huge part to play in reinforcing the credentials of organic – as a farming system ‘working with nature’ to restore goodness in the land, with a positive impact on personal health and wellness, and the environment. There is so much additional value in organic, and more than ever before, it’s time to broadcast it.
Retailers continue to have strong confidence in the opportunity for organic, so as an industry, we will rise to the challenge together.