Wednesday, 1 July 2020
Farmers and the wider food supply chain are used to responding to changing consumer requirements. However, it is hard to recall a time when the consumer landscape changed quite as dramatically as over these last three months of lockdown. AHDB has been following these changes closely, so whether we are considering shopping behaviour or the rise of in-home eating, we have been reporting on the key issues which affect the demand for our sectors’ products.
Within this article I summarise some of the key factors which shape consumer demand and feed into this year’s Agri Market Outlook. Until recently the big consumer issue for agriculture was the reputation of farming, particularly meat and dairy production. Plant-based was the buzzword of the day and sustainability and environment were a key focus. While these issues haven’t disappeared, short-term concerns about getting the family fed and longer-term financial worries have now taken centre stage. Are these genuine shifts that will shape consumer demand or drivers that will fade away as aspects of normal lifestyles return?
A gloomy economic outlook
Economic forecasts regarding the impact of Covid-19 vary but all agree we are facing the biggest recession since the 1940’s. Measures such as the Government’s furlough scheme, taken up by a staggering 7.5 million workers, will have sheltered many from the full impact. When the scheme finishes in October unemployment will rise and incomes will fall. This is important for farmers, growers and processors as when the recession bites, consumers will have less money to spend. Given the anticipated scale of recession, I expect this will be the most important driver for consumer behaviour, impacting on the type of food we buy and where we buy it. It’s not just the ‘depth’ of the recession but the speed of recovery. Indeed, the 2008 recession was characterised by a very slow recovery and a similar pattern would weigh heavily on consumers for a sustained period.
Price conscious shopping
We know from previous recessions that consumers change their behaviour when money is tight or their confidence in the economy is low, as we explore in more detail here, drawing on evidence from IGD and AHDBs own consumer tracker. Two behaviours we have seen change in the past are preparing food from scratch more often and eating out less. I discuss these in more detail later, and expect they will not come as a surprise to many.
What may be more surprising is the extent many consumers change their shopping habits in a recession. Trading down has been the key way consumers make their money go further, such as buying fewer brands, buying more from value/basic ranges or buying more from the hard discounting supermarkets. Of course, since the last recession, we’ve seen the continued growth of the hard discounters, particularly driven by store openings. Similarly, all retailers have altered their ranges in a bid to keep hold of shoppers, particularly focusing at the value end. But we should be in no doubt that the battle for footfall and consumer spend will intensify as the recession bites.
The Covid-19 lockdown has already impacted shoppers. AHDB’s consumer tracker (AHDB/YouGov) from April demonstrates diverse attitudes about budgeting, with a third of consumers agreeing they have already adjusted their food budget and a third disagreeing. So far the financial impacts appear asymmetric, with some consumers unemployed or furloughed and others on full pay with fewer outgoings. Over the coming months I expect the negatively impacted group to grow in size, as the full impacts of recession will be felt by more of the population.
Consumer confidence towards eating out will be impacted both in terms of social distancing measures and tighter household budgets. There will be fewer consumers who want to eat out and fewer who can afford to. As a result, those consumers who may have eaten out in high end restaurants may trade this for premium tier offerings at the supermarket or a takeaway – a reminder that recessionary behaviour is not all about value lines.
Going online and local
Government advice to stay at home benefited online shopping (up from 7.4% of total grocery to 10.2% in April, Kantar Worldpanel) and local convenience stores. Butchers have also seen significant growth, with their market share up from 4.2% to 5% of total meat, fish and poultry (12 w/e 17 May 2020). This has led some to suggest a growing interest in provenance and buying local. However, consumer attitude surveys do not support this, and I feel it is more likely that convenience and availability are the true drivers of this growth. The well-publicised challenges with product availability in larger format stores in the run up to lockdown may have helped push shoppers towards different channels.
Local food specialists, including farm shops, will have benefited from shoppers using different channels and outlets. The challenge is to what extent such businesses can maintain a proportion of this custom in future as availability become less of an issue for shoppers. By contrast, shopping online for food and drink is a trend that’s already well documented, with coronavirus accelerating growth in this sector. It’s certainly been given a boost by coronavirus, but it’s a definite trend, not a short-term blip.
New cooking habits
With many people spending more time at home, we have seen big increases in at-home meals. We have seen increases in the number of consumers who think beef, lamb and pork are suitable for a mid-week meal, which may be due to them having more time to cook or cooking a wider variety of meals.
The AHDB consumer tracker found that around a quarter of consumers say they are scratch cooking more now than they did previously and the same number have been using leftovers more often. Over the next 18 months I expect this trend to continue. Whilst lockdown is now being eased many businesses are encouraging their staff to work from home. The ‘new normal’ will continue to involve significant remote working, with social distancing measuring significantly restricting office capacity.
As highlighted in the price conscious consumers section, recessions often bring about increases to scratch cooking, and we expect the challenging economic situation will add support to this trend and is potentially good news for our livestock sectors.
Positivity towards meat and dairy?
Over recent months the home cooking trend has benefited in home consumption of meat and dairy products. Many people have moved back to products they know to build nourishing meals. This has led to impressive growth figures in sales of meat and dairy, particularly for staples such as beef mince, chicken breast, cheese and cream.
There is also a significant reduction in the number of people claiming to be cutting back on meat and dairy in the period post-lockdown. In fact, the amount of people claiming to be eating more meat has doubled from seven to 14% (AHDB/YouGov April 2020) whilst those reducing has moved from 27% to 16%. For dairy, there has also been a reduction in those claiming to cut back (from 17% to 11%) with consuming more increasing from five to 12%.
In time of recession, when consumer confidence is low, health often becomes less of a priority. Consumers become heavily price focused and look for meals which offer them comfort. I therefore see a decrease in meals eaten for health. We will continue to track how the number of meals eaten for health reasons evolves. The level of consumer confidence will impact to what extent this trend is paused in favour of price and comfort.
Over the next few months, as we emerge from lockdown into the ‘new normal’ we can expect to see some re-evaluation about what is important to consumers. I expect some key factors to shape consumer demand:
- Don’t expect a rapid recovery in the eating out market. Social distancing measures will reduce capacities when re-opening does happen. I don’t see consumer concern about Covid-19 disappearing quickly and its economic impact will be felt for months and years to come. This mean that many consumers with not want to eat out as often and others will not be able to afford to eat out as often.
- Shoppers will become even more price conscious, impacting on what they purchase in retail. Trading down will become the predominant shopping behaviour. Factors such as heath, provenance and the environment haven’t gone away for all consumers but we know from previous recessions that they will have to take a back seat as purchase drivers for many.
- We will see a revival in home cooking and scratch cooking – driven by economic factors and the increased time people will be spending at home.
- An acceleration in growth for takeaways and food delivery could be on the cards. Occasional treats are important during recessions and I see takeaways and food delivery as being a potential winner due to affordability and perceived safety.
These factors shape the demand estimates within the Agri Market Outlook. Specific issues are outlined in sector summary pages. AHDB will continue to track and monitor consumer attitudes and behaviours to bring you the latest insights. More information can be found in the Retail and Consumer Insight pages of the website.