While trust may not have anything to do with this global COVID-19 pandemic, our ability to establish and build trust has everything to do with finding solutions to our challenges. The only way we solve problems is through people. Nothing plays a bigger role in people, their work and performance than trust.
“Trust” is more important now than ever in an organization’s success. Per Stephen M.R. Covey, “marketplace success is trust monetized.” That is, the market places a higher value in best-in-class companies, as consumers purchasing those products have higher confidence and greater trust in those products/services than their competitors.
Nothing engenders trust more than these four simple words: “I believe in you.” Especially in these uncertain times when employees may feel frightened of the future (if not the present), I encourage business owners / managers to say these words to their employees and subordinates. It must be genuine and sincere, however, and backed-up with actions.
Often companies need to re-gain trust and credibility with their employees, customers, investors, consumers and other stakeholders. They do this by admitting mistakes publicly, product recalls (think Johnson & Johnson during the Tylenol debacle), debt repayment, and employee benefits. Individuals similarly often need to act their way back to self-trust through maintaining their commitments and self-improvement so they feel at ease with themselves.
Finally, I have a short anecdote which I experienced while working in Asia for Nestlé’ during the 1998 financial crisis. Our largest competitor was a local subsidiary of Kraft USA, and we each shared about 50% of the retail coffee market. As the financial crisis began to unfold, all liquidity evaporated and coffee wholesalers were unable to meet their AP and pay our invoices. Nestlé’s policy was to immediately cease all shipments to these customers that did not pay their outstanding invoices, and all credit terms were changed to pre-payment in full prior to shipment. Our competitor, on the other hand, extended long credit lines to their customers, shipped orders free of charge, and provided them with a lifeline to remain in business. The result? Within a short period of time, Kraft USA had a majority market share and Nestle shuttered its coffee factory and resorted to imports due to small volume.
The moral of the story is this: trust your customers/employees/stakeholders, and they in turn will not only trust you but also deliver results.
The Speed of Trust, Stephen M.R. Covey, 2020
In the Chinese language, the word “crisis” bears the meaning of “opportunity.” In the case of North American Food & Beverage brands, we believe the 1.4 billion people Chinese market will be an opportunity for foreign goods as consumers trust foreign brands more than local ones. It is an opportune time to develop strategies for sales growth in China and other foreign export markets.
In addition, F&B brands can capitalize on the trends occurring in the U.S. to advance their businesses during – and after – this health crisis. Consider the following trends and actions to separate your brand from competitors in your category:
- Consumer Trends
- 69% of consumers are buying different brands than usual; excellent opportunity for trial and sampling with aim of new customer acquisition
- Shift from foodservice consumption to retail grocery and e-commerce. Consider downsizing FS pack sizes to smaller consumer packs.
- Kroger reporting +30% growth in all categories vs. 2% LY (+28% for all retail grocery)
- Building material & home improvement stores +7.6% vs LY, indicating consumers are simply eating at home and making home improvements
- All other retail sectors declined significantly, including:
- Electronics & appliance stores -15.9%
- Clothing & accessories stores -50.7%
- Sporting goods, music, & book stores -22.7&
- It’s hard to purchase products when most retail stores are shuttered
- As a result, E-Commerce sales increased +12% vs LY. Consider deploying more A&P spending in e-commerce and away from traditional media, and optimizing your presence and product portfolio on platforms such as Amazon, Jet, T-Mall, Ocado and Rakuten.
- Manufacturers Should Focus On:
- Customer communication; remaining relevant
- Updating financial assumptions, including sales forecasts, AR, and cost of capital
- Capital; sufficient liquidity to maintain optimum inventory levels during a slowdown in demand
- Monitoring the credit risk of customers and suppliers
- Supply chain; ensuring input availability while containing costs
- Establish protocols for working on site and develop best practices for social distancing
Every country in the world has been impacted by the recent COVID-19 health crisis, some more than others. In the U.S. food and beverage industry, we are seeing the following trends:
- CPG Trends
- Brand switching from mainstream to value (decreased brand loyalty)
- Increase in Private Label
- Cost valued more than convenience
- Shift from premium to value channels (Mass & Club)
- Decrease in Foodservice and increased eat at home
- Foodservice Trends
- In 2019, U.S. foodservice experienced +4.1% growth
- 25% of total eating occasions were in a restaurant
- In 2020 expectations are for a -13% to -28% decrease
- The winners in foodservice are restaurants which deliver and/or consumers take out:
- +30% curbside pick-up since crisis
- +22% delivery
- +20% take out
- We will see initial pent up demand as the crisis mitigates and restaurants open
- Longer term there will be fewer restaurants (IRI estimates -100,000) and less choices
- In 2019, U.S. foodservice experienced +4.1% growth
These trends will continue through the crisis, but North American consumers will begin to return to their original purchase patterns over time. In the meantime, food and beverage brands and foodservice establishments must adjust to the new normal in consumer behavior. It will not be “business as usual” for quite some time, and brands will need to pivot to remain relevant in a depressed local economy.
The following trends are from primary research conducted by AMI’s UK representative, which are consistent with retail and foodservice sales trends in other European markets:
• UK Retail Sales Boom
o UK grocery sales +20.6% in March vs. LY
o The Big 4 supermarkets – Tesco, Sainsbury’s, Asda & Morrisons – +17.7% combined
o Discount retail giants Aldi and Lidl +24.5% over the period
o Convenience stores +30%
o Independent retailers double the growth in grocery at +45%
• Factors Driving Retail Sales Growth in the UK
o Foodservice sales switched to retail, causing surge in retail demand
o Increasing consumer basket size and total spend
o Ocado, UK’s leading Food & Beverage e-commerce platform, experienced 10x demand
o Ocado sales in Q1 increased +12.5% with 133,000 new customers acquired
o All e-commerce retailers limited available items for sale and prioritized vulnerable customers
• Retailers Adapting to New Environment
o Limited number of items eases availability issues
o Offer elderly, vulnerable and medical staff exclusive shopping hours
o Retail execs assigned new temporary roles to deal with emergency situation
o Foodservice sales declined -71% in March vs. LY
o Healthcare accounted for 67% of foodservice sales vs. 6% normally
o Hotels, restaurants, cafes, close and reliable on government funding to survive
o All outlets focus on food delivery, take out and app orders to maintain income
o Key issue in retail is supplying huge demand
o Payment terms from smaller suppliers has been reduced by large chain grocery accounts
o Promotions cancelled which equals higher sales and margins for retailers
o Essential items such as paper goods and comfort foods have been the focus of demand
o Temporary de-listings have impacted smaller suppliers
o New product launches have been postponed or cancelled
o E-commerce becomes a larger portion of all supplier’s sales
o Foodservice suppliers are the hardest hit
Nonetheless there are positive signs in the UK Food & Beverage industry. The advantages of a Direct-to- Consumer model are clear and business will focus more on succeeding in this channel. Finally, agility and resilience will be the rule, and businesses large and small will need to respond quickly and creatively to new future challenges and opportunities.
Working with the right local partner and understanding the local consumer preferences will never go out of style.
Consumers are looking for the convenience of home delivery on every continent, is your brand ready to seize the opportunity?