The pandemic has transformed the food and drinks industry. The sector has witnessed enormous changes and disruptions, which have affected the type of food and drink we buy, where we buy it, and how often.
But is this just a temporary correction or can we expect things to go back to how they were in 2019? In this blog, we examine what’s next for the food and drink industry.
Real World Data
The food and drinks sector stands at a crossroads. Will the monumental changes that have been seen since the beginning of the pandemic be permanent? How will supermarkets, restaurants and food brands compete for future growth? And is this the new normal or is there more upcoming disruption for the sector?
In a recent webinar, data analytics and brand consulting firm Kantar presented some fascinating insights to answer these questions. With their findings based on purchase and usage panels that record 3.5 million purchase moments and 1.2 million consumption moments a year, the data has a solid basis and provides comprehensive perspectives on the food and drink market.
Early Pandemic Food Purchase and Consumption Changes
Just before the pandemic, there was an approximately 60:40 split in food and drink bought for use at home versus that bought out of the home. About 61% of our money was being spent on both large and smaller grocery shops; 25% on food and drink in cafés and restaurants; 8% on food bought on the go from retail outlets; and 6% on takeaways and deliveries.
A year later, that picture had changed. Kantar’s figures show that in the first year of the pandemic, we spent £9bn less. The makeup of our buying had changed too. We bought more food in our large grocery shops (more than 20 items) and spent more on takeaways and deliveries, while spending less on small grocery shops, retail on the go and in cafés and restaurants.
Hospitality was closed for much of the time, so it’s no surprise that this area suffered such a large decline. And with many more employees working from home, spend on food on the go and smaller grocery shops also contracted. We became more efficient in our buying, cutting back on the trips out, buying larger supermarket shops – often delivered, and devoting more of our money to takeaways and deliveries.
Recent Trends Indicate a Modest Recovery
After that first year of the pandemic, there has been a certain amount of recovery in some of the sectors. But they have not seen a full correction back to their original 2019 positions.
The amount spent on large grocery shops has reduced and that on small grocery shops has increased. Neither is back to pre-pandemic levels, though. Retail on the go has also recovered. But the largest differences are that visiting cafés and restaurants is still 30% down on pre-pandemic levels, and takeaway and delivery is thriving, up 121%.
These figures reflect the greater mobility we’ve had in the past eight months, as well as a slight movement back to working in the office for many. However, there has been a marked shift away from eating prepared meals out – towards eating them in. As Kantar confirms, “There are still 11% more in home consumption occasions than there were pre-Covid.”
Growth in Online Purchases
Where the UK consumer is spending their food and drink budget has also shifted. As with many other purchases, the industry saw a big swing towards online buying. Unable or unwilling to visit the supermarkets as often, we bought more of our groceries online.
While there has been a little bit of a correction, things are not back to the 2019 situation and a large proportion of the switch to internet shopping has remained.
Takeaways Versus Eating Out
Interestingly, it’s not only the share of each type of food-buying experience that has changed. The way we are buying for each has also changed in terms of frequency and the amount we are spending.
For food to take home, we are spending 17% more but buying 8% less often. And we are making fewer out of the home purchases – down 11% – but spending 12% more on each trip. This indicates that we are trying to be more efficient about our grocery purchases, while having fewer, but more special eating out experiences.
Takeaways are becoming more commonplace, with a 204% year-on-year change in the number of purchases made. And we’re eating out 52% less, albeit we are spending 47% more on these occasions. It’s not clear if this is a result of increased restaurant prices or simply that we are spending more because we are doing it less often.
The Key Takeaways
Kantar summarised the key changes across the five retail food and drink touchpoints. Depending on which sector you operate in, these are the observations that you should be aware of:
- Large grocery shops of more than 20 items – ecommerce is disrupting the role of the large supermarket
- Small grocery shops – convenience stores face a growing challenge to drive more footfall
- Retail on the go – there has been a change in shopper mix (fewer purchase made by affluents types as they are more likely to be working from home) and a change in the product mix (more sales of soft drinks, confectionary and crisps/snacks)
- Cafés and restaurants – customers are being more selective about when they dine out, but are spending more when they do
- Takeaways and deliveries – these are no longer limited to being a Saturday night treat and are far more prevalent than before
How is your food and drink business placed to react to these changes? Are you ready to take full advantage of them?
If you need some help to pivot your business, to add an online shop, or to help streamline your supply chain, then NetSuite is the perfect ERP system for the food and drinks industry. Contact us today to find out more.