Farmers and food suppliers are used to responding to changing consumer demands. However, it is difficult to recall a time when the consumer landscape was changing as dramatically as in the last three months of quarantine.
The UK Agriculture and Horticulture Development Council (AHDB) has closely monitored these changes and highlighted key parameters that influence demand.
This article posted on the site Potato News Today, David Swales, Head of Strategic Analysis at AHDB, summarizes some of the key factors that shape consumer demand and influence agricultural prospects this year. Swales writes: “Until recently, the main consumer problem for agriculture was the reputation of farming, especially meat and dairy production. Plant food was a fashionable concept, and sustainable development and environmental protection were key areas. And these problems have not disappeared, but today people's attention has shifted to short-term and long-term financial worries.
How deep are these shifts shaping consumer demand? How will things change as people return to their usual way of life?
Gloomy economic outlook
Economic forecasts regarding the effects of Covid-19 vary, but all researchers agree that we are on the verge of the largest recession since the 1940s. Measures such as the government payroll plan for workers on unpaid leave, which benefited 7,5 million people, have protected many. But their action will end in October, unemployment will increase, and incomes will fall.
This is important for farmers, producers and processors, since when the recession sets in, consumers will have less money to spend. Given the estimated magnitude of the recession, I expect this to be the most important factor in consumer behavior, affecting both the choice of food type and the place of purchase.
Of great importance is not only the “depth” of the recession, but also the rate of exit from it. Indeed, the 2008 recession was characterized by a very slow recovery, and a similar picture would put a heavy burden on consumers for a long period.
We know from previous experience that consumers change their behavior when their budget is tight or their confidence in a secure future is not too high. Based on data from our own consumer tracker IGD and AHDB, we can distinguish two types of behavior that we have observed in the past - it is more often to cook food ourselves (without using convenience foods) and less often to eat outside the home. I'll cover this in more detail later.
But more surprisingly, how many consumers change their buying habits during the recession. The ways in which consumers spend their money are very indicative: people pay less attention to brands, buy mainly necessary goods or purchase the bulk of goods in supermarkets with hard discounting. Of course, since the last recession, we have seen continuous growth in hard discounters. In line with this trend, all retail stores have also lowered prices in an attempt to deter customers.
Quarantine has already affected buyers. The AHDB consumer tracker (AHDB / YouGov) from April shows a different attitude to budgeting, with a third of consumers noting that they have already adjusted their food budget, and a third claiming they are not committing changes.
Until now, the financial implications have seemed asymmetrical: some consumers were unemployed or laid off, while others were fully paid at lower cost. In the coming months, I expect that the negatively affected group will increase in size, as all the consequences of the recession will be felt by most of the population.
Consumer confidence in catering establishments will depend both on measures of social distance and on tightening household budgets. There will be fewer consumers who want to eat outside the home, and fewer who can afford it. As a result, those consumers who may have eaten in high-end restaurants can switch to purchasing premium-class products in supermarkets or give priority to take-away food.
Government recommendations for staying home have benefited online stores (from 7,4% of the total grocery stores to 10,2% in April, Kantar Worldpanel) and small convenience stores. Meat sellers also observed sales growth, their market share increased from 4,2% to 5% of the total meat, fish and poultry (data as of May 17, 2020).
Based on these facts, some researchers have suggested that there is a growing interest in local products in the country. However, consumer surveys do not confirm this, and I consider it more likely that convenience and accessibility are the true drivers of this growth. Widely highlighted issues with the availability of products in larger stores on the eve of quarantine may also have pushed shoppers away from supermarkets.
Small shops (including farmers) benefited from the situation. The problem is whether they will be able to maintain this advantage in the future.
But the tendency to buy food and drinks on the Internet can already be classified as sustainable, and coronavirus only accelerated growth in this sector.
New culinary habits
As many people spend more time at home, we are seeing a significant increase in interest in home cooking. We note an increase in the number of consumers who believe that beef, lamb and pork are suitable for mid-week eating, which may be due to the fact that they have more time to cook or cook a wider range of dishes.
According to the AHDB study, about a quarter of consumers say they cook more now than before. Over the next 18 months, I expect this trend to continue.
Quarantine restrictions are gradually lifted, but many companies encourage their employees to work from home. Thus, a significant number of people will continue their activities away from the office.
As was emphasized in the Conscious Shopping section, recessions often lead to higher prices for products for home cooking, and we expect that the difficult economic situation will strengthen this trend, which will positively affect the development of the livestock sector.
Growth in meat and dairy products
In recent months, the trend of cooking at home has led to an increase in the consumption of meat and dairy products. Sales of items such as ground beef, chicken breast, cheese and cream have increased markedly.
In addition, the number of people claiming to reduce the consumption of meat and dairy products since quarantine has been significantly reduced. In fact, the number of people claiming to eat more meat has doubled - from 7 to 14% (AHDB / YouGov, April 2020), while the number of those who reduce their consumption has decreased from 27% to 16%. As for dairy products, there was also a decrease in the number of those who reduced their consumption (from 17% to 11%), and the number of dairy lovers increased from 5 to 12%.
During a recession, when consumer opportunities are low, price becomes the most important parameter when choosing products. Naturally, during this period, there has been a decrease in the volume of sales of products for healthy eating.
Over the next few months, when we emerge from isolation and begin to live in a “new norm”, we can expect some revaluation of consumer values. I assume that consumer demand will be shaped by factors, which will be discussed below.
Do not expect a quick recovery in the catering market. The need to maintain social distance and other requirements will not contribute to the growth of profits of cafes and restaurants. The impact of the pandemic on the industry will be felt in the coming months and years. Many consumers will not want to eat as often as before, while others will not be able to afford it.
Buyers will become more economical, the number of purchases will be reduced. Factors such as the environmental friendliness of the product and its impact on health will remain significant for all consumers, but as we know from the experience of previous recessions, they will no longer be drivers for most purchases.
We will see a revival of home cooking due to economic factors and an increase in the amount of time people will spend at home.
The growth of the food delivery and takeaway sales sector is also expected due to affordability and perceived security.
These factors will affect the development of the agricultural market. AHDB will continue to monitor consumer behavior to keep agricultural producers informed. More information can be found on the pages of the site. Retail and Consumer Insight.