Those of us around Harlan Foods have been paying a fair amount of attention recently to some recent trends and discussing the impact these numbers will likely have on consumer consumption of CCPG items such as food (Consumable Consumer Packaged Goods).
Advance estimates of U.S. retail and food services sales for February 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $658.1 billion, an increase of 0.3 percent from the previous month, and 17.6 percent above February 2021. Total sales for the December 2021 through February 2022 period were up 16.0 percent from the same period a year ago.
Is this good news for the food industry? Or not? Depending on how food manufacturers, retailers and food brands approach the situation, it can be a mixed bag.
While as of February, we are at a year over year double digit increase from 2021, we have a few extenuating factors to consider:
- Continued downward shifts in COVID numbers
- A lessening of restrictions and mandates backed by the CDC
- A significant uptick in gas prices
- A continued growth of inflation
- Instability in eastern Europe that is news 24/7
- A quarter point increase in the prime interest rate
Further, US Index of Consumer Sentiment is at a current level of 59.70, down from 62.80 last month and down from 84.90 one year ago. This drop is the hangover after the party around the hope that things were getting better and all the uncertainty and stress was behind us..
So, will increased freedom from COVID restrictions outweigh the squeeze on the consumer’s wallet? Probably not in the short term. Look for recent dining out trends to retreat from the recent upward trends. With this said, will all on-premise retailers be penalized by the current state of affairs? Probably not. QSR’s will likely outperform fast casual, casual and upscale retailers but it isn’t likely going to be gangbusters. Grocers and even digital home delivery services will see the scales for share of wallet tip to their favor.
Food manufacturers need to be thinking about supply chain commodity cost management and with the consumer, four key things:
- Unit cost value
- Product differentiation
- Convenience of the product in terms of consumption and access
- Balancing nutrition and taste
All these things play an important, really a critical role, in maintaining share of wallet as market dynamics shift. As food suppliers, we want to avoid any form of a whipsaw in consumer consumption patterns. For those involved in the supply chain of food manufacture and especially towards the last mile, make it easy for consumers to buy your products.
- QR codes with recipes and recommendations on packaging
- Frictionless redemptions (this is Millennial code for ‘Digital Coupons’)
- Oddly, fewer but healthier SKU options.
- Link products to day parts and health-oriented activities. For instance, sell a high carb bagel thin that is usually a breakfast food? Late afternoon snack with peanut butter and bananas before you go to the gym or in your child’s backpack before they go to basketball practice.
Simple stuff, however, remember providing ‘High Utility’ (make it valuable in chaotic/busy lives where people are more stressed and pre-occupied than in the past) at the same time it is ‘Low Friction’ (make it easy) wins the day.
Given the fact that the market headwinds currently outweigh the market tailwinds, and we don’t expect this to change until perhaps H2 of this year, simple, consistent, high utility, low friction focused on Unit Cost Value, Product Differentiation, Convenience of the product in terms of consumption and access and finally Balancing Nutrition and Taste will give you an advantage.