New Report Shows Food Retailers How To Navigate Out Of Covid Twilight Zone

Former Senior Fellow and Director, Food Policy Center
New challenges and opportunities are awaiting food retailers coming out of the Covid tunnel.
New challenges and opportunities are awaiting food retailers coming out of the Covid tunnel.

With a Covid-19 vaccine coming, we are all looking forward to happier and healthier times next year. Food retailers like KrogerAlbertson’s and Ahold Delhaize USA, who have enjoyed periods of double-digit sales growth during the pandemic when everyone stayed home and cooked more, will need a new game plan for 2021 when we emerge from seclusion.

new report from the Partnership for a Healthier America (PHA) points the way out. The report (which I helped write) analyzes dozens of recent studies that confirm that the pandemic has turbo-charged a trend towards healthier, sustainable food that’s been underway for years. Consumers, even those who were stress-eating during their months in quarantine, are now more keenly aware of how food impacts health and the environment and are determined to change their diets. Grocers can ride this wave by re-thinking their category management practices, display and shelving norms and marketing models.

This will be a different challenge from the one the industry met so well during this pandemic, when they made huge logistical changes to deliver staples like milk, meat and flour to grocery store shelves to meet demand from people eating more meals at home. But while we may have soothed ourselves with casseroles, bread and other comfort foods, Covid has changed us. We saw the disease hit our unhealthiest loved ones and friends the hardest: those with obesity, Type II diabetes and other diet-related problems.

Not surprisingly, this crisis is forcing many of us to re-think what we eat, as the PHA report points out. It cites a study by FMCG Gurus, a global market research firm, that found that 80% of consumers around the world are attempting to eat and drink healthier to buttress their health and immunity. Here are the six major takeaways from the PHA report for grocers and packaged foods companies seeking sustained growth next year:

Consumers want to eat healthier, but need the retailer’s help. Despite our best intentions we are still biologically wired to crave salty, fatty, sugary snacks. Retailers and Consumer Packaged Goods (CPG) companies can overcome this through using behavioral economics to make healthier foods more attractive – such as through their placement on grocery shelves and end-aisle displays — and they can incentivize their category management teams to find ways to move those products. A good example for grocers to follow is Ahold-Delhaize USA’s commitment that by 2025 at least 54% of its private label foods and beverages would meet its Guiding Stars nutritional standards.

Consumers want foods and beverages that help them build a strong immune system and fight off illness. Because of Covid-19, baby boomers are feeling their age more than ever; Kombucha-drinking millennials are even more health conscious; and those with chronic diet-related diseases, such as obesity, just want to stay out of the hospital given their disproportionate rates of hospitalization and deaths. All of these sentiments bode well for grocers and food manufacturers that can make, deliver and retail foods that help support immunity. Grocers can promote traditional healthy foods such as fruit, vegetables, and whole grains along with high-volume beverages and snacks that deliver functional or immune-support benefits. Stores can also establish “health enhancement” product sections or displays to drive sales and to simplify the shopping experience for those who wish to improve their health and build their defenses.

“Sustainable” foods and beverages are here to stayConsider that over the past five years 16% of sustainably-marketed foods have accounted for almost 55% of item growth, even though they haven’t been marketed as aggressively as other non-sustainable products. Now consider that 54% of consumers say they will continue to make sustainable choices after the pandemic. Moreover, climate-related regulation may be on the way with a new administration and as policymakers become increasingly worried about Big Food’s environmental footprint — especially in light of a September 2020 UN report highlighting that food systems account for up to 37 percent of all greenhouse gas (GHG) emissions. Food companies and retailers can go a long way to satisfying their growth objectives by selling and promoting healthier and more sustainable products.

Ditch or reduce the sugarSugar is the new tobacco: an ingredient that many argue that the world would be better without. Two-thirds of consumers are looking to reduce it, and public health entities such as the World Health Organization, the USDA Dietary Guidelines Advisory Committee and the Robert Wood Johnson Foundation want to banish or restrict it. And package labels now highlight Added Sugars to notify consumers of a product’s sugar content. With obesity rates continuing to rise and new “junk food” regulations percolating, now is the time for food and beverage companies and retailers to get even more aggressive behind developing, marketing and promoting reduced-, low- or no-sugar products, especially since a bevy of newer sweeteners that provide good taste are hitting the market now.

Plant-based products will experience a growth spurt. Sales of plant-based products had already grown 29% between 2017 and 2019, but really took off during the pandemic when meatpackers slowed down and alternatives from Beyond Meat and Impossible Foods filled the void. The growing number of “flexitarians” looking to add more plant-based foods to an omnivorous diet is sure to keep this growth going. Grocers can capitalize on this trend by shelving and displaying plant-based items adjacent to their established meat and dairy counterparts. This ensures that the consumer does not have to go on a scavenger hunt to find these substitutes when shopping.

We will still want our comfort foods. Consumers, while concerned about their health, are not yet ready to give up lasagna and chocolate. Through the end of the first quarter 2020, Nielsen tracking showed that dry pasta was up 199%, macaroni and cheese grew by 176% and lasagna and pizza sales increased by around 126%. And in the period from March 15 to Aug. 9, 2020 chocolate and candy sales in grocery stores were up 16.6%. Retailers can’t fight all comfort foods—and shouldn’t—but they will get credit if they help consumers stay in bounds on portion size. Comfort foods may flourish during stressful times, but the “health” trend is long term. Companies that marry these two desires will enjoy a broader base of loyal consumers. This way they can have their (smaller) cake and eat it too.

The food industry has entered a new Twilight Zone where the rules and growth opportunities are different. Retailers and their packaged goods brethren admirably came through the tunnel on supply chain challenges arising out of the pandemic. But a new post-Covid food world awaits them, one where healthy, sustainable and plant-based options will become staples rather than boutique items. Those who recognize that this is the new mainstream will flourish. The others will miss the boat.

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