IRI COVID-19 Thought Leadership
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Part October COVID-19 The Changing Shape of the CPG Demand Curve 20 2020 POWERING THE FUTURE OF CONVENIENCE RETAIL EXECUTIVE SUMMARY During the COVID-19 pandemic, the convenience channel has been negatively impacted: consumers are opting to shop large format stores and the employed are working from home more, resulting in fewer commutes. Representing $166B of IRI’s $1.1T total tracked sales, convenience represents a valuable channel in CPG retail. For many manufacturers, this channel represents meaningful growth year-over-year. This report provides insight into recovery of the convenience channel and strategies for manufacturers and operators to reinvent and connect with shoppers seeking convenience for success in a post-pandemic world. Road to Recovery for Convenience & Gas • Convenience channel growth is cyclical and tied to macro-economic trends, including gas prices and housing starts. Today, it’s also dependent on pandemic recovery and full consumer mobility. • Some high-growth categories pre-COVID-19 (e.g., salty snacks, pastry/doughnuts) have decelerated as on-the-go occasions eroded. • Beverage alcohol sales have increased dramatically as on-premise consumption remains constricted. Implications for Manufacturers Implications for Retailers • As the channel bounces back, re-evaluate • Adapt and communicate the key value proposition of the channel: assortments (e.g., larger packs, multi-serve packs). convenience. Invest in omnichannel technology for pre-ordering, • Partner with convenience retailers to bring excitement curbside pickup and home delivery. Expand assortment for curbside to your categories; support cross-promotion with pickup and home delivery as consumers shop for more in-home products associated with trip drivers. consumption occasions, especially with foodservice offerings and • Growth of suburban/rural units and loss in urban other meal and snack solutions. Encourage pairing with essentials markets indicates an opportunity to review assortment like milk and paper products. and reframe for changing needs of shoppers; for • Tailor assortment and pack sizes to drive additional growth in urban markets especially, promote convenience of categories such as beverage alcohol, non-alcohol drinks, and others. purchasing meal solutions with essential products. • Leverage “trip driver” categories such as beverage alcohol to • Offer products that fit both cash-strapped consumers promote complementary items, such as snacks, refrigerated entrées, and premium products for those not impacted by and foodservice items. unemployment or financial constraints. • Urban markets are suffering with de-densification; operators should • Boost assortment of healthy options that support both shift support to later dayparts such as mid-day, late night vs. pandemic and flu season. morning. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2 The U.S. Economy -4.3% Economic Growth Is Following the Q3 2020 Global Trend of Shrinking $2.18 1.3% Economies in the Average Price Inflation per Gallon of Gas September 2020 Third Quarter 2020 September 2020 7.9% 330.4MM Unemployment Rate Population In the U.S., modest 12.4% Underemployed October 2020 employment gains September 2020 1.0% 0.6% Annual Growth result from easing of Retail Sales pandemic restrictions. September 2020 Source: U.S. Census Bureau © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 3 Convenience Channel Growth Occurs in Cycles, Often Linked to Macro Trends, Including Disposable Income, Gas Prices and Housing Starts Convenience Channel Edible Sales % Change vs. YA Dollars Volume 12 10 COVID-19 Great 9 8 Recession 8 6 6 6 6 5 5 4 4 4 3 4 3 3 4 3 3 3 3 4 3 3 4 3 3 3 3 3 3 3 3 2 2 2 1 1 1 2 -1 0 -1 -2 -2 -3 -3 Q3 2008 Q3 2011 Q2 2013 Q2 2015 Q2 2018 Q1 2020 Q1 Q4 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q2 2020 Q3 Macro Drivers % Change vs. YA Disp. Income 4 2 0 -1 -1 1 3 3 4 5 6 5 5 4 5 5 4 7 0 0 1 -1 4 5 6 6 6 5 4 3 3 3 3 3 4 5 5 5 6 6 6 6 5 4 3 3 3 12 10 Gas Prices 34 -22 -39 -38 -33 14 42 20 6 10 19 34 34 17 10 -1 0 4 0 -3 -2 -6 -4 2 -2 -12 -32 -27 -25 -23 -16 -15 -14 2 23 7 9 13 10 17 15 3 -9 -2 -6 -1 2 -29 -13 Housing Starts -33 -43 -50 -47 -32 -15 17 13 -1 -4 -6 -5 6 23 21 28 26 36 35 18 13 11 -2 14 17 4 4 17 13 7 17 1 -1 10 8 1 2 1 7 8 5 -6 -8 -1 4 22 24 -17 -11 Note: Macro indicators are Total U.S. disposable personal income per BEA, all grades retail gas prices per EIA, and housing starts per U.S. Census. Source: IRI POS data Convenience channel for edible scan products. Includes archived data. Moody’s Aug 2020 baseline © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 4 C&G’s 2020 Sales Dipped Dramatically with Mobility and Gas Prices in April-May; Even in Late Sept., Restricted Mobility Continues to Hold Convenience Sales Back C&G Total Store Weekly $ % Change vs. YA Weekly U.S. All Grades All Formulations Retail Gasoline Prices (Dollars per Gallon) % Change vs. YA $ % Chg 15 Gas Prices % Chg vs YA 10 Mobility % Chg 5 0 -5 -10 -15 -20 -25 Gas Buddy reports a rebound of gas -30 station visits in third-quarter 2020, -35 back in line with pre-COVID-19 -40 levels and up 17% from the previous -45 quarterly footfall index report. -50 01- 01- 01- 01- 02- 02- 02- 02- 03- 03- 03- 03- 03- 04- 04- 04- 04- 05- 05- 05- 05- 05- 06- 06- 06- 06- 07- 07- 07- 07- 08- 08- 08- 08- 08- 09- 09- 09- 09- 05- 12- 19- 26- 02- 09- 16- 23- 01- 08- 15- 22- 29- 05- 12- 19- 26- 03- 10- 17- 24- 31- 07- 14- 21- 28- 05- 12- 19- 26- 02- 09- 16- 23- 30- 06- 13- 20- 27- 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Source: IRI TSV; https://www.cspdailynews.com/technologyservices/signs-c-store-foot-traffic-rebound; Gas Price Source: U.S. Energy Information Administration; Note: Mobility - Google Mobility Report, based on Retail and Recreation % Chg from pre-COVID-19 baseline (Jan 3-Feb 6, 2020); https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_NUS_DPG&f=W © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 5 After Rebounding in Summer, Late September Reflects Increased Incidence of COVID-19, Resulting in Lower Volume and Flat Sales in the Convenience Channel Sales and Price / Mix Trends: Total Store / Edibles / Nonedibles Total Store Edibles Nonedibles % Change vs. YA, C&G Pre-COVID 52 Weeks March – April 2020* May – August 2020 Latest 4 Weeks 3/3/19 to 2/23/20 3/1/20 to 4/26/20 5/3/20 to 9/1/20 Ending 9/27/20 4.9 3.8 4.3 3.6 3.0 2.2 2.8 2.0 1.1 0.2 DOLLAR SALES -0.2 -3.0 4.5 4.3 4.3 4.9 4.8 5.0 3.6 3.1 4.2 3.2 4.2 PRICE / MIX* 2.0 0.6 0.0 0.5 ESTIMATED -0.6 -0.6 -1.6 VOLUME SALES -1.9 -2.7 -3.3 -3.6 -4.9 -4.5 0.7 -1.0 -0.6 -1.2 -1.9 -3.0 UNIT SALES -4.4 -4.1 -5.8 -6.4 -9.1 -12.3 Source: IRI TSA; * Mar – April 2020: Excluded from remaining slides; *Dollar sales-weighted price per volume and volume change across categories © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 6 Throughout 2020, Large Format Stores Are Viewed as Easier and More Convenient to Shop than C-Stores; Shoppers Value One-Stop-Shopping and Physical Distancing Sales and Price / Mix Trends: Total Store / Channels Conv MULO Grocery % Change vs. YA, C&G Pre-COVID 52 Weeks March – April 2020* May – August 2020 Latest 4 Weeks 3/3/19 to 2/23/20 3/1/20 to 4/26/20 5/3/20 to 9/1/20 Ending 9/27/20 35.5 25.6 17.3 DOLLAR SALES 12.5 10.7 14.4 3.0 1.9 1.4 4.3 1.1 -0.2 4.5 5.4 6.1 4.9 3.6 2.3 2.9 3.2 2.9 4.3 4.1 4.3 PRICE / MIX* 29.7 22.0 ESTIMATED 10.6 9.7 6.7 6.3 VOLUME SALES 0.0 -0.6 -0.4 -1.5 -3.3 -3.6 27.5 21.7 UNIT SALES 6.0 8.7 5.8 7.7 -1.0 -0.6 -1.7 -3.0 -5.8 -9.1 Source: IRI TSA; * Mar – April 2020: Excluded from remaining slides; *Dollar sales-weighted price per volume and volume change across categories © 2020 Information Resources Inc.