Will Covid-19 spark longer-term shift in consumption?

Will Covid-19 spark longer-term shift in consumption?

After years of gains for foodservice in the US, Covid-19 has boosted demand for food to eat at-home. How can packaged-food companies protect those gains longer term? Victor Martino reports.

Five years ago, foodservice sales surpassed retail food and beverage sales in the US and were expected to continue to gain share until Covid-19 hit.

Almost overnight, that trend has reversed due to the pandemic-related shutdown of restaurant dining rooms and the total closure of most other institutional away-from-home eating venues. 

In 2019, consumers spent about 51% of their food and drink dollars away-from-home, according to US Department of Agriculture statistics. Current estimates suggest this spending has shifted dramatically since March, with about 70% of consumers now spending their food and drink dollars at retail, resulting in a new (albeit government-mandated) trend that finds more Americans cooking and eating at home.

The shift has been a boon to most consumer packaged-food companies, particularly the majors, but also many smaller brands. However, the big question for packaged-food companies is whether or not cooking and eating at home is a mere short-term trend forced on consumers by the pandemic or if it portends a longer-term change in consumer behaviour.

The jury is still out. On the one hand, the longer the pandemic lasts, the more likely there to be a longer-term change in behaviour. That said, there's also pent-up demand among consumers to eat out, both because of cooking fatigue and the simple desire to resume one of their most-enjoyable normal culinary and social experiences.

According to a new report based on survey data from US sales and marketing firm Acosta, more than half (55%) of consumers are eating at home more as a result of the coronavirus pandemic but not all are enjoying the change in eating habits. Acosta's research found a quarter of consumers are sick of preparing food and eating at home, while a third said they've found a new passion for cooking since the pandemic began. 

The Hartman Group has conducted similar research (ethnographic as well as survey research) on the consumer shift to planning, preparing and eating more meals at home. According to the firm's results, 41% of consumers said they are cooking more of their meals themselves at home. Additionally, 27% said they're planning more of these meals in advance, and 20% said they're trying more new dishes than ever before. The Hartman Group has concluded consumers are navigating an unprecedented shift in American society that will have lasting effects on US food culture, changing consumers' collective and individual experiences in both broad and targeted ways, including more food preparation and eating at home.

How and where people eat is always changing but, for packaged-food companies, the pandemic-related momentum shift from consumers eating away-from-home to at-home offers an opportunity of a lifetime.

The shift to cooking and eating at home was brought about by an external event, rather than by the purposeful efforts of packaged-food companies and grocery retailers. But packaged-food companies and brands can build on the momentum by taking actions that will help ensure that the shift becomes more of a permanent change in consumer behaviour, rather than a government-mandated flash in the pan.

Merchandise the meal

Consumers think in terms of meal occasions – breakfast, lunch, dinner, snacks – and meals, rather than categories, which is how packaged-food companies and grocery retailers generally think about and organise things.

This tends to result in a disconnect between brands and consumers. Finding more and better ways to merchandise the meal to consumers will make it easier for them to cook at home and help alleviate cooking fatigue. Make it easy, speak their language, and try to relate brands to meals rather than isolated product categories.

Recipe renewal

Over the years, the historic process of using recipe development to build and grow packaged-food brands has gone somewhat by the wayside.

A renewed effort to create simple but exciting recipes that make it easier for people to cook and eat at home will encourage consumers to keep doing so.

Packaged-food companies need to become consumers' trusted partners in home meal preparation. Good recipes also have longevity, which offers excellent return on investment for brand marketing budgets.

Partner with restaurant brands

This isn't a new phenomenon. Packaged-food companies have co-branded with restaurant brands to various degrees of success for years – but it is something that needs to be viewed in new ways today.

People are missing their favourite restaurant brands and selling them in grocery stores, for example in the frozen food case, offers new opportunities in the new normal. For example, restaurant chain Cinnabon just introduced a line of its popular breakfast treats and sandwiches in the frozen food case at Walmart stores nationally and plans for national distribution starting in the fall.

Partnering with America's favourite regional and national restaurant brands and foods and bringing them to consumers at retail offers greater opportunity for packaged-food companies today than it has in the past.

US bakery restaurant group Cinnabon to launch line of retail products this autumn

Romance the home meal

Meal preparation and eating at home offers myriad benefits for families and for society as a whole. Historically, the kitchen and meal preparation were the centre of activity for families; a place where discussion took place over a meal.

Cooking brings people and families together in a myriad of positive ways. With cooking and eating at home having gone by the wayside over the last decades, families and society as a whole have lost much of the cohesion that sitting together at the kitchen over a home-cooked meal provides.

Packaged-food companies can play an important role in helping bring back this tradition in a positive way, while maintaining sales momentum at the same time. The opportunities to 'romance the home meal' are near-unlimited and offer packaged-food companies an opportunity to play a greater role in consumers' lives, along with gaining increased consumer trust.

Keep price top-of-mind

While cooking and eating at home remains generally less expensive than eating out, the economic recession sparked by Covid-19 is influencing what consumers are buying to cook and eat at home.

In particular, we're starting to see a shift to less-expensive store brands. Packaged-food brands will need to hold the line on price if they want to continue to capture their share of the food-at-home sales growth.

Many consumers will continue to pay a premium for certain manufacturer brands over private label as long as such brands add value but, since we don't know how deep and prolonged the recession will be, price needs to be a top-of-mind consideration even though consumers have shifted to buying food at retail and cooking and eating at home. Private label is a major threat and restaurant dining rooms won't be closed forever.

Price will influence consumer spending on brands. It will also influence their frequency of eating out versus eating at home when things get back to normal.

The shift in the sales momentum from foodservice to retail offers packaged-food brands one of the greatest opportunities in decades. Prior to this year, the primary objective for the industry and brands was to stem the continued growth of food-away-from-home sales. The coronavirus pandemic changed that objective in a little over six months.

The goal now for packaged-food brands is to sustain the eat-at-home trend and the retail sales increase that has come with it. It just might be a once in a lifetime opportunity.

just-food columnist Victor Martino is a California-based strategic marketing and business development consultant, analyst, entrepreneur and writer, specialising in the food and grocery industry. He is available for consultation at: [email protected] and https://twitter.com/VictorMartino01.