After months of lockdown and social distancing as a result of COVID–19, consumers have been forced to shop differently—reprioritizing what is essential and swapping the checkout line for online shopping more than ever before. Here, J.P. Morgan Research looks at how COVID-19 has changed consumption trends globally, in many cases for the long-term.
Life in lockdown: what did consumers buy?
COVID-19 case numbers have soared exponentially since the first cases of the virus were reported in China in December last year. By early April, the world had recorded one million cases, with the tally hitting 10 million cases less than three months after that. The current confirmed caseload has since surpassed 30 million.
By March, much of the world was forced into either full or partial lockdown as a result of the outbreak, meaning most consumers were following stay-at-home orders and restricted to leaving the house for essential items only from grocery stores or pharmacies. Panic buying took hold, with retailers around the world forced to limit the number of purchases of high-demand items, such as hand sanitizer and toilet paper. For the world’s largest personal care, food and drink companies, data showing which products sold the most tells the story of how consumers spent their time and money during lockdown.
“In the data earlier this year, you could see flat growth followed by a huge spike—double digit growth. That is very rare for this industry and was totally prompted by the lockdown and the fact that people couldn’t get out,” said Celine Pannuti, Head of the European Food, Home and Personal Care Research J.P. Morgan.
U.S. market growth across staple categories
U.S. market growth across staple categories
“There has been a normalization of the panic buying as shoppers have realized things are not going out of stock. In the U.S., it is still very uncertain as different states open at very different rates. We have seen that buying spike easing, but demand at retail still remains well above trend. In some categories, we saw pantry de-loading or de-stocking. That was the case for baby food, as concerned parents may have built up stocks at the start of lockdown but are now going through those stocks,” said Pannuti.
“The next wave to look at is the fact that people are going to be at home much more going forward. Firstly, a lot of at home working will continue so there will still be a need to eat or consume more at home. Also, even if you are allowed to go out, restaurants are probably not the first place many people want to be,” said Pannuti.
“In the next 12-24 months, consumers are going to be left with less money in their pocket. Many people will be left unemployed and will have less to spend. This will reinforce the trend for staying at home. We could also see some downtrading as consumers settle for more affordable options, though for now we have seen consumers buying big brands and, choosing household names over value or private label products,” Pannuti added.
What products did consumers buy the most during COVID-19 lockdown?
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Household cleaners and soaps
Unsurprisingly, sales of household cleaning and disinfectant products saw huge growth. Dettol and Lysol owner, Reckitt Benckiser, saw U.S. sales of cleaning wipes surge over 100% in the first three months of the year, compared to a year earlier and up 60% in the second quarter, with continued momentum into the third quarter with sales +19%. Aerosol disinfectant sales are up over 100% so far this year, climbing +120% in the third quarter, while dishwasher detergents and general kitchen cleaner sales are also up by around 40%.
Henkel, parent company of brands such as Persil and Schwarzkopf, saw U.S. hand soap sales climb by around 60% in the first half of the year and see continued demand into the third quarter, up 33%, with October sales +23%."
Clearly, hygiene and health are two factors that customers will continue to be focused on. All household cleaners and hand sanitizers, soaps, cleaning gels are at the top of consumer’s shopping lists. The items that were in high demand earlier in the year are still hugely popular. Overall, consumers want very high standards of hygiene, so the reality is cleaning and disinfectant products are going to be in demand for quite some time to come,” said Pannuti.
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Vitamins and supplements
As the pandemic took hold, health conscious consumers also loaded up on vitamins and supplements throughout the year. Reckitt Benckiser saw U.S. sales climb around 50% in the first half of the year with continued support in the third quarter (+26%).
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Hair color
In both U.S and Europe, home hair color products have proved to be especially popular as salon visits had to be cancelled due to the lockdown. Sales of hair color in the second quarter were up over 30% for companies like L’Oreal and Henkel.
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Coffee
Coffee was another popular choice for lockdown consumers, as working from home became the norm for large numbers of the workforce around the world. Nestlé in Europe has seen fresh roast coffee sales climb by around a third so far this year, and in the U.S., Starbucks at-home products, Nescafé and Coffee-Mate grew at double-digit rates in the first half of the year.
Dettol, Lysol and e-commerce are boosting Reckitt Benckiser growth
Dettol, Lysol and e-commerce are boosting Reckitt Benckiser growth
What products did consumers stop buying during lockdown?
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Double digit declines
25%
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Cosmetics
Makeup sales have taken a hit this year as staying in and working from home became the new normal. Globally, L’Oréal said the beauty market had fallen 13-14% in the first half of the year, with luxury beauty, professional beauty, makeup and fragrance sales all falling around 25%.
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Sun care
Sales of SPF have fallen this year as holidaymakers cancelled or postponed trips away. Nivea parent group, Beiersdorf, said sun care was the most negatively impacted skin care category, with the group seeing ‘deep double digit’ declines in sales. J.P. Morgan Research estimates like-for-like growth for Beiersdorf in 2020 to be -6% as sun care and luxury sales remain under pressure.
I think right now categories that are less relevant are color cosmetics—people are not wearing make up when working from home. Sun care has also taken a hit because consumers don’t know whether they will be able to travel. Some categories will find it very hard short-term. They should come back, but discretionary products more closely linked to the economic cycle will be more impacted because they are generally not must-haves.
Celine Pannuti
Head of European Staples & Beverages, J.P. Morgan
Online shopping leads the way
E-commerce around the world, across sectors, has surged this year as pandemic-weary consumers looked online for everything from hand sanitizer and groceries to skincare products and cleaning supplies. In the U.S., consumers spent $211.5 billion during the second quarter on e–commerce, up 31.8% quarter- over-quarter, according to the U.S. Census Bureau.
The pandemic has pushed more shoppers online, with e-commerce now accounting for 16.1% of all U.S. sales, up from 11.8% in the first quarter and this trend is likely to stick, even as brick-and-mortar stores open their doors again.
“Online shopping has really advanced. This is very obvious in China, where the digital experience for shoppers and online integration is extremely advanced. With everyone stuck at home, there has been a lot more focus on online systems, advertising and delivery from the corporate side and this will reinforce the push to shopping online,” said Pannuti.
In many cases, the boom certain companies saw in e-commerce in the first half of the year offset slower parts of their business, leading them to rethink and invest in their e-commerce abilities in coming quarters. Reckitt Benckiser said along with professional hygiene and their Dettol and Lysol brands, online sales represented a core growth opportunity. E-commerce represented 12% of sales in the first six months of the year, growing over 60% with strong performance across digital channels, including direct to consumer sales and click and collect solutions.
Food and drink giant Nestlé said e-commerce grew 49% in the first six months of the year to reach 12.4% of sales compared to 8.5% of sales in 2019. Despite the closure of their Nespresso boutiques, the Nespresso brand was up mid-single digits % in the first half, driven by surging e-commerce sales that offset stores decline.
Amongst European consumer companies, L’Oréal boasts the highest exposure to online, reaching 25% of sales in the first six months of the year, after seeing online sales surge 65% over the same period. After a disappointing second quarter, L’Oreal singled out e–commerce as the key driving factor behind its expected market growth for the remainder of 2020. For the months of May and June, e–commerce sales were up by 75% and 82% respectively, accelerating every month, even as stores are re-opening. In the medium term, Pannuti expects the company to be able to derive half of its sales online.
L’Oréal, e-commerce as % of sales and digital media spend
L’Oréal, e-commerce as % of sales and digital media spend
“In the past few years, some of the big players have invested a lot to be more digitally savvy, accelerating innovation and refocusing their portfolios. I think a few of these companies had come into the pandemic prepared to a certain degree, because they had prepared their company to change and pivot more online. We see retailers narrowing their product range, focusing on what matters more and mainstream brands and products, so the shift to e-commerce for big and small brands is key,” added Pannuti.
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