South Africa - 204 Days of Lockdown - COVID-19 Impact on CPG & Retail 16 October 2020 - Trade Intelligence
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Content • COVID–19 Update • Black Friday Retail Preparations • A Very COVID-19 Christmas: What to Expect this Year • Latest Category Performance • Liquor Growths and Comparison • Tobacco Snapshot • Pet Update • Private Label During Lockdown • IRI COVID-19 Global Update © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2
Level 1 lockdown continues • SA COVID-19 cases are slowly starting to increase under Level 1 lockdown. Second waves and lockdowns across many other countries are prompting concerns that SA may follow suit • Retailers and manufacturers looking to bolster sales are preparing to embrace the Black Friday and Christmas shopping seasons. Changes include social distancing in store, extended promotions and an even bigger focus on e-commerce • Grocery, excl. Liquor & Tobacco, value growth is at 6.8% for the total lockdown period. September month-end week saw lower sales than LY, but higher October mid-month sales are driving the latest 4wk growth of 9.3% – Staples have returned to strong performance with Wheat Flour, Dry Pasta, Sugar&Sweeteners, Rice and Soup&Stock all showing latest week growth levels amongst the highest since lockdown began. This follows a muted month-end. Soaps&Sanitiser, Household Cleaning and Wipes all follow a similar trend – Liquor’s initial boost after the ban was lifted was followed by an extended period of decline. October is seeing a pick- up driven particularly by Wine and Spirits. Both LSM groups are moving their spend from Beer & Fabs to Wine – Tobacco’s initial sales boost, post the ban lift, was also followed by extended declines, however this category has not seen the same recent turn around visible in Liquor – Pet is showing growth of 4.8% during lockdown, possibly suggesting consumers took the opportunity to adopt new pets, as well as spending more time with existing animals. Dog and Other Pet growth is strong in both LSM groups, however Cat growth is predominantly in the higher LSMs – Private Label’s lockdown share is in line with its share prior to COVID-19 levels. Winners and losers are seen across categories and retailers, showing that both National and Private Label brands are relevant and important in the SA context • IRI’s Marketing Mix methodology has been adjusted to identify and isolate the COVID-19 impact on sales, resulting in the most accurate forecast and delivering growth for clients
SA no longer in the global top 10 Covid-19 countries case ranking # Cases Deaths 1 USA 8 093 600 1 220 900 2 India 7 241 517 2 110 645 3 Brazil 5 114 823 3 151 063 4 Russia 1 340 409 4 23 205 5 Spain 925 341 5 33 204 6 Colombia 924 098 6 28 141 1 091 693 globally 7 Argentina 917 035 7 24 572 +16% vs. last month 8 Peru 853 974 8 33 409 38 417 027 globally 9 Mexico 853 974 9 84 420 +29% vs. last month 10 France 825 340 10 32 941 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 5 https://www.worldometers.info/coronavirus/#countries 13th Oct 2020
Gauteng and Free State lead in terms of active case count https://sacoronavirus.co.za/2020/10/13/update-on-covid-19-13th-october-2020/ © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 6 https://www.covid19sa.org/provincial-breakdown
SA COVID-19 Timeline WHO declares global health emergency JAN Global cases: 500k MAR First South African tests positive for Coronavirus, Ramaphosa declares a National State of Disaster Global cases: 1 million Start of SA lockdown. Liquor and tobacco banned, First death in SA APR SA lockdown extended Global cases: 5 million MAY SA lockdown level 4 begins, All online retail sales open (excl Liquor & Tobacco) SA spent 35 Global cases: 10 million; deaths: 500k JUN SA lockdown level 3 begins; alcohol sale unbanned, SA records 50k days in cases level 5 Global cases: 15 million JUL SA records 200k cases, SA alcohol ban announced with immediate effect lockdown SA records 400k cases 31 days SA spent 34 in level 4 Global cases: 20 million AUG SA records 500k cases, Lockdown level 2 begins days in Liquor and tobacco bans lifted, SA records 600k cases level 2 Global cases: 30 million; deaths: 1 million SEP Lockdown level 1 begins 78 days in 25 level 3 OCT SA’s international borders open days in level 1 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 7
The second wave of coronavirus infections seen in European countries is driving concerns that SA might be vulnerable as restrictions ease in Level 1 https://www.enca.com/news/health-minister-warn-sa-second-wave/ https://www.euronews.com/2020/10/15/is-europe-having-a-covid-19-second-wave-country-by-country-breakdown © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 8
Vaccine trials, antibody tests and regulations for companies opening their doors show a new normal in South Africa https://www.news24.com/news24/southafrica/news/sa-scientists-launch-trial-to-test-if-childhood-vaccine-can-protect-frontline- healthcare-workers-20201014 https://www.businessinsider.co.za/trending/you-can-now-get-a-covid-antibody-test-at-clicks-with-results-in-15-minutes-2020-10 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 9 https://www.businessinsider.co.za/business/covid-19-rules-regulations-for-employers-companies-2020-10
Retailers prepare for Black Friday 2020 while maintain the ‘new normal’ social distancing and hygiene regulations required by COVID-19 STEPS RETAILERS ARE TAKING TO PREPARE FOR BF 2020: Online will be an even bigger focus than in the past Extending ‘Black Friday’ deals throughout November to avoid over- crowding on the day Encouraging shoppers to use online resources beforehand resulting in a faster shopping experience Making deals available online or online only instead of in-store only Upgrading e-commerce systems and logistics ahead of time to ensure they can cope with demand Maintaining all social distancing and hygiene standards as per current COVID-19 regulations In the US Walmart and Target will be closing stores on Thursday the 26th and focussing on contactless options on Friday https://mybroadband.co.za/news/black-friday/370891-black-friday-2020-south-african-stores-to-extend-specials.html https://businesstech.co.za/news/business/438429/game-and-makros-black-friday-2020-plans/ © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 10 https://www.bizcommunity.com/Article/196/394/209001.html#more
A very COVID-19 Christmas: What to expect this festive season ‘Come peak season, if items aren’t available in the way and timeframe that consumers want, they will switch faster than ever before. Coronavirus has tested brand loyalty to the limits.’ (1) Retailers face a tough environment going into the festive season: Economic recession and high unemployment Retailers need to ensure they maximise their figures leave consumers strapped for cash share of wallet this Christmas season A solid online presence will be key to success • Customers have become used to shopping online in the past few months; Click & Collect in particular has proven popular • With social distancing measures still in place, online shopping is safer and easier for many • Fast and efficient ordering and fulfilment is key! (1) https://www.essentialretail.comments/will-covid-steal-christmas/ (2) https://www.vendhq.com/blog/covid-christmas-retailers-prepare-holidays/ © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 11
A very COVID-19 Christmas: What to expect this festive season Consumers are planning Cash-strapped consumers will increasingly research ahead, and will start their and review purchases online Christmas shopping early (‘Q&As on product pages attract a 120% revenue per visitor lift on best-in-class sites and reviews drive a 159% lift in revenue per visitor’ (1)) Consumers will be Customers will expect festive cheer / decoration on looking for discounts online platforms Brick & Mortar stores need to ensure customers feel safe and can ensure they spend more time in store through the following strategies: Allow customers to find Catalogues handed out to customers Longer trading hours key items quickly and waiting to enter Clear signage for easily (front of store or Offer the option of ‘online’ purchases navigation and pop-up store) in the queue (e.g. staff with tablets) reassurance (1) http://www.netimperative.com/2020/07/22/2020-christmas-predictions-5-retail-trends-for-the-new- shopping-landscape/ (2) https://www.thegrocer.co.uk/supermarkets/a-very-covid-christmas-how-are-retailers-preparing-for- the-festive-season/645263.article © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 12
IRI’s Marketing Mix methodology has been adjusted for clients to identify and isolate the COVID-19 impact on sales, as well as the forecasting approach A clear understanding of the COVID-19 impact on Accurate forecasting results accounting for the 1 your brand and category 2 COVID-19 impact and/or changes in your trade marketing activities IRI estimates what sales would have been if COVID-19 didn’t happen IRI’s adjusted forecasting methodology allows clients to exclude or include the COVID-19 impact A: Category Sales Trend Sales YA Prediction Price Increase Promo optimisation COVID Sales Drop Sales incl. COVID-19 Simulated Sales COVID- Sales Year Ago 19 impact Pre-model COVID-19 Impact Estimated sales if not for COVID-19 Result: 15% of sales growth was from COVID-19 Impact © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 13
LATEST CATEGORY PERFORMANCE © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 14
While month-end sales were lower vs. YA, a marked spike in sales is evident in the latest week Total Groceries (excl. Liquor) Grocery (excl. Liquor) Growth: Weekly Actual Value sales Total Period: 6.8% Last Yr This Yr Linear (This Yr) Latest 4 week: 9.3% Lockdown Level 5 Level 4 Level 3 Level 2 Level 1 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 15
After a muted month-end, Staples perform well in the latest week. Sassa payouts in the w/c 5th October, as well as promotions by some retailers drive growth March April May June July August September Sep 13th Sep 20th Sep 27th Oct 4th Oct 11th Baking Ingredients Ice Cream Wheat Flour Yoghurt % Value growth Biscuits vs. YA Frozen Veg/Potato Spices & Seasoning Scale: Condiments & Sauces >100 Cheese 70 to 100 Edible Groceries Dry Pasta Snacks 50 to 70 Sugars & Sweetners 30 to 50 Spreads 11 to 30 Cereals 0 to 10 Oil Canned Food -10 to 0 Confectionery -30 to -10 Soup & Stock -30 to -50 Fresh Meat < -50 Bread Frozen Meats Rice Maize © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. © 2020 16 Inc. (IRI). Information Resources Confidential and Proprietary.
Strong performance in Personal Care and Household Essentials in the latest week March April May June July August September Sep 13th Sep 20th Sep 27th Oct 4th Oct 11th Soaps & Sanitiser % Value growth vs. Household Cleaning YA Non-Edibles Wipes Scale: Personal Care Toilet Paper >100 Oral Care 70 to 100 Vitamins 50 to 70 Medicinal 30 to 50 Pet 11 to 30 0 to 10 -10 to 0 -30 to -10 -30 to -50 March April May June July August September Sep 13th Sep 20th Sep 27th Oct 4th Oct 11th Beverages < -50 Milk Coffee & Tea Juice CSDs & Water © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 17
Top and Bottom Growth Categories across Lockdown and by Month (excl. Liquor & Tobacco) Indulgent / Baking categories, Soaps & Sanitiser and Pantry Staples were consistently among the top- performing categories Total Period March April May June July August September Baking Ingredients Wipes Baking Ingredients Baking Ingredients Wine Vitamins Baking Ingredients Biscuits Soaps & Sanitiser Wheat Flour Ice Cream Soaps & Sanitiser Spirits Soaps & Sanitiser Soaps & Sanitiser Frozen Veg/Potato Ice Cream Juice Wheat Flour Ice Cream Soaps & Sanitiser Wheat Flour Dry Pasta Cheese Top 10 Growth Categories Wheat Flour Soaps & Sanitiser Sugars & Sweetners Wheat Flour Baking Ingredients Baking Ingredients Wheat Flour Dry Pasta Vitamins Coffee & Tea Soaps & Sanitiser Sugars & Sweetners Dry Pasta Dry Pasta Spreads Sugars & Sweetners Spreads Toilet Paper Spices & Seasoning Yoghurt Wheat Flour Medicinal Vitamins Spreads Biscuits Sugars & Sweetners Spreads Spices & Seasoning Yoghurt Yoghurt Biscuits Oil Sugars & Sweetners Spreads Yoghurt Condiments & Sauces Cheese Spices & Seasoning Cheese Rice Dry Pasta Canned Food Oil Dry Pasta Sugars & Sweetners Spreads Frozen Veg/Potato Soaps & Sanitiser Soup & Stock Biscuits Cereals Spreads Vitamins Rice Sugars & Sweetners Toilet Paper Categories outlined in red are declining, while the others are showing single digit growth. Total Period March April May June July August September Juice CSDs & Water Juice CSDs & Water Juice Juice CSDs & Water Juice Bottom 10 Growth CSDs & Water Confectionery CSDs & Water Frozen Meats CSDs & Water CSDs & Water Juice CSDs & Water Categories Confectionery Canned Food Confectionery Toilet Paper Maize Maize Confectionery Maize Bread Bread Personal Care Medicinal Fresh Meat Canned Food Bread Personal Care Personal Care Rice Toilet Paper Bread Toilet Paper Confectionery Personal Care Medicinal Canned Food Frozen Veg/Potato Pet Wipes Pet Fresh Meat Canned Food Ice Cream Rice Household Cleaning Oral Care Fresh Meat Confectionery Pet Rice Snacks Pet Household Cleaning Rice Wipes Personal Care Pet Confectionery Fresh Meat Wipes Maize Personal Care Bread Fresh Meat Household Cleaning Household Cleaning Rice Pet Rice Wipes Household Cleaning Wipes © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 18
After muted sales for most of September, Liquor sales pick up in October, with Wine and Spirits driving the recovery March April May June July August September Sep 13th Sep 20th Sep 27th Oct 4th Oct 11th % Value growth vs. Tobacco Tobacco YA Wine Wine Scale: Beer Beer >100 FABs FABs 70 to 100 Spirits Spirits 50 to 70 30 to 50 11 to 30 0 to 10 -10 to 0 April May June July August September Sep 13th Sep 20th Sep 27th Oct 4th Oct 11th -30 to -10 Rum -30 to -50 Gin < -50 Other Spirits Whisky Brandy Vodka © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 19
After high sales (stock-piling) in August, muted sales are evident for most of September. However, October is showing an uplift in sales Category Performance Beer Wine Spirits FABs Total 8 Wk Period 2020-08-23 2020-08-30 2020-09-06 2020-09-13 2020-09-20 2020-09-27 2020-10-04 2020-10-11 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 20
While Wine and Spirits are showing positive growth over the last 8 weeks, total Liquor growth is down -1% vs. LY Liquor Categories Spirits © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 21
Liquor value is declining amongst both LSM groups since sales reopened 8 weeks ago. Both LSM groups have increased spend on Wine and decreased spend on Beer & Fabs 8 wks to Total Liquor Spend LSM 1 - 6 11/10/2020 LSM 7 - 10 Value Share to 12% 15% Wine 21% 25% 19% 18% Fabs 15% 13% 38% 42% 38% Spirits 43% 32% 25% 26% Beer 19% Last Year This Year Last Year This Year Value Growth % YA Total Liquor Beer Spirits Fabs Wine Total Liquor Beer Spirits Fabs Wine © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 22
Tobacco sales see value declines across several weeks vs. last year, after the initial stock-up shop when sales opened 8 weeks ago 8 wks since sales Tobacco Value Growth % YA reopening LSM 1-6 LSM 7 - 10 LSM 1-6: +13% LSM 1-6: +6% 23/08/2020 30/08/2020 06/09/2020 13/09/2020 20/09/2020 27/09/2020 04/10/2020 11/10/2020 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 23
During lockdown, the Pet category saw 4.8% growth vs. YA during, driven primarily by Accessories (9.8%) and Food (4.5%) We saw customers stockpiling Food in March, as well as an increase in sales of Accessories during lockdown months (treats, leashes and toys). This corresponds to people spending more time at home with their pets, while many also took the opportunity to adopt new pets Pet Food Pet Accessories Total Period March April May June July August September Pet Treats Cat Food Pet Food Dry Dog Food Wet Dog Food Bird Food Fish Food Rabbit Food Pet Bedding Collars & Leashes Pet Accessories Pet Bowls Pet Medicinal / Accessories Pet Toys (1) https://www.prnewswire.com/news-releases/global-pet-services-market-2020-2025---increase-in-number-of-pet-owners- and-increased-spending-on-pets-amid-covid-19-301114856.html © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 24 (2) https://www.supermarketnews.com/winning-pet-care/pet-adoptions-rise-boosting-product-sales
Pet has seen strong growth in both LSM groups, especially Dog, and the much smaller Other Pet categories Value Growth % YA – Full Lockdown period LSM 1 - 6 LSM 7 - 10 Total Pet Cat Dog Other Pets Pet Acc. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 25
The COVID-19 lockdown has provided a retail landscape in which both National Brands and Private Label brands are relevant and important Food categories see higher baseline sales across Private Label and National Brands as the lockdown drives dining at home. • Private Labels are reliant on many of the same factors as National Brands: – Price sensitivity has driven share losses in high inflation categories (see Example A) – Investment into latest food trends is driving growth, particularly in categories that are benefitting from the ‘eat at home’ trend (E.g. B) – Some categories saw National Brands run out of stock faster in early lockdown, driving higher share for available Private Labels (E.g. C) – Retailers have reduced instore shelf space (bulk bins/gondola ends) to allow space for social distancing, impacting both National and Private Label Brands – Panic buying and stock outs lead to trial across a variety of categories – both National and Private Label brands need to retain these shoppers © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 26
Private Label has retained overall share into lockdown with gains in Dairy, Beverages and Snacks brought down by losses in Protein and Toiletries Private Label Value % of Macro Category Mat to Aug2019 PreCovid Sep-Feb2020 Panic Buying Mar2020 Lockdown Apr-Aug2020 45 40 39 36 36 34 35 30 27 26 26 25 25 20 19 18 19 18 15 15 15 15 15 13 14 12 11 12 12 10 10 10 9 10 9 9 5 0 Total Grocery Dairy Protein Beverages Snacks Toiletries Sample of South African retailers & wholesalers 24 of the top CPG categories © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 27
Private Label’s category specific performance is dependant on multiple factors, with no single reason for shifts • Private Label top and bottom performing categories during lockdown: Top Categories where PL gained % Bottom Categories where PL lost % Biscuits & Rusks Sugar & Sweeteners Household Cleaners Hand & Body Canned Meat & Meals Frozen Convenience Fermented Beverages Bakery Dessert Spices & Seasonings Cooking Oil Pet Food Cereals Processed Meat UHT Juice UHT Milk Edible Fat Vitamins & Supplements Sample of South African retailers & wholesalers 24 of the top CPG categories © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 28
Example A: Private Label took price above National Brands in Sugar & Sweeteners during lockdown and has lost significant share as a result 40 PL % of Category Total Category Ave. Price (Rand/Kg) PL Ave. Price (Rand/Kg) 20,0 35 19,0 R18,32 30 18,0 R17,49 25 17,0 R16,26 20 16,0 R15,59 15 15,0 10 14,0 5 13,0 0 12,0 Pre Covid Sep-Feb20 Post Covid Apr-Aug20 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 29
Example B: Recent strategic Private Label launches in Convenience Sauces capitalized on the ‘eat at home’ trend PL Value % of Convenience Sauces SA lockdown 6% begins Panic buying 5% month 4% 3% 2% 1% 0% © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 30
Example C: Private Label gained share of Fresh Cream as National Brands struggled to keep up with stock demands 7000 30,0 PL % of Fresh Cream National Brand OoS 6000 25,0 5000 20,0 4000 15,0 3000 10,0 2000 5,0 1000 0 0,0 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 4 WEEK to 29/09/19 27/10/19 24/11/19 22/12/19 19/01/20 16/02/20 15/03/20 12/04/20 10/05/20 07/06/20 05/07/20 02/08/20 30/08/20 Top 10 Branded Fresh Cream SKUs © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 31 Top 1000 Stores
GROWTHS FROM AROUND THE GLOBE Global data up to 30 August 2020 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 32
IRI COVID-19 Dashboard Menu Link Go to our website for more detail → Latest insights from the IRI Demand Index w/ending 27.09.2020 include: • Consumer demand in CPG remains elevated for total CPG compared to a year ago for all countries except France, which is stable versus last year. High demand in Non-Edible is tempered by lower demand in Edible in France • In the U.S. demand for grocery is outpacing non-edible. In demand for non-edible is higher. U.K is showing similar demand levels across both Edible and Non-Edible • Highest demand versus LY is seen in the US and this is driven by Frozen, particularly meat and beverages • Each country indicates different category trends in edible but there are some consistencies. Frozen is driving U.S, UK, the Netherlands and Italy. Alcohol is also prominent in U.K, the Netherlands, Italy and Germany • Non-Edible demand is behind versus LY in Germany. This is driven by Air Care, Cosmetics, Textile & Pet • Homecare demand remains high and is driving Non-Edible across many countries. Health demand has dropped off in the Netherlands © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 33
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Insights and Strategic Guidance for Better Decisions IRI’s Online Resources Include Real-Time Updates and Weekly Reports Which Track the Impact of the Virus on CPG and Retail The IRI COVID-19 Info Portal Includes COVID-19 impact analyses, dashboards and the latest thought leadership on supply chain, consumer behavior, channel shifts for the U.S. AND international markets The COVID-19 Dashboard and The IRI CPG Demand Index™ Accessible through the insights portal and tracks the daily impact of COVID-19. This includes the new IRI CPG Demand Index™, top selling and out of stock categories across countries, and consumer sentiment on social media. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 44
CONTACT US IRI South Africa Level 1, Block D, Aintree Park FOR MORE Doncaster Road, Kenilworth Cape Town, 7708 INFORMATION +27 21 700 7420 Follow IRI on Twitter: @IRIworldwide © 2020 Information Resources Inc. (IRI). © 2020 Information Resources Inc. (IRI). Confidential Confidential and and Proprietary. Proprietary. 45 45
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