THE IMPACT OF A SECOND ROUND OF STIMULUS ON THE CPG DEMAND CURVE - COVID-19 Emerging Point of View - IRi
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COVID-19 Emerging Point of View THE IMPACT OF A SECOND ROUND OF STIMULUS ON THE CPG DEMAND CURVE July 30, 2020
Executive Summary IMPACT OF SECOOND STIMULUS In March 2020, the $2.2 trillion CHECK ON CPG DEMAND Coronavirus Aid, Relief, and • Consumers are likely to spend most of the stimulus check on essentials (e.g., rent, Economic Security Act (CARES Act) utilities) or discretionary categories (e.g., stimulus bill was passed, and electronics, home amenities etc.) or savings / included $1,200 per adult whose investments income was less than $99,000, as • About a third of consumers (mostly lower income) will use the extra money to buy well as an extra $600 per week on groceries; value channels are likely to benefit top of states’ unemployment benefits; that benefit is scheduled EFFECT OF REDUCED to end July 31. Congress in May UNEMPLOYMENT BENEFITS approved a $3 trillion stimulus As benefits are reduced, recessionary spending package, the Heroes Act, to extend behaviors are likely to take hold: lower income economic support through January shoppers will stick to the basics; middle income shoppers will revert to lower-income behavior; 31, 2021. The Senate is currently highest earners may catch the “fear fever” and negotiating a separate $1 trillion save, rather than spend. package, the HEALS Act. In this • Discretionary spending would suffer report, we anticipate likely impact • Shoppers will seek value in economically of the second stimulus check and valuable, larger pack sizes, as well as smaller pack sizes required by tight budgets reduced unemployment benefits • Price / value perceptions will matter even more on the CPG Demand Curve. in choice of brands and retailers © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2
What Happens July 31st? The $2.2 trillion CARES Act, which included a one-time check to individuals earning less than $99,000, an additional weekly unemployment benefit of $600, as well as hundreds of billions of dollars in forgivable small business loans worked to bolster an economy hit by shuttered businesses and massive unemployment, all fallout of the deadly coronavirus. Intended to carry consumers and the economy through the pandemic, these benefits are set to expire July 31. With dramatically increasing cases of COVID-19 and 18 straight weeks of more than 1 million individuals applying for unemployment benefits, it’s clear that support beyond July is needed. Who is impacted? • 51.3MM Americans have filed for unemployment due to COVID-19.** • 25MM people currently receive the $600 unemployment booster check each week.* • The eviction moratorium for those living in federally backed mortgages or receiving government assisted housing expires on July 25 (with some extensions to August 31), impacting 40MM.* Two-Thirds of Americans Say They Need Additional Stimulus Support • Job losses among low-wage workers represent 56% of total unemployment.** • About 61% of middle-income Americans have cut spending in the wake of the pandemic.** • About 78% of U.S. workers are living paycheck to paycheck.* • More than a quarter of U.S. households missed last month’s rent or mortgage payment and there is a lack confidence in the ability to pay next month. Source: *CNBC; **USA Today © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 3
More Than Half of Consumers Fear Losing Their Job; 35% Fear Loss of Employment Income Household Pulse Survey – Total U.S. 51.1% 47.0% 38.8% 35.2% Loss in Employment Income Expected Loss in Employment Income Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 April 23 July 23 Source: U.S. Census Bureau; % of adults in households where someone had a loss in employment income since March 13, 2020 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 4
More Than a Quarter of U.S. Households Missed Last Month’s Rent or Mortgage Payment; There is a Lack of Confidence in Ability to Pay Next Month United States Housing Scarcity by Week 50 26.4 26.5 27 MILLIONS 45 25.9 25.4 26 25.3 40 24.6 24.7 24.5 25 35 23.6 23.7 24 30 23.2 25 23 22.1 20 22 15 21 10 5 20 0 19 1 2 3 4 5 6 7 8 9 10 11 12 April 23 WEEKS July 23 Measure Definition: % of adults who missed last month’s rent or mortgage payment, or who have slight or no confidence that their household can pay next month’s rent or mortgage on time / Timeframe: April 23 – July 23, 2020 Source: https://www.census.gov/data-tools/demo/hhp/#/ © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 5
A Second Stimulus Check is on the Table; the First Check Was Saved, Used for Rent / Mortgage and Spent on Groceries $2.2 trillion CARES Act: Sales took off in mid-April when many Americans began to receive their $1,200 stimulus checks. Within 10 days of receiving their stimulus checks, households spent around one quarter to one third of it, research shows, including rent, bills, food, personal care and nondurables. Uses of Stimulus Payment 4/3 - 4/5 4/10 - 4/12 4/17 - 4/19 4/24 - 4/26 5/1 - 5/3 48%48% 41% 43% 44% 41% 42% 40% 40% 38% 35% 34% 34% 32% 30% 18% 16% 17% 16% 11% 12% 10% 13% 9% 9% 8% 7%6%7% 5% 5%5%5% 5% 3% 2%1%1%1%1% To Pay Rent, To Add to My To Buy More To Pay To Buy Furniture, To Buy To Pay for Child Other Mortgage, Taxes Savings or Groceries and Healthcare Appliances or Clothing Care or a or Utilities Investment Other Everyday Bills Electronics Caregiver for Accounts HH Essentials an Adult Source: MarketWatch, IRI Consumer Network™ Panel Survey representing Total U.S. Primary Grocery Shoppers, base ~1,200 adults aged 18+ © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 6
Stimulus Spending Shifts Based on Household Income; Lowest Income Households Focused on Necessities of Food, Utilities, Household Supplies Percentage of Recipients Allocating Economic Impact Payment Toward Specific Expenses, Among Those Who Used the Stimulus to Mostly Pay Expenses, by Household Income Note: Population weights applied. This figure represents adults over the age of 18 who responded to the income and economic impact payment questions. Source: American Enterprise Institute Analysis of U.S. Census Bureau. “Week 8 HH Pulse Survey: June 18-23, July 1, 2020 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 7
Tracking the Stimulus Spend IRI’s weekly consumer surveys reveal the majority According to the of stimulus money went to housing expenses, National Bureau of savings and grocery bills. Retailers experienced Economic Research, an upsurge in sales of discretionary categories, households spent including electronics, clothes and toys. about $0.25 - $0.35 more for each stimulus Retailers Reporting Increases dollar in the first 10 days after they TVs, electronics, gaming equipment, received the payment. sporting goods, apparel, bicycles Researchers found that TVs, electronics, gaming equipment, consumers spent more apparel and cosmetics than 40% of the money from the checks after a week or two. TVs TVs Uptick in ALL Electronics Electronics Products Sewing Machines © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 8
As Unemployment Benefits Decrease, Recessionary Behaviors Will Increase Shopping Behaviors of Past Recessions Spend Less on Spend Less on Personal Buy Smaller Buy at Lower Buy at Value Eating Out Services, e.g., Amounts Prices Channels Hair, Nails Buy Fewer Purchase More Shopped Buy More DIY Nail Care Retailers That Affordable Treats Individual- Private Label Sales Increase Serving Packages Products Offer More Value Fewer Prepared Buy Smaller Stock Up at Meals, More Home Hair Color Amounts of Plan Trip to Stick the Beginning Scratch Cooking Sales Increase Favorite Treats To List / Budget of the Month Cut Back on Use More Buy Less at Non-Essential Coupons; Look Convenience Groceries for Deals Stores CLICK HERE for More on Recessionary Behaviors with IRI’s “Recession Proof Your Business” Series Source: IRI analysis © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 9
Comparing House’s Heroes Act and Senate’s HEALS Act vs. CARES Act CARES Act HEROES Act HEALS Act Stimulus Package Cost $2.2 trillion $3 trillion $1 trillion Stimulus Check $1,200 to single filers earning under $75k per Same as CARES Same as CARES Maximum Payment year, $2,400 for joint filers under $125k Stimulus Money $1,200 for dependents, maximum of three $500 for all dependents, no age limit $500 for all dependents 16 and under Received for Dependents Initially $200 per week, then up to $500 Enhanced Unemployment $600 per week plus state benefits Same as CARES per week to match 70% of lost wages Benefit when added to state benefits Enhanced Unemployment January 2021 for most workers $200 per week bonus through September, then Expires July 31 70% matching of lost wages; expires 12/31/20 Duration $659B in forgivable loans for small businesses, Expands eligibility, eliminates 75% payroll $190B into the PPP fund; allows businesses to Paycheck Protection who must use 75% on payroll to be eligible for requirement and extends application request a second loan; expands approved Program forgiveness; expires 8/8/20 period to 12/31/20 use of funds for loan forgiveness Increases tax credit to 80% of up to Increases tax credit to 65% of up to $30,000 Employee Tax Credit Tax credit on 50% of up to $10,000 in wages $15,000 in wages Eviction Protection and Bans late fees until 7/25, evictions until 8/24 on Expands to cover rent, extends eviction Does not address Moratorium properties backed by federal mortgage programs moratorium, allocates $200B for housing programs $70B to K-12 that open for in-person classes, School Reopening Does not address $58B for grades K-12, $42B for higher education. $29B for higher education, $1B to Bureau of Indian Education, $5B state discretion Liability Protection from 5 year liability shield to prevent schools, Does not address Does not address businesses, hospitals, from being sued over Coronavirus Illness coronavirus related issues Coronavirus Testing Does not address $75 billion $16 billion © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 10
Insights and Strategic Guidance for Better Decisions IRI’s Online Resources Include Real-Time Updates and Weekly Reports That Track the Impact of the Virus on CPG and Retail The IRI COVID-19 lmpact Includes COVID-19 impact analyses, dashboards and the latest thought leadership on supply chain, consumer behavior and channel shifts for the U.S. AND international markets. IRI CPG Economic Indicators, Including the IRI CPG Demand Index™, IRI CPG Supply Index™ and IRI CPG Inflation Tracker™ Accessible through the insights portal to track the daily impact of COVID-19. This includes top-selling and out-of-stock categories across the country and consumer sentiment on social media. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 11
NOW INCLUDES IRI CPG Demand Index™ U.S., UK, FRANCE, ITALY, GERMANY & NETHERLANDS The IRI CPG Demand Index™ provides a standard metric for tracking changes in spending on consumer packaged goods. It measures weekly changes in consumer purchases, by dollar sales, against the year-ago period across departments, including fixed and random weight products, grocery aisles and retail formats. The IRI CPG Demand Index™ is available for eight U.S. regions, all U.S. states, UK, France, Italy, Germany and the Netherlands. CLICK HERE FOR MORE! © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 12
The Latest COVID-19 Reports and Insights from IRI (click to see full report) IRI COVID-19 IMPACT THE CHANGING SHAPE ASSESSMENT REPORTS OF THE CPG DEMAND CURVE RECESSION PROOF YOUR BUSINESS © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 13
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