Beverage market, retailers adjust to handle coronavirus
Associations, retailers work to protect their essential workers
As we entered 2020, Americans likely had a collection of varying items on their docket to complete, experience and enjoy throughout the year. However, as news reports continued to highlight the spread of the novel coronavirus that originated in Wuhan, China, things quickly began to change. Months removed from the first public reports, COVID-19 has become a pandemic that’s touched every continent except Antarctica.
In the United States, the first reported case emerged in late January. In the weeks that followed, media reports began highlighting spreads to various locations. Yet, consumer behavior remained largely unchanged. It wasn’t until late February or early March that the marketplace began to see a shift in consumer purchasing behaviors.
Chicago-based Information Resources Inc. (IRI) collaborated with its partners at the Boston Consulting Group (BCG) to analyze consumer shopping behavior. In its March 19 report titled “COVID-19 Impact: Consumer Spending Tracker,” the market research firms identified the week ending March 1 as the inflection point at which significant consumer stockpiling began. The behavior continued throughout March at the same time states and the federal government were shutting down schools, businesses, public parks, etc., to promote social distancing to slow the spread of the novel virus.
Many retailers and food and beverage suppliers also were shuttered, causing a major shift in their operations. On March 18, the Washington, D.C.-based American Beverage Association (ABA) submitted a letter to President Donald Trump requesting essential services exemptions for food and beverage manufacturing and distribution. The association followed that up with respective letters to the National Association of Governors, the United Sates Conference of Mayors and the National Association of Counties requesting these leaders follow Department of Homeland Security (DHS) federal guidance identifying its workforce as essential critical infrastructure workers.
The food and beverage industries are leading during this national emergency, the ABA says.
The first action that the industry took was requesting that President Trump deem the food and beverage industry as essential to critical infrastructure so that its workforce could continue to manufacture, transport and deliver much-needed consumer goods, it adds. Beverage companies have been able to keep the manufacturing and distribution process moving under the circumstances. Industry employees, especially drivers and bottling facility workers, are doing a tremendous job of replenishing and stocking shelves with basic grocery items, the ABA says.
The National Beer Wholesalers Association (NBWA), Alexandria, Va., also is taking a proactive role to guide its members as they continue to deliver essential items to U.S. consumers.
“We’ve been communicating with our members like never before,” says Craig Purser, president and chief executive officer of the NBWA. “Beer distributors are working every day to keep America’s supply chain moving, making sure beer — and other products — get to store shelves to meet demand. These community businesses play an essential role in moving goods during this crisis. Our members face unique challenges — and there is no playbook for this unprecedented event.
“NBWA has been in constant communication, sharing best practices from across the country with our members,” he continues. “We’re getting them the tools they need to be successful during this uncertainty, from the cleaning products to have on hand to the best ways to structure their operations for social distancing. We’re also sharing best practices they can tap into to help the community, like donating refrigerated trucks to food drives, giving water and other non-alcoholic drinks to first responders or donating expired beer to produce hand sanitizer.”
Those services of bottlers and wholesalers have been in high demand as market research firms have highlighted the soaring sales as a result of stockpiling. Early sales data points to the week ending March 15 as the height of this behavior. As part of IRI’s March 26 report titled “COVID-19 Impact: Consumer Spending Tracker for MULOC Retailers – US, UK, France, Italy, NZ,” it shows that overall beverage sales were up nearly 40 percent for the week ending March 15 compared with the same week of the previous year. This is based on transactions from the POS database with data collected in multi-outlet plus convenience (MULOC) channels, which include grocery, drug stores, convenience stores, mass merchandisers, Walmart, club and dollar chains, and commissaries. Alcohol sales also were up that week, posting a 27.6 percent gain.
Posting the strongest gain among beverage subcategories for the week ending March 15 was convenience/PET still water, which was up 82 percent. Given this strong demand for the segment, bottled water manufacturers are doing their part to ensure consumers’ demands will continue to be met.
“IBWA member companies are working tirelessly to ensure that their customers and retail consumer needs are met,” says Jill Culora, vice president of communications for the International Bottled Water Association (IBWA), Alexandria, Va. “This includes many operations that are working 24 hours a day to meet the need. In past years, the bottled water industry has been able to successfully supply water during a succession of severe hurricanes affecting different parts of the United States during a single hurricane season — this is in addition to handling all of the boil alerts that occurred around the country, and other emergencies such as wildfires, etc.”
Culora adds that consumers should note that no directives have been given about stockpiling packaged water.
“It is important to note that no authority has directed consumers to stock up on bottled water in connection with the COVID-19 outbreak,” she says. “Consumers should feel safe in continuing to drink tap water. The CDC’s Water Transmission and COVID-19 webpage addressed COVID-19 transmission through drinking water stating that ‘COVID-19 virus has not been detected in drinking water. Conventional water treatment methods that use filtration and disinfection, such as those in most municipal drinking water systems, should remove or inactivate the virus that causes COVID-19.’”
Yet, no matter which beverage products consumers are looking to purchase, distributors are doing their part to ensure that the distribution supply chain is minimally impacted. This is thanks to the front line delivery personnel within the bottler and wholesaler networks.
“So many workers across the country are going above and beyond so that Americans have the essential services and products they need to get through this challenging time,” says Katherine Lugar, president and chief executive officer of the ABA. “We commend our nation’s workforce for ensuring the needs of our communities are met — from those on front lines who are heroically battling this pandemic to the dedicated men and women working around the clock to manufacture, deliver, replenish and stock shelves with a full range of food and beverages.”
With health a top priority for all at this time, the beverage community is taking the necessary steps to help ease consumers concerns when it comes to product safety. At the same time, they also are looking to prioritize the safety and health of its employees.
The U.S. food supply remains among the safest in the world, the ABA says. It adds that the Food and Drug Administration has found no evidence that COVID-19 is transmitted through food or food packaging. The association is following all federal guidelines and best practices to ensure the safety and well-being of its employees, consumers and customers, the ABA says.
Among those practices included developing standardized factory protocol with its colleagues in the food market about what should be done in the event that an employee or customer tests positive for the virus, the ABA explains. This is in addition to the already stringent food safety best practices.
Beverage manufacturers and distributors are following the guidance of federal health agencies, including the Centers for Disease Control and Prevention (CDC) and Food and Drug Administration (FDA), as it relates to the production and delivery of its products as well the safety and well-being of the communities they serve, the ABA says.
In addition to this, the association’s three largest members — PepsiCo Inc., Keurig Dr Pepper and The Coca-Cola Co. — all have developed resource pages that explain the practices and procedures they are administering to protect employees and prioritize their well-being as they serve their customers.
Because the situation continues evolve so quickly, associations also are delivering important information to the beverage community to help guide them through the pandemic.
“The speed at which the situation continues to evolve adds an extra level of complexity to communication,” NBWA’s Purser says. “We strive to give our members real-time information and anticipate what’s around the corner, but that has proven to be a real challenge in an unprecedented crisis of this magnitude. Our leadership huddles internally every morning, and we are on the phone with distributors and industry leaders all day, assessing the situation and figuring out how we can do even more to help our members weather this storm. NBWA has a strong team, and in times like these, we rely on them to do everything they can to help our members, whether that means having a conversation with elected officials or getting distributors the information they need to keep rolling.”
Retail outlets also are taking extra precautions in the wake of the global pandemic.
“Like all retailers, our industry is placing a priority on cleaning and sanitizing,” says Jeff Lenard, vice president of strategic industry initiatives for the National Association of Convenience Stores (NACS), Alexandria, Va. “Stores are more regularly cleaning services that come in contact with customers, whether fueling nozzles, garbage cans, cooler doors or door handles. And they are providing more gloves and sanitizer at key places for customers and employees to use.
“Specifically for employees, we are seeing more stores look at options like installing Plexiglas shields to separate the customer from the employee,” he continues. “It goes against everything you usually want to do at retail because it creates a barrier between the customer and the employee. But during this pandemic, barriers and a sense of control over what everyone can do to protect themselves and the larger community at large is embraced.”
In mid-April, NACS published an article titled “C-Stores Adopt Temperature Checks,” which highlighted that various operators were now taking employees temperatures prior to their shift beginning to look out for their health and the health of the consumers.
With the proliferation of stockpiling as well as fewer people traveling for work, retail outlets saw a deviation from traditional shopping patterns.
“The traditional customer experience at our stores is someone stopping off the highway to get gas, perhaps use the restroom and purchase food and drink inside,” Lenard says. “At neighborhood stores, the traditional experience was someone stopping on their way to or from work, or perhaps picking up lunch and taking a break from the office for a bit. Or stopping at the convenience store on the way to or from going somewhere else, whether out on the town or just shopping at a mall or some other store further away. All of those experiences have been disrupted.”
C-stores also have shifted their portfolio to reflect consumers’ current buying trends. Outlets have removed refillable and self-serve of any kind while adding take-home and bulk items.
“We’re already seeing an upswing in 12-pack and 18-pack beers — not necessarily because people are consuming more beer but more because they want to maximize what they purchase every time they go out to a store,” Lenard says. “And, with the reduction of self-serve beverages, we are also seeing an increase in sales from the cooler doors.
“Convenience stores have always sold time to consumers,” he continues. “What’s changed — at least for the short term — is how consumers are defining time. Today, it’s about maximizing the amount of items you purchase during your time out.”
However, maximizing shopping trips is not the only way that consumers have shifted their behaviors. Because many states have shutdown dine-in for bars and restaurants, purveyors are relying on eCommerce to remain afloat.
“The shelter-in-place orders have nearly shut down the entire foodservice industry. Sixty-seven percent of consumers have avoided restaurants/going out to eat because of the coronavirus pandemic,” says Caleb Bryant, associate director of food and drink for Chicago-based Mintel, citing data from March 19-27. “Restaurants are now relying on delivery and takeout to stay afloat. Some have created new takeout-specific menus or have created unique alcohol promotions such as cocktail kits (e.g., selling spirits and cocktail ingredients together in a pack). Many consumers are looking to support their local restaurants and ordering takeout or gift cards to their favorite restaurant. However, consumers will likely choose to reduce their restaurant expenditures as they experience financial uncertainty.”
Bryant notes that even with these eCommerce efforts, the foodservice and on-premise markets’ futures still remain influx.
“The long-term implications for the restaurant industry will depend on the duration of shelter-in-place orders and the results of government stimulus packages,” he explains.
The growing prevalence of eCommerce for American seems to have been expedited as a result of the pandemic.
In its April 2 report titled “COVID-19 Impact: Consumer Spending Tracker for Measured Channels – U.S., UK, France, Italy, Germany, NZ,” IRI and BCG note that eCommerce shopping in the United States show a significant uptick starting the week ending March 15, although brick-and-mortar sales spiked similarly, leaving overall online share slightly down.
IRI’s report notes that online edible-only sales were up 95 percent for the week ending March 15. By comparison, online sales were up 75 percent and online nonedible-only sales were up 67 percent for that week.
In terms of eCommerce fulfillment type, the market research firm reported that pickup and home delivery have seen slight upticks. For the week ending March 15, home shipment accounted for the largest share at 73 percent, while delivery sales made up 8 percent and pickup sales were 19 percent of market share. IRI data also shows that each fulfillment type all posted strong growth compared with a year ago. For instance, home shipment sales were up 60 percent for the week ending March 15 compared with the same timeframe. Delivery and pickup were up even more, up 100 and 200 percent, respectively.
Beverage alcohol is one beverage market that has realized the benefits of eCommerce. Boston-based Drizly has reported that its alcohol-delivery app has experienced some of its strongest gains during this pandemic.
“Many consumers are turning to delivery services as a safer alternative during this time,” says Liz Paquette, head of consumer insights at Boston-based Drizly. “We first started to notice a discernible impact on Drizly the week of March 9 and have since seen sales continue to accelerate week over week. This past week [week of March 23], sales were up 267 percent over baseline (defined as 8 weeks prior — essentially what we would have expected to see around this time) and this week [March 30] are currently tracking at 488 percent over baseline.
“We had our biggest day ever last Friday, March 27, and anticipate that even that will be beat today,” she continues. “To a very large extent, this was driven by new customers who accounted for 42 percent of orders (this is usually closer to 15 percent). New buyers, specifically, were up 900 percent year over year. Overall, consumers [are] placing larger orders, 25-50 percent more than normal, which has indicated a ‘stock up’ mentality.”
Although sales are up for the app, Paquette notes specific days might shift best-selling products, but overall market share breakdowns have remained consistent.
“We have observed consumers sticking to their standbys — at least from a categorical perspective — during this time,” she explains. “This year, the average category breakdown on Drizly by GMV was as follows: wine, 42 percent; liquor, 39 percent; [and] beer, 17 percent. We've seen general fluctuations in this week over week — early days were seeing an uptick in wine (up to 44 percent of share) and most recently, we've seen a rise back in beer (up to 19 percent), but have not noticed major changes.
“Red wine continues to be the No. 1 seller on Drizly (with Cabernet Sauvignon being the No. 1 varietal), followed by white wine, vodka, bourbon, hard seltzer, alternative whiskeys and tequila,” Paquette continues. “Liqueurs, cordials and schnapps have, however, continued to see outpaced growth, with a major increase this past week in particular (up 964 percent over baseline thus far this week [March 30]). Mixers, syrups and bitters are up 1,395 percent over baseline thus far this week. This is a potential indicator that folks may be experimenting with recipes or stocking up their bar cart while they're home. Beers are also making a comeback this week — with IPAs, ales, stouts and porters all at 740-plus percent growth in sales above the baseline.”
Given its increased sales, Drizly is taking extra steps to ensure the safety of its consumers and employees.
“Our top priority is the health and safety of our employees, customers, and partners,” Paquette explains. “With alcohol, the handoff does need to legally happen in person. We've been working closely with our retail partners in more than 180 markets across the U.S. and Canada to provide guidelines on new ways of working to facilitate safe and contactless deliveries.”
Paquette highlights the following measures that the alcohol delivery app is incorporating:
- Following general guidelines by the CDC and practicing good hygiene.
- Eliminating the need for signatures. Providing fraud insurance for free to its partners at this time to encourage them to complete contactless deliveries.
- Guiding its drivers and customers not to hand IDs back and forth.
- Guiding both retailers and customers to meet outside at the delivery point.
As consumers altered their buying patterns during this pandemic, distributors, manufacturers and retailers have stepped up their efforts to keep those essential needs fulfilled.