Pandemic Accelerated Digital Investment

24 June 2021 – The fast-moving consumer goods (FMCG) industry has undergone substantial transformation, driven by the ongoing Covid-19 pandemic. Characterised by high volumes and low profit margins, the sector has seen demand for some products increase significantly, while others have become stagnant – and even obsolete – as consumer buying patterns have changed. 

According to Michael Uskert, managing vice president of Gartner Supply Chain Practice, 2020 was an unprecedented year, marked by the global pandemic and uneven economic impacts. “From a business perspective, some companies benefited while others did not. What the pandemic did do was force supply chains to move faster and to predict needs that seemingly shifted overnight; it accelerated digital investment and rapidly changed models to meet customer demands as quickly as possible.”

The stay-at-home and work-from-home culture introduced by lockdowns and quarantine policies significantly impacted the FMCG market. Demand for many items remains significantly volatile. While short-term demand for some items has skyrocketed, demand for other items has significantly decreased.

A study by IRI showed that with less dining out and socialising due to Covid-19 restrictions in many countries, people were spending more time at home cooking from scratch, driving demand for healthy food treats and cooking ingredients. In the UK, flour and bread-making sales were up 41.9% and chilled pastry sales up 35.2%, while in Italy sales of prepared vegetables saw increases of up to 76.6%.

The opposite effect was seen for cosmetics sales with products in the bottom five categories in countries such as France (-13.3%), Italy (-16.1%) and Spain. Also, luxury items have seen a drop in demand. Demand for sanitary and cleaning products, on the other hand, continue to increase. According to IRI, soap in Spain for example saw a spike of 2828.3%.

The sector has further been impacted by the move away from brick-and-mortar stores. The booming e-commerce market continues to be a driving force. According to Gary Benatar, CEO of Relog, it has become increasingly difficult to make sure that the right products are on store shelves (virtual or physical), at the right time.

Speaking during a recent online event, he said consumer behaviour should be at the forefront of every business strategy, irrespective of the company size, establishment and markets in which they operate. “In the competitive environment of today, it is all about aligning the supply chain to the customer. Every decision taken should be with the end customer in mind.”

He said it was a rapidly changing environment and warned against touching products in the FMCG sector too much, saying every touch added cost and reduced efficiency. Source (FreightNews)