Surging COVID cases trigger another wave of stockpiling, threatening inventory, but not like in Spring

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Source: Getty/Drazen Zigic (Getty Images/iStockphoto)

As the current wave of coronavirus cases crests the peak of the first, consumers once again are stockpiling essentials, although many manufacturers do not anticipate as great a sales lift as they saw in March and April at the beginning of the pandemic.

According to a survey of nearly 8,000 adults nationwide conducted Nov. 23-25 and released Dec. 14, by the rewards app Shopkick, nearly half of Americans are more concerned about the pandemic now than a month ago and 61% say they are stocking up on essentials.

While more consumers may be stockpiling now than in March, when Shopkick found less than half (47%) of shoppers were pantry-loading, fewer are focused on food and water this time around, according to the data. It found 85% of respondents are stocking up on food and water now compared to 93% in March.

While potentially hard to fathom, the difference appears to be made up in part by more consumers stocking up on toiletries now than in the spring. Shopkick found 87% of respondents last month reported buying essentials like toilet paper, 67% cleaning supplies and 61% hand sanitizer. In the spring, only 74% were buying extra toiletries and 58% cleaning supplies.

The spike in demand for toilet paper and cleaning supplies once again has led to consumers noticing less availability in stores, with 76% reporting essential items that were in-stock last month are now more limited in stores, according to Shopkick.

It adds that of the 39% of consumers who are not currently stockpiling the essentials, 47% say they will if cases of COVID-19 continue to climb at the current rates.

CPG execs weary of supply strain

Despite the uptick in consumer demand and purchasing, many food and beverage manufacturers are not predicting a surge in sales similar to what they saw in the spring, but several are cautioning about supply strains.

For example, Post Holdings CEO Rob Vitale noted in November during the company’s fourth quarter earnings call that he expects slightly elevated sales to continue compared to pre-pandemic rates with the second half of the new fiscal year accelerating over the first, but nothing compared to the surge of demand that occurred in April and May.

Nonetheless, he cautioned that the company is running close to the wire to meet demand and as such near term supply chain viability could be at risk if demand outpaces production. However, he suggested the strain is more likely to come from production challenges related to COVID’s impact on the work force rather than a surge in sales that outstrips availability.

Similarly, JM Smucker Co. is bracing for another round of potential stockpiling, but its decision to move forward with promotions and marketing suggests it does not expect COVID fears to spikes sales as much as in the spring when many promotions were put on hold to ensure supply could meet demand.

Hormel Foods executives say they are hoping for a sales lift in its next fiscal year, but it is unclear if that would come from heightened demand compared to that of the spring, summer or even fall. Rather, if the company enjoys increased sales, it could be attributed to Hormel’s efforts to expand production to meet existing demand, which it fell short of doing in Q4, according to leadership.

Among Hormel’s efforts to increase supply are increased production facilities and increased labor, two factors that have held back sales in 2020.

Promotions return despite inventory concerns

Like other big food companies, Mondelez International appears to be switching gears from ramping up production and scaling back SKUs to meet increased demand like it did during the first stockpiling phase of the pandemic in the spring, to focus more on keeping new consumers by offering increased value with new promotions and marketing.

With a tacit suggestion that any future stockpiling likely will not meet those of the spring, Mondelez EVP and chief financial officer Luca Zamaella recently told investors that the company’s main focus in 2021 will be to retain market share gains from throughout the pandemic. While it will try to grow those gains, Zamaella noted that “its not that we’re talking about the same amount of share gains that we have in 2020 into 2021.”

Even though balancing supply and demand appear to be top of mind for many CPG executives who spoke to investors in the past two months, Shopkick general manager Dave Fisch suggested that the app’s research indicates they should do more.

He explained in a release about the research that “these findings should serve as a huge wake-up call for retailers and brands,” and argued “the same issues that severely impacted supply chains during the first wave of COVID have returned as consumers revert to stocking up and panic buying.”

He added: “Retailers and brands must act immediately to implement strategies that will keep store shelves well-stocked in order to maintain sales and consumer loyalty during this time.”