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How European shoppers will buy groceries in the next normal
December 2, 2020 | Article
Article (10 pages)
As the COVID-19 pandemic continues, early evidence shows that some—but not all—of Europeans' new grocery-shopping habits will stick.
Consumers changed the way they shopped for groceries during the lockdowns related to the COVID-19 pandemic in the first half of 2020, and their shopping behaviors have continued to evolve during the crisis. Once the crisis abates, to what extent will consumers revert to their prepandemic grocery-shopping behaviors? Will some of the new behaviors stick and become more pervasive? If so, which ones?
This article was a collaborative effort by Gizem Günday, Stijn Kooij, Jessica Moulton, Marek Karabon, and Jorge Omeñaca.
Behavioral science tells us that it takes an average of two months to form a new habit, which will stick only if reinforced through routines and rewards. In this article, we examine the grocery-shopping behaviors of consumers in the EU-5 (France, Germany, Italy, Spain, and the United Kingdom). And we identify five themes that have become increasingly evident among these consumers that could outlast the pandemic, based on early evidence from the consumer-sentiment surveys we have conducted across the globe from March 2020 through September 2020. 1 1. McKinsey is fielding consumer surveys to understand the impact of the COVID-19 crisis on consumer sentiment and stated behavior. The surveys, now fielded in 35 countries, are conducted online in local languages on a weekly, biweekly, or monthly basis, depending on the region. For the latest survey results, see "Global surveys of consumer sentiment during the coronavirus crisis," updated regularly on McKinsey.com. The five themes are a steady (but slower) migration to online shopping, a focus on healthy eating, a shift to value, gains for big brands (although perhaps temporary in some categories), and an increased importance of purpose. We also offer our initial thoughts on the implications for grocery retailers and consumer-packaged-goods (CPG) manufacturers in the next normal.
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As lockdowns went into effect across markets in the spring of 2020 because of the COVID-19 pandemic, EU-5 consumers shifted to online grocery shopping because of restrictions on movement and concerns about exposure to other people in indoor public spaces. Online sales of groceries surged.
In April, the demand for online groceries more than doubled in Italy. 2 2. "Coronavirus: Si 'normalizza' la crescita della GDO," Nielsen, April 3, 2020, nielsen.com. In the United Kingdom, Tesco's online-grocery business went up to 16 percent of total country sales in the first quarter of 2020, from about 9 percent. 3 3. "First quarter trading statement 2020/21, Tesco, June 26, 2020, tescoplc.com. Online supermarket Ocado Retail reported in April a tenfold increase in demand and web traffic up to 100 times higher than prepandemic levels. 4 4. How Ocado works, "Service changes: How you're affected," blog entry, April 3, 2020, blog.ocado.com. And online growth could have been much higher, since consumer demand for online ordering has exceeded available supply throughout the crisis—and continues today in most markets.
Throughout the pandemic, about 15 percent of surveyed EU-5 consumers have shopped for groceries on a website that they had never used before. Among those consumers, more than 50 percent say they intend to continue shopping at their newfound site for at least some part of their grocery needs. Additionally, 12 percent of them have also switched to different grocery stores to take advantage of home delivery or click-and-collect services, both accessible via online ordering.
Throughout the pandemic, about 15 percent of surveyed EU-5 consumers have shopped for groceries on a website that they had never used before.
But not everyone has liked their online grocery-shopping experience. UK respondents have had the most positive experiences with online grocery ordering and delivery, with 33 percent of home-delivery users saying they are "very satisfied" and just 5 percent saying they are "strongly dissatisfied" (Exhibit 1). The United Kingdom has the most developed online-grocery market in Europe, with 6.5 to 6.9 percent overall penetration in 2020 (compared with 5.0 percent in France, 1.7 percent in Spain, 1.5 percent in Germany, and 0.7 percent in Italy), 5 5. Lii Bernovski-Smith, "Interim grocery channels forecasts: US, China, UK 2020," IGD Retail Analysis, May 2020, retailanalysis.igd.com; Jon Wright, "2020 grocery channel forecasts: France, Germany, Italy and Spain," IGD Retail Analysis, June 2020, retailanalysis.igd.com. so it isn't surprising that UK grocers were better placed to respond to surges in online demand. Other grocers simply didn't have the infrastructure to serve the surge of online consumers, and our research reflects the correlation between customer satisfaction and the ability to keep up with demand. In Italy, France, and Germany, only 13 to 16 percent of respondents feel very satisfied with their online grocery.
Furthermore, even some customers who are very satisfied with their online-shopping experiences say they view online grocery shopping as a temporary measure and plan to return to physical stores. Indeed, according to our September survey across EU-5 consumers, the only country where consumers expect to increase their online grocery shopping is the United Kingdom, with a net intent 6 6. Net intent was calculated by subtracting the percentage of respondents saying they expect to buy less from the percentage of respondents saying they will buy more for each category and type of channel. of +5 percent. Other consumers expect to reduce their online grocery shopping, with net intent of –1 percent reported in France, –10 percent in Germany, –12 percent in Spain, and –14 percent in Italy. That said, online sales are still higher than they were before the pandemic. A new subset of people who tried online grocery shopping during the pandemic have found that they enjoy it and will continue to use it. We thus expect the share of online sales to continue growing at a faster rate than it did prior to the COVID-19 crisis.
From a consumer-behavior perspective, we are very much still in the heart of the crisis. According to our September survey, 63 percent of EU-5 con­sumers say they aren't resuming "normal" (prepandemic) out-of-home activities while they wait for their governments to lift restrictions, for a vaccine to become available, or for medical authorities to deem activities safe. In the United Kingdom and Spain, 73 percent and 72 percent of the population, respectively, still isn't back to normal out-of-home activities, while in Germany, Italy, and France, the shares are 62 percent, 58 percent, and 51 percent, respectively.
What will this mean for the postpandemic grocery landscape? One implication is that the availability of delivery slots—so that consumers can order and receive groceries when they need them—will be critical to staying competitive. Grocers with an in-store picking model—in which online orders are fulfilled in the store for delivery or pickup—have found it easier than those without one to meet online demand and ramp up deliveries because the model's limited capital expenditures and shorter drive times allow for more flexibility. Online-only retailers, with no stores to deliver from, found it more difficult to meet the demand surge, although there are some exceptions (such as Italy's Cortilia, a food retailer that has continued to grow its fresh-food-delivery service).
With so much time at home, a focus on health—but also fun
Cooking from scratch and buying fresh products have been prevalent behaviors during the COVID-19 pandemic (Exhibit 2). More than half of EU-5 survey respondents—and up to 85 percent in some countries—report that a focus on healthy foods is a "very important" consideration in their weekly grocery shopping. The behavioral shift is particularly pronounced among (but not limited to) younger consumers. Among both Generation Z and millennial consumers, approximately 35 percent cook meals from scratch more often than they did prior to the COVID-19 crisis, as do 23 percent of Gen Xers and 17 percent of baby boomers.
EU-5 consumers were already conscious of their food choices before the pandemic, with 25 to 30 percent of UK consumers reporting in January 2020 that they had "very active" food goals or followed specific diets. 7 7. McKinsey consumer research, January 2020. During the pandemic, food has become even more central to consumers' lives. Home has been recast as the new restaurant, with heightened health consciousness (though with some allowances, since home is also the new pub and new center of entertainment, reflected in skyrocketing sales of baking products, alcohol, and snacks).
As consumer needs and preferences continue to change, the offerings from retailers and CPG companies will need to evolve as well. In times of economic and public-health distress, that might mean helping customers find inspiration for healthy, fun, and affordable meals that they can make from scratch.
As consumer needs and preferences continue to change, the offerings from retailers and CPG companies will need to evolve as well.
Value critical for price-sensitive consumers
About 25 percent of survey respondents report that their personal finances have been negatively affected by the COVID-19 crisis. And short-term forecasts indicate a recessionary environment, even as the overall macroeconomic forecasts show a vaguely U-shape recovery. Based on previous recessions, we expect price sensitivity to continue to affect retail. The current recession, however, has the added element of an increased amount of time spent at home, which has led to higher grocery sales. How extreme will the rise in price sensitivity prove to be?
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Our research shows that at the end of June 2020, consumers expected to further reduce their spending on all categories except groceries—where they expected to spend more, with a net intent of +4 percent. We are seeing that intention reflected in behavior that is more cautious, such as the increased use of shopping lists to reduce impulse buying. In June, 29 percent of UK respondents were shopping based on a list versus 21 percent in April; in Germany, the shares were 16 percent in June versus 6 percent in April.
When surveyed during lockdown, most consumers who had switched to cheaper versions of the products they usually buy said they were less likely to continue buying the cheaper versions after the lockdowns had lifted. But in our June survey, more consumers had traded down than hadn't in Italy and Spain. And we see a similar trend of trading down happening in Germany and the United Kingdom (Exhibit 3). It's likely that price pressure will intensify further, particularly on discretionary products (such as alcohol and premium fresh produce).
According to our September 2020 survey, UK consumers have traded down the most, with 33 per­cent of those who have changed their shopping behaviors reporting that they have switched to less expensive brands or stores or started buying items on sale. And 20 percent of UK respondents were already doing so before the pandemic. We see the most profound behavior changes in Germany, where just 6 percent of consumers were trading down in 2019 but 24 percent have done so in 2020 (Exhibit 4).
In June, a number of the surveyed EU-5 consumers (22 percent in Italy, 19 percent in the United Kingdom, 13 percent in France, 13 percent in Spain, and 7 percent in Germany) who had shopped at brick-and-mortar stores during the crisis had switched to a different primary grocer. And they did so mainly based on convenience, with 33 percent of consumers who had changed stores citing proximity as the main reason for doing so. The survey results also suggest that consumers may stay with their new stores if the price is right: 25 percent of those who had switched stores say they did so because of lower prices.
In September, the surveyed consumers were contin­u­ing to try out new retailers, with similar shares (19 percent in Italy, 17 percent in the United Kingdom, 13 percent in France, 11 percent in Spain, and 5 percent in Germany) reporting a primary-grocer switch. Consumers' motivations, however, had changed, with price as the primary driver: 28 percent of respondents who had changed stores cite better value as the reason, and 27 percent cite better prices and promotions. But location remains important, with 26 percent of respondents who had switched moving to a store closer to their homes. And the shares of respondents who are looking for more ways to save money when shopping than they did before the crisis are approximately 44 percent in Spain, 36 percent in both Italy and the United Kingdom, 27 percent in France, and 23 percent in Germany.
We expect that price will continue to take priority over proximity when choosing a store, especially in households facing economic pressure. We may thus see a shake-up among grocery players as they battle for consumer loyalty. For retailers, that means that now is a critical time to invest in retaining their newly gained customers.
Gains by big brands—may not stick
Within the CPG industry, small brands have had the lion's share of growth in recent years. In the United States, small brands accounted for 50 percent of value growth between 2017 and 2019, although they contributed just 11 percent of revenues in 2016. That growth was fueled largely by consumer preference for small brands' authenticity and uniqueness, with the help of investments from the venture-capital industry. In efforts to capitalize on the trend, large CPG companies have devoted significant attention and effort into building, acquiring, and incubating small brands—and have been increasingly successful in doing so.
But the COVID-19 pandemic has revived some large brands. In the first months of lockdowns, surveyed consumers in most EU-5 countries said they preferred well-known brands versus trying new, smaller brands (Exhibit 5). Availability was clearly a major reason: during full lockdowns in March and April 2020, large CPG companies were able to keep up with demand, while smaller players struggled to make products available because of supply-chain challenges and retailers cutting down SKUs. The big-brand revival, however, might be short lived. Early signs suggest that consumers' interest in small brands is returning. Across EU-5 markets, the net purchase intent of smaller or lesser-known brands was –9 percent in June, compared with –15 percent in March.
Over time, we expect small brands to return to their previous growth trajectory. Our survey results show that brand authenticity and provenance are increasingly important to consumers, and that will likely benefit the small brands that are resilient enough to weather the crisis. Some small brands won't recover, but others will continue to grow, and new ones will enter the market. Some large brands will also improve their growth profiles for the long term, in part by acquiring small brands.
A stronger sense of purpose
Consumers increasingly value retailers and brands with a purpose. While healthy food is still the main priority for surveyed consumers' weekly grocery shopping, consumers are also conscious of the values and purpose of the brands they are buying (Exhibit 6).
We have seen an increase in overall net sentiment across environmental and ethical product attributes as consumers have more choices about where to shop and what to buy. In Italy, net sentiment toward brands with strong values and purpose reached 49 percent in June 2020. And across France, Germany, Spain, and the United Kingdom, about one-fourth of respondents see brands' values as important. That sentiment has remained true through September, with 18 percent of respondents buying more sustainable and eco-friendly products, and 12 percent report buying more from brands based on their purpose than they did at the beginning of the COVID-19 pandemic.
During and after the 2008–09 recession, it was important for consumers that large companies prioritize social responsibility. A few years later, 70 to 90 percent of consumers in various countries said they expected corporations to operate in ways that align with society's interests, even if it meant sacrificing shareholder value. 8 8. Edelman Trust Barometer 2011, edelman.com. In the current crisis, early evidence suggests that the importance of social responsibility has accelerated for consumers. EU-5 survey respondents report strong intent to support local stores and brands that demonstrate care and concern for their staff and that use and promote sustainable solutions. Against this backdrop, retailers and CPG manufacturers should be ever-more mindful of their roles in society as responsible and purpose-led employers, providers of essential goods and services, and pillars of their communities.
In the current extraordinary times, consumer behaviors continue to change, and the themes we have discussed in this article will likely evolve in nuanced ways. CPG companies and retailers must closely monitor such changes. Their strategy, category-management, innovation, and consumer-insights teams should closely collaborate to develop price-point, brand, and category offers that address consumer needs in both online and offline channels. And finally, as the world works through the unprecedented humanitarian and economic crisis related to the COVID-19 pandemic, companies should reassess and strengthen their corporate purposes—and bring them to the forefront. The positive impact of purpose-led actions could last long after the pandemic ends.
Gizem Günday is a partner in McKinsey's London office, where Stijn Kooij is a consultant and Jessica Moulton is a senior partner; Marek Karabon is an expert at the Wroclaw Client Capability Hub; and Jorge Omeñaca is a capabilities and insights specialist in the Madrid office.
The authors wish to thank Steven Begley, Tamara Charm, Becca Coggins, Matthew Maloney, Steve Noble, and Tobias Wachinger for their contributions to this article.
This article was edited by Justine Jablonska, an editor in the New York office.
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