As we are going through the time of social distancing and self-quarantine to cease the rapid spread of coronavirus, which has affected and killed many in India, consumers are stockpiling non-perishable food items including breakfast cereals. This has resulted in an increase in demand for eat-at-home like cereals and health bars. It has been observed that within a week after the lockdown many multinational companies of cereal brands have witnessed a high stock surge. These companies have been using non-perishable products such as Campbell soups and General Mills that take away all the woes of the consumers to stock up food-items for a longer period of time. These items are distributed to grocery stores and online retailers who are happy to stock up on these too as they are good for health and have a long shelf-life.
Companies need to scale up production
As the number of positive cases of COVID-19 keep increasing, it is also pivotal to learn that the food production is also threatened if the lockdown is extended after May 3rd. Though both local and international agricultural organizations have urged the government not to include farmers as part of those affected by the lockdown, it is also important to understand that the lockdown would affect everyone in the long-run if the disease is not contained. Production plans are frequently being changed based on consumer demand. Companies should take proactive precautionary measures to manage business continuity, including plans to help ensure that they have sufficient ingredients, manpower and logistical support.
Supply chain disruptions, a major roadblock
As per a survey conducted by the Institute For Supply Chain Management in March 2020, nearly 75 percent of companies reported supply chain disruptions in one form or the other due to coronavirus-related transportation restrictions, and the figure is expected to rise further over the next few weeks. With every passing day, the side effects of COVID-19 outbreak are felt more strongly and despite the unprecedented steps and cumulative efforts undertaken by governments, businesses and individuals to stem its growth, the virus continues to rampage unchecked across the globe, causing loss of life and hitting businesses across industries and verticals. KPMG in its report titled ‘Potential impact of COVID-19 on the Indian economy’, said, “The coming two to three weeks would be a testing ground on how supply chains are able to keep pace with this temporary rise in consumption.”
In the future we can expect that the companies will explore newer distribution channels focused on a direct consumer route. It has urged the government for easing manufacturing rules for essential commodities with faster clearance and adequate insurance coverage against extreme business disruptions. Even after the COVID-19 pandemic, social distancing and staying home are further expected to push the consumers towards online shopping as people will take some time to adjust with the behaviour they have been following for the last couple of months. At the same time, the uncertain consumer demand and supply chain issues will continue to affect the e-commerce industry. The COVID-19 pandemic issue can also affect big merchants, which are experiencing a drop in casual shopping, supply chain disruption, and an increase in purchases of essential toiletries, groceries, and other products. Over the e-commerce sector, KPMG said that there would be increased pressure on the supply chain. Another challenge for e-commerce companies is that they will need to equip their employees with appropriate resources to manage operations remotely with little or no disruption, it added.
Impact of prolonged lockdown on consumer behaviour
After Covid-19, the habit of stockpiling and panic buying around will extend beyond emergency items to grocery basics and essentials, such as canned goods, bottled water, toilet paper and cleaning products. Consumers will take some time to return to their normal way of buying things. As people will avoid going to crowded places even after the lockdown gets lifted there will be more focus on e-commerce systems. There will be a change in shopping behaviour as people will prefer buying online instead of visiting the stores. According to the experts, the behaviour of buying online products will last for the next six months. Consumer behaviour also depends on employment. As the lockdown has rendered many people jobless, the purchasing power of the consumer is surely going to take a hit. There will also be pent-up demand. Before the virus, people were eager to spend on experiences. During the lockdown, many have been forced to recreate some of that at home, but we expect some positive changes too as people didn’t just go to the gym for fitness but also socialization—and they will want to go out and gather again.
Industry’s recommendation from the Government
All these above-mentioned factors show that the quantum of production would go down substantially but the retailers have to ensure that at least there is food available on the shelves so that there should not be any panic buying in the market. It will take a while to streamline the entire ecosystem for the movement of essential goods. The local and central Governments have eased some of the big bottlenecks that the industry was facing for movement of raw materials, packing materials and finished products. It would certainly help in kick-starting the functioning of the supply chain.
At the same time, the government is asking people to stay at
home owing to the current situation and it will trigger a situation where we will shut down and then restart economic activity. This will have an impact on consumer demand as economic activity contracts. The government needs to chalk out a strategy for economic recovery and it may need a massive fiscal stimulus, because if the shutdown lasts beyond two to three weeks, it can result in a big economic shock. Unfortunately, this pandemic is likely to push the already stressed rural areas to the brink. Hence, we expect overall recovery to be delayed by at least two quarters.