Interviews, insight & analysis on digital media & marketing

How the Coronavirus is speeding up changes in the FMCG sector

By Alex Rahaman, Owner, Shenorock Ventures and Chairman of Adimo.

It seems like an age since the first warning signs of the virus-that-shall-not-be-named started to emerge. And yet, it was just a few months ago the world was turned upside down. As we adapt to this, be it with quizzes on Zoom, virtual Grand Nationals and pub takeouts, multiple new patterns of behaviour have emerged. But what impact has this had on brand media spend, and will it be a lasting one? 

One sector witnessing monumental change is FMCG. Pre-pandemic, the online grocery market was growing at four times the rate of offline, with an estimated worth of $400million by 2022. Brand spend was increasingly digital, with a predicted global media ad spend in 2020 of $712.02Bn, up 7.4% in 2019 (pre Coronavirus). 

But you only have to look at the shifting landscape over the last three months to see just how much of an impact COVID-19 is having. In the months since the outbreak began, ecommerce sales have jumped 129% in the USA alone, with global ecommerce sales up 146% (as of April 21st). With retailers across the world struggling to meet surging demand levels, you’d be forgiven for thinking that brands would be scaling back their paid media activity during this time – when in fact the opposite is true.

Responding to change

In the four short weeks from February 17th to March 9th, ad spend from eCommerce sites doubled to $9.6million. When you consider that over 30% of consumers increased their online purchases in March alone, upping ad spend during this time is a very shrewd move – and there are plenty of CPG companies following suit.

With the Olympics postponed, Mondelez has re-allocated budget saved from sponsorship deals and trade programmes, and invested heavily in their paid media strategy. The company’s CEO, Dirk Van De Put described the pandemic as “a moment to really attack the market in the second half”; an approach that is paying off with 15.1% YoY growth across their snack brands in North America.

Amongst the brands investing in media to “retain mental availability” sit P&G. The cross-category giant is “putting its foot down” on media spend, to drive awareness in the minds of consumers, at a time where physical stock is in shorter supply. Joining them in this approach are Kraft Heinz, who as well as launching a Heinz DTC service, are continuing to plough an extra 30% into their paid media activity, despite the virus and its economic threat.

What about the future?

It’s no secret that retailers have been hit hard during this period. The effects of stockpiling on supermarket supply have been well documented in the media, with a surge in online demand resulting in virtual queues for many, before you’ve even managed to book an online delivery slot (which are like gold dust these days). 

Unprecedented shifts online have forced retailers to invest heavily (and quickly), to simplify the ecommerce experience and withstand increased demand. The recent expansion of Sainsbury’s Chop Chop 60min delivery service in the UK, and Walmart’s 2-hour delivery launch in the US, a signal that express delivery services will become a huge part of our lives post-pandemic – and more importantly that online is here to stay. 

The reality is, we have no idea what the future holds when it comes to COVID-19, but there are some observations I know to be true.

Before the virus came to be, growth in online grocery was doubling consistently YoY, and COVID-19 has only gone and accelerated this adoption. Consumers who once preferred a bricks and mortar store will now be all too familiar with the convenience that online shopping gives them. With online grocery becoming the new norm, retailers will have to maintain online capacity to stay competitive or risk losing customers to newer pure-play alternatives. 

So where is the opportunity?

Post pandemic, the world of ecommerce will be a very different place. Vastly increased volumes of shoppers will be spending not only more time online but more money too. The media industry has a real opportunity to react here and reposition its long-standing reputation by moving from primarily an awareness marketing tool to one that can also deliver performance.  

With retailer’s ecommerce capacity expected to keep growing, taking online grocery sales with it, this shift will create winners and losers in digital media. Those who blend quality creative and actionable ads with solid purchase data, will have a media strategy that not only performs but converts. Those who fail to seize the opportunity, risk missing the boat entirely.