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Coca-Cola recovery continues as it grows leaner in pandemic

Coke-Facebook-delivery-360x203Coca-Cola measured gradual improvement in the third quarter as it focused on emerging leaner from the global pandemic.

Revenue fell 9% to US$8.7 billion, edging out Wall Street expectations of $8.4 billion, according to analysts polled by FactSet. It was far better than the 28% drop in revenue in the second quarter.

Net income was $1.7 billion. Earnings, adjusted for one-time items, fell 2% to 55 cents per share. That also outpaced analyst forecasts of 46 cents.

Coke has been decimated with the closure of arenas, restaurants, theatres and other public places where it books about half of its revenue.

It has been making up for some of that damage as people buy more beverages, such as orange juice, at home. However, sales of sparkling soft drinks fell 1% in the July-September period; sales of trademark Coca-Cola grew 1% for the quarter. But other beverages struggled. Sales of enhanced water and sports drinks dropped 11% and tea and coffee sales were down 15%, hurt by closures of Costa retail stores.

So far this month, sales based on unit cases are seeing single-digit declines compared to last year; in April, those sales were down 25%.

Chairman and CEO James Quincey said the company had accelerated a planned reorganization that would put more emphasis on fast-growing brands.

In August, the company began offering voluntary buyouts to around 4,000 people, which it hopes will reduce the number of people it eventually lays off. Coke is reducing the number of individual business segments from 17 to nine.

Coca-Cola Co. also announced last week it was retiring several products this year, including Tab, Zico coconut water, Diet Coke Fiesty Cherry and regional offerings such as Northern Neck Ginger Ale. In July, the company announced it would retire Odwalla juices.

Coke plans to reduce its brands by half, to 200.

Coke said it would use the savings to invest in growing brands like Minute Maid and Simply juices and fund the launch of new products like Topo Chico Hard Seltzer, Coca-Cola Energy and Aha sparkling water.


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COVID-19 can remain on bank notes and glass surfaces for 28 days: Study

Research emphasizes the importance of hand washing and stringent in-store cleaning regimes

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Coronavirus may remain for weeks on bank notes and glass surfaces, such as touchscreen, according to new research from the Australian Centre for Disease Preparedness.

The study, which set out to examine the “effect of temperature on persistence of SARS-CoV-2 on common surfaces” shows the virus is “extremely robust.”

Polymer bank notes (like the ones used here in Canada), de-monetised paper bank notes and common surfaces, including brushed stainless steel, glass, vinyl and cotton cloth were used as substrates in this study.

The research showed SARS-CoV-2 can survive  for 28 days on smooth surfaces, such as glass on mobile phone screens or self-checkout touchscreens, and plastic banknotes, at room temperature (20 degrees Celsius/68 degrees Fahrenheit), compared to 17 days survival for the flu virus.

According to the scientists involved in the study, “These findings demonstrate SARS-CoV-2 can remain infectious for significantly longer time periods than generally considered possible. These results could be used to inform improved risk mitigation procedures to prevent the fomite spread of COVID-19.

“While the primary spread of SARS-CoV-2 appears to be via aerosols and respiratory droplets, fomites may also be an important contributor in transmission of the virus.”

In essence, these findings reinforce the importance of hand-washing or using hand sanitizer (with at least 60% alcohol) after handling cash, opening doors, using an ATM, self-checkout machines or entering a PIN at checkout: All best practices for c-store operators and shoppers. In addition, the research emphasizes the importance of cleaning commonly touched surfaces, including door handles, fridges and freezers. countertops, ATMs, fuel pumps, car wash equipment and debit machines.


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Front-line retail workers call for the return of COVID-19 pay bump as cases spike

ShutterstockCalls for the return of hazard pay are mounting as workers on the front lines of Canada’s retail industry grow increasingly anxious amid rising COVID-19 cases.

While some companies, including major convenience players in Canada, offered so-called hero pay to essential workers at the outset of the pandemic, most wage premiums ended as the first wave ebbed.

Yet retail workers say morale is lagging as COVID-19 cases spike across much of the country.

Without a pay bump that recognizes the risk of working during a pandemic, they say workers are increasingly calling in sick – leaving fewer staff to enforce rules around mask-wearing and physical distancing.

Some companies have pre-emptively addressed the issue.

Lowe’s Canada said this week it plans to pay a discretionary bonus to all eligible Lowe’s, RONA and Reno-Depot workers.

The Boucherville, Que., home improvement retailer said full-time staff will receive $300 later this month, with $150 for part-time staff. The October bonus is in addition to bonuses paid in March and August, and $2 per hour wage premium paid from April to July.

The Home Depot Canada said it has implemented paid sick leave benefits and is providing workers with an ongoing weekly bonus – $100 for full-time workers and $50 for part-time workers.

Meanwhile, Chapman’s Ice Cream recently made its $2 an hour pandemic pay raise permanent.

Ashley Chapman, vice-president of the Markdale, Ont., company, said the wage top-up was initially conceived as “danger pay” to help get workers back in the door after a two-week shutdown last spring.

But he said given the rising cost of living, making the pay increase permanent for the company’s 750 workers was “the right thing to do.”

“It was an easy decision for a family-owned business to make,” he said, noting that he doesn’t think it’s fair to compare the ice cream maker to larger public companies.

“Everybody who owns shares in our company has the last name Chapman.”

Making the pay bump permanent is something unions across the country are calling for, arguing that the wage premium not only recognizes the ongoing threat of COVID-19 but also pays workers a living wage.

Yet some retailers have argued that they are now operating safely in a “new normal.”

In a June statement, Loblaw Companies Ltd. chairman Galen Weston called it “the right time to end the temporary pay premium we introduced at the beginning of the pandemic.”

“Things have now stabilized in our supermarkets and drugstores,” he said. “After extending the premium multiple times, we are confident our colleagues are operating safely and effectively in a new normal.”

Many workers and unions disagree.

It’s a debate currently playing out in Newfoundland and Labrador, where 11 Loblaws stores under the Dominion banner are shuttered amid an escalating labour dispute.

It’s one of the first collective agreements to be negotiated in Canada since the start of the pandemic, and experts say it could serve as a forerunner for what to expect as other locals go to the bargaining table in the coming months.

Jennifer Green, a front-end cash supervisor at a Dominion in Conception Bay South, said 1,400 grocery store workers have been on strike for more than six weeks in an effort to obtain better wages.

She said without the COVID pay premium, she lives “paycheque to paycheque.”

“A lot of us were really struggling,” Green said. “But when we got the $2 an hour raise, we felt important.”

She said when the pay premium was cancelled, workers felt “sad and upset” and that going into work remained “nerve-racking.”

“It’s been stressful and at times scary,” Green said. “And it’s been really, really busy with online orders and extra cleaning.”

Loblaw did not respond to a request for comment.

Some retail workers have had to deal with aggressive customers, with videos surfacing on social media of shoppers challenging rules around masks and physical distancing.

UFCW Canada spokesman Tim Deelstra said some of the union’s members have been in “disgusting situations.”

“There have been screaming matches,” he said. “Some of our members have been spit on or attacked by members of the public.”

The union is calling for a pay bump to recognize the ongoing efforts and risks taken by front-line workers.

Amanda Nagy, assistant bakery manager at a Fortinos Supermarket in Hamilton – also a Loblaw franchise – said she’s worked throughout the pandemic but is now growing increasingly nervous.

“It’s really overwhelming when we see the number of cases rising every day,” she said. “Then we have anti-maskers come in or people who claim they have a pre-existing condition and don’t wear masks: It’s just a scary environment to be in.”

Nagy said at the outset of the first wave, many people were calling in sick. She said that changed when the pay premium was introduced.

“It’s just good for the morale to feel appreciated,” she said. “Otherwise we’re basically risking our lives at a job where we can barely make ends meet.”


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Liberals revamp rent relief for businesses as second wave threatens job gains

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The Trudeau Liberals sought Friday to get ahead of growing economic concerns linked to rising COVID-19 case counts, vowing new and revamped business supports to keep workers on payrolls and maintain job gains threatened by the pandemic’s second wave.

The government plans to provide direct rent support to commercial tenants at a projected cost of $2.2 billion through the end of the year, rather than flowing the money through landlords who were not keen on a previous version of the program.

A wage subsidy program will cover up to 65% of eligible costs through December, costing the treasury $6 billion over that time, and $11 billion more to a well-used loan program by providing an added $20,000, half of which would be forgivable.

Even though many businesses have reopened, a number are not at full capacity while others worry about surviving a second wave. Prime Minister Justin Trudeau said the government wants to help companies hang on, and keep their workers employed.

Job growth in Canada accelerated rather than slowed down last month, as the economy added 378,000 jobs in September, bringing overall employment to within 720,000 of pre-pandemic levels, and dropping the unemployment rate to nine%.

Still, there were 1.8 million Canadians unemployed in September, with about 1.5 million of them looking for work. Statistics Canada said the unemployment rate would have been 11.9% in September had it included people who wanted a job, but didn’t look for work, in its calculation.

The growth in overall job numbers for workers hit hardest by losses earlier this year, such as those in the service sector and visible minorities, are now at risk as local lockdowns loom, said Trevin Stratton, chief economist with the Canadian Chamber of Commerce.

Losses for those groups could further strain a K-shaped recovery, where some sectors of the economy and workers fare well, and others do not.

“Now that we’re entering this second wave, that’s where we’re seeing this split take place,” Stratton said. “We can’t use a one-sized-fits-all policy response to this.”

The government opted for targeted relief in this second wave to help companies most in need, said Finance Minister Chrystia Freeland.

The rent-relief program, for example, will cover up to 65% of eligible expenses for businesses, charities and non-profits on a sliding scale with income losses, with a top-up for those closed by public health orders that would cover up to 90% of costs.

“This is not for everyone. Some businesses are able to work at full capacity despite COVID-19 and they are doing well and that’s great,” Freeland said Friday.

“This support is not designed for them. These measures are targeted for those who need it most.”

While NDP small business critic Gord Johns was pleased with the new program, he urged the government to backdate funding so tenants in arrears or steeped in debt could get relief their landlords had refused.

Dan Kelly, president of the Canadian Federation of Independent Business, said it was critical for federal and provincial governments to immediately get the welcomed economic supports to affected firms with closures seemingly imminent.

Threatened by surging case counts are gains for restaurant workers, whose industry saw a 72,000 increase in September. That is still 188,000 jobs shy of where it was in February before widespread closures of non-essential businesses.

With winter on its way, outdoor dining may be impractical in some cities, leaving fewer patrons at local bars, pubs and restaurants, even as Canadians are already planning on cutting spending in the area, Statistics Canada said.

“One of the key questions isn’t just what happens in areas like the restaurant industry, but whether the jitters that might show up there spread over to the broader economy,” said Brendon Bernard, an economist with job-posting website Indeed.com.

There are also jitters over the state of the “she-covery,” which in September seemed to catch up with the “he-covery” as mothers and fathers had employment levels that matched what was recorded pre-pandemic as their children went back to school.

Statistics Canada noted a greater share of mothers than fathers worked less than half their usual hours in September, and a higher percentage of mothers than fathers reported working from home in the month, suggesting childcare responsibilities were still falling on women.

Economist Armine Yalnizyan with the Atkinson Foundation said school and daycare closures since the labour force survey was taken suggest October’s figures may reverse some gains, and noted a year-over-year drop in the number of women in the workforce likely linked to the pandemic.

“Gender equity in the labour force is poised to go backwards by decades,” Yalnizyan said, adding that stopping that “really does depend on what our public policies are.”


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Canadians divided over whether to let pandemic disrupt Halloween, holidays: Poll

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Canadians are divided about whether to let the COVID-19 pandemic disrupt their plans for upcoming holidays and seasonal events, a new poll suggests.

The poll, conducted by Leger and the Association for Canadian Studies, comes as COVID-19 cases are surging and public health authorities are pleading with Canadians in places with rising case counts to avoid contact with anyone outside their immediate families or at least to stick to small social circles.

The results suggest that message is only partially getting through.

Respondents with children who went door to door for Halloween last year were closely divided on whether to let them go trick-or-treating again this year, with 52% saying they won’t and 48% saying they will.

The poll found sharp regional variations, however. About two-thirds of respondents in Atlantic Canada, which has been relatively untouched by COVID-19’s resurgence, said they will let their kids go out. In harder-hit Ontario and Quebec, two-thirds said they won’t.

Those kids who do go trick-or-treating will find slimmer pickings, with 49% of respondents nationwide saying they won’t open their doors this year to hand out candy.

Again, Atlantic Canadians were more likely to say they’d give out treats; in Ontario and Quebec, trick-or-treaters seem set for sparse pickings. In Ontario, 24% of respondents said they’ll give out treats. In Quebec, just 13%.

Respondents were also divided about celebrating Thanksgiving this coming weekend, with 40% of respondents saying the pandemic is causing them to change their plans _ and an equal percentage saying it is not. Another 20% said they don’t usually celebrate Thanksgiving in any event.

As for the Christmas holiday season, 49% said they’ll change their plans, 44% said they won’t. Another 8% said they don’t usually celebrate that holiday.

Those who intend to change their plans were asked to describe how. They were allowed to give multiple answers: 74% said they’ll celebrate with close or immediate family members to keep their social interactions to a minimum, 54% said they’ll limit celebrations to a smaller number of visitors, 40% plan to issue strict instructions against kissing, hugging or handshaking, and 37% plan to avoid air travel.

Meanwhile, 30% said they’ll hold virtual celebrations and 25% said they won’t attend religious services or celebrations they would otherwise have gone to. Nineteen% said they plan to cancel celebrations altogether.

The online poll of 1,523 adult Canadians was conducted Oct. 2 to 4. It cannot be assigned a margin of error because internet-based polls are not considered random samples.

Almost three-quarters of respondents – 72% – said Canada has already entered the second wave of the pandemic, up 10 points since just last week.

There was less division over how governments should respond to the second wave of the deadly coronavirus that causes COVID-19.

In fact, 53% said high-risk businesses and activities should be shut down while others should remain open for the time being. Another 28% said as many businesses as possible should be kept open while we see how the second wave progresses, while 14% favoured a near-total lockdown similar to that imposed last spring.

Fully 85% said they’d support shutting down bars, nightclubs and casinos, while 74% would support shutting down movie theatres and all amateur sports, including school sports.

And, 67% would back shutting down places of worship, 61% interprovincial travel, 52% schools and universities, 52% visits to long-term or personal care homes, 47% parks and playgrounds, 46% restaurants and offices, 44% shopping malls and 33% retail stores.

 


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How to prevent disruptions in food supply chains after COVID-19

By John G. Keogh, strategist, advisor, academic researcher, University of Reading

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Almost all businesses involved in the food supply chain have experienced effects ranging from a mild shock to severe disruptions during the COVID-19 pandemic, and further disruptions may be ahead during the second wave.

Yet not all organizations have learned critical lessons, and history shows us some companies are destined to remain unprepared for the next waves.

Many companies have taken decisive action to survive the pandemic and enhance their supply chain resilience. In doing so, they are protecting their interests and those of their business customers or consumers. We believe that successful firms are taking what’s known as a systems thinking approach to enhance food supply chain resilience.

In the systems engineering world, systems represent the interconnected complexity of ecosystems that are connected both internally and externally.

For example, a food production business is connected to numerous ecosystems internally and to those of their suppliers, business partners and customers.

Businesses have varying degrees of inter-dependence on infrastructure ecosystems outside of their direct control, such as the power grid, telecommunications and internet service providers. Other ecosystems include banking and insurance, logistics and technology providers and various levels of government that provide inspections, permits and approvals.

The cascading consequences of an outage, failure or cyberattack in any one of these interconnected ecosystems can be catastrophic for any food business.

Snowball to an avalanche

When a seemingly small disruption occurs within a company – such as a production line stoppage – the impact may be felt far and wide in the food supply chain. We can view a disruption like a tiny snowball that starts to roll down a mountain and may result in a catastrophic avalanche.

Disruptions can result from actions or decisions of individuals, departments or organizations. For example, in Canada, the government food safety inspectors union, citing health and safety concerns, refused to allow its members to enter meat-processing plants experiencing COVID-19 outbreaks.

Like the aforementioned snowball, this decision contributed to a disruption – the plant’s closure – with complex, unintended and potentially devastating outcomes and far-reaching implications, including domestic beef supply and exports. The outbreaks in geographically concentrated meat-processing plants in Alberta resulted in approximately 75% of the Canadian beef supply going offline when three Albertan facilities closed temporarily.

That disruption sent ripples through food services and grocery businesses nationwide and resulted in consumer concerns about food security and increasing prices.

It’s been noted that Canada’s failure to invest in and adopt digitalization accounted for 85 per cent of the technology investment gap between the United States and Canada, and has contributed to Canada’s lagging productivity. When that lack of digitalization is coupled with poor interconnectivity among supply chain ecosystems, it results in food uncertainty concerns.

Food uncertainty is knowing we have enough food but without the visibility to know where it is in the supply chain. These concerns have led to calls for enhanced supply chain resilience through digitalization.

Avoid internal silos

To enhance food supply chain resilience during the pandemic, companies should be using systems thinking to consider the unique requirements of food supply subsystems (livestock, for example) and to prepare for potential systems shocks in these interconnected ecosystems.

We believe it’s vital to look through a systems lens to understand how future food chains should interact and how risk should be managed. This is particularly critical as we confront a second wave of COVID-19 and the threat of additional disruptions.

Many organizations have internal silos that barely communicate with other divisions or subsidiaries often dependent on their decisions or output. Using the metaphor of the snowball, without an adequate avalanche detection system, organizations are at a higher risk of a shock or significant disruption.

That’s mainly because timely, actionable information is not being captured and shared within and across organizations, and because no one has contemplated the potential cascading consequences of interconnected system failures.

Digitalization and systems thinking

Systems thinking can help organizations to visually map their business’s ecosystems landscape. Once this is done, they can examine or simulate where a failure or system shock may come from.

A business should assess its foundational requirements as it determines how to use technology to provide early warnings of potential disruptions.

When businesses apply advanced or predictive analytics tools, such as artificial intelligence and machine learning, these tools can provide invaluable pre-alerts of potential disruptions before they happen, and allow for a course correction. This is akin to GPS warning a driver of an obstacle on the road ahead or traffic congestion with a suggested change of route.

In the figure below, we build on 2013 empirical research from logistics scholars John R. MacDonald of Michigan State University and Thomas M. Corsi of the University of Maryland by visualizing these advanced warning systems that we call tripwires and circuit-breakers.

The circuit-breakers are analogous to the GPS providing a suggested change of route _ they help companies correct a disruption before it cascades out of control. For example, closing a food-processing plant for sanitization purposes to address an outbreak is a circuit-breaker intervention.

Advances in technology require organizations to continually adapt to new ideas, innovations and methodologies. There is no doubt that many businesses employ brilliant people and technologies, and they just work fine in everyday situations.

Unfortunately, we’re living in an unprecedented era of social and economic turmoil and must react accordingly with a strategic, holistic, agile systems view. For food chain resilience, that approach must include integrated early detection alerts and rapid course-correction capabilities.

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This article was co-authored by Karen J. Hand, founder and president of Precision Strategic Solutions in Guelph, Ont., and Carl “CJ” Unis, systems engineer at Sandia National Laboratories in Albuquerque, N.M.


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With trick or treating in doubt, experts say Halloween sales could be weak

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A Halloween night that falls on both a Saturday and a full moon would normally be ideal for spooky festivities, driving up sales of candy, costumes and decorations.

But with cases of COVID-19 on the rise, experts expect retailers to see soft demand for Halloween supplies as plans are scaled back and trick-or-treating is questioned altogether.

They add that sales related to the spooky celebration may also serve as an indicator for what retailers can expect this Christmas, the largest shopping season of the year.

Farla Efros, president of HRC Retail Advisory, says Halloween is a significant portion of business for many retailers and candy makers.

She says the lack of gatherings, office parties and trick-or-treating could lead to soft sales for retailers from grocers to specialty Halloween pop-up stores.

Retail analyst Bruce Winder says families and friends might plan their own “bubble Halloween” like a backyard celebration or scary movie night.

He says while people will still buy some candy, decorations and costumes, it likely won’t be as profitable a season as usual for retailers and candy manufacturers.


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The ‘homebody economy’ and changing consumer habits

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The fast-moving consumer goods (FMCG) industry experienced significant and prolonged lifts in sales across most categories as COVID-19 spread and drove people into weeks of lockdown. Their lives quickly became centered on the home (whether they liked it or not), and the so-called “homebody economy” was born. In Canada, year-to-date we have seen an explosion in sales with FMCG dollars seeing growth of 12.6%. To put it in perspective, that is 2.7 times higher than total FMCG growth in 2019 in Canada. Sales across many categories that fed this trend remain stronger than in pre-COVID conditions; after all, we’re eating more meals at home, and spending more time in our homes, resulting in everything from paper towels to garbage bags and cleaning products being in high demand.

While value and volume growth was inevitable for many FMCG categories during lockdown conditions, that growth may not be sustainable as economic challenges overtake health concerns. The global economy and the behaviours of consumers within it face escalating levels of change.

Unemployment will be a significant driver of this change. For some consumers, furloughs will turn into unemployment; for others, reliable employment may remain out of reach for years. Canada started the year with record low unemployment at 5.2%; however, by May it had more than doubled, spiking at 13.7%. June saw minor recovery to 12.4% with phased re-opening approaches across Canada. Even more telling across Canada is that 24% of households have had at least one person who has been impacted by job loss and/or furlough, and another 11% of Canadians are expecting impacts in the future.

Projections like these clearly highlight that consumers will need to recalibrate their spending habits. In other words, we may still be eating more meals in our homes, but what we eat and how much we’re able to afford will change, and that change may possibly last years. And it won’t just be food that changes. Consumers will completely reassess what goes in their shopping baskets.

And that means brands and retailers will need to serve consumers differently, and these are consumers with low confidence levels for economic recovery. Consider the likely shift to demand for more value-for-money products. For Canadians, buying on sale and in bulk are key saving strategies, with 79% using this saving strategy and 54% of shoppers buying larger sizes. However, these strategies will not work for everyone. Large multi-packs may offer the best value, but they may be out of reach for people short on cash. Cash-strapped consumers may be forced to buy smaller pack sizes, and brand loyalty across categories may fade.

Consequently, FMCG manufacturers are reassessing their portfolios to adjust. Similarly, retailers are looking at how to stay relevant to consumers who will have rapidly changing consideration sets. In the past, retailers could have performed these kinds of assessments with relatively ample time for testing. That is no longer the case. Changing retail channels are a case in point. Online adoption has taken just weeks to get to a tipping point that would have otherwise taken years. In Canada, online shopping was the fastest-growing FMCG retail channel, increasing 44% in the first quarter. Put in perspective, this is growing 3.5 times the rate of the total market.

Whatever the channel, it’s clear that getting assortment and pricing right will be key. So, too, will be packaging and brand claims. Consumers are looking for clear claims that highlight the benefit of the product. Not surprisingly, there is strong demand at all price points for products offering various health benefits such as immunity-boosting capabilities or germ-killing powers.

Wherever brands sit along the price spectrum, it will be critical that they shift as consumers reconcile their wallets with their shopping baskets. Keeping pace with those reconciliations will, of course, also be essential.

Originally published at Canadian Grocer. 


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Insights and lessons from pandemic snacking trends

Increased home time, family time, leisure screen time, stress and near 24/7 access to our pantries, have all translated into a rise in snacking, as Canadian consumers reach for treats and comfort foods

Screen Shot 2020-08-10 at 4.30.51 PMOther than checking my bathroom scale, there are broader metrics to demonstrate that consumers like me increased snacking during the lockdown.

In order to quantify these kinds of shifts in consumer spending in the United States as a result of the COVID-19 pandemic, market tracking company IRI recently launched its CPG Demand Index to measure weekly changes in consumer purchases, by dollar sales and channel.

IRI tracked an increase in total core snacking of +40% year-over-year (YOY) for the week ending March 15, and +34% for the following week. For the week ending April 5, snacking sales modulated, but still grew +7 YOY.

Results from a broad survey of consumers in the United Kingdom, conducted by supermarket chain Waitrose, revealed that nearly 40% of consumers reported an increase in snacking during lockdown. 

In turn, the Frito-Lay Snack Index, released at the end of May, found 85% of respondents said eating their favourite snack makes them feel normal, while 83% said their favourite summer snacks remind them of good times and nearly half (48%) said eating their favourite snack makes them feel happy. 

Bottom line is that increased home time, family time, leisure screen time, stress and near 24/7 access to our pantries, have all translated into a rise in snacking, as Canadian consumers reach for treats and comfort foods. 

 

Stocking up

In the third week of February 2020, the Dow Jones average was nosing 30,000 for the first time: This was the end of the longest bull market in recorded history. However, by the third week of March, the Index had lost more than one-third of its value, essentially wiping out the cumulative gains of 2017, 2018, 2019, and Q1 2020. As of this writing, markets have recovered somewhat to levels of early January 2018.

There have been some exceptions to this general trend. Shopify is a Canadian multinational e-commerce company, offering a proprietary software platform that facilitates retailers selling their products online and in stores. Shopify’s stock value has flourished during COVID-19, as most retailers scrambled to up their online presence. Between January to mid-March 2020, Shopify stock was up about 5%. Between March and May, Shopify’s stock value doubled, surpassing RBC as Canada’s most valued stock. 

Despite a precipitous drop in foodservice channel sales during the global lockdown, a number of large food companies have seen success. Mondelez, PepsiCo and Kellogg’s are all examples of bucking the trend and boats rising in a down market.

Mondelez reported organic sales growth of more than +6% for the first quarter of 2020, beating Wall Street estimates. Mondelez CEO Dirk Van de Put attributed the performance to the rapid growth in snacking due to shelter-at-home behaviours.

PepsiCo reported nearly +8% net revenue growth in Q1 2020, as consumers stocked up on beverages, salty snacks and other food items for at-home consumption. Key observations during COVID-19, include:

o   Shift to at-home consumption – growth in snacking during the day

o   Increased usage of large-format pack sizes

o   Shift away from immediate consumption

o   Increased purchase “basket size”—fewer shopping trips with a higher value

o   Increased use of e-commerce sourcing

The company is leaning into the changes in consumer behaviour and has developed a game plan, with an emphasis on snacking. While PepsiCo expects gradual improvement in sales at convenience and gas channels as people return to work, the company is also embracing an e-commerce strategy, launching two U.S.-based direct-to-consumer sites to capitalize on the growing appetite for snacks. Snack.com offers more than 100 Frito-Lay snack products, while PantryShop.com features multi-product bundles of Quaker and other brands to meet specific day-part and lifestyle needs

At Kellogg’s, North America financial reporting for the first quarter of 2020 showed organic sales rose 6%, with volumes up 5%. This largest driver for this growth was the company’s snacks segment, according to Amit Banati, senior vice president and chief financial officer.

Kellogg’s cracker sales jumped almost 40% versus a year earlier, while salty snacks and wholesome snacks rose nearly 30%.

“This consumption growth has been broad-based across our portfolio of brands,” Banati said. “From an occasion standpoint, we have seen less lift for on-the-go items and more growth for pantry packs”.

Opportunity to take share

Traditional convenience and gas non-fuel sales have been oriented towards impulse consumption—providing products that are consumed within an hour of purchase. Legislated changes to consumer behaviour have impacted the convenience channel significantly. 

The convenience business model is built on and grounded in consumer mobility, social activity and time scarcity. In a pandemic, virtually overnight, this evolved into immobility, isolation, CPG scarcity and boredom. Rather than getting from point A to B as fast as possible, fuelled by an on-the-run meal or snack, consumers’ priorities shifted to limiting retail trips, avoiding crowds, and eschewing public transit.

The great news for the convenience channel is that proximity plus offering consumers a streamlined retail experience have never been more important. As working from home and home schooling/daycare become entrenched as a kind of new normal for consumers, there is an expanded role for the convenience channel to play as a provider of pantry staples, meal kits, fresh produce, non-food cleaning/hygiene products and even office supplies.  

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Use your smarts

Symphony RetailAI, along with partner ROC Associates, use technology to optimize performance for gas/convenience, foodservice and grocery, drawing insights from their pool of retailers: Their findings are representative of thousands of stores and millions of households globally. 

Trusha Pandya, account director at Symphony RetailAI noted a number of trends emerging across the convenience channel as the effects of the COVID-19 pandemic unfolded.

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Data showed that, overall, c-store sales tracked improving week-over-week performance. At the outset of the lockdown, Symphony “recommended that convenience store retailers stock up on frozen and canned fruits and vegetables.” As the market gradually transitions into a new phase of the pandemic, Symphony is advising convenience retailers to renew their “focus on better-for-you and fresh options, (which should) also translate to snack categories.”

 Be a camel

In an article in The Globe and Mail, venture capitalist Alexandre Lazarow called for Silicon Valley to create a new model for a post-pandemic world. 

He notes that the tech world has spent the past 20 years trying to find the next “unicorn” startup. Unicorns are companies having seemingly unlimited potential, capable of growing from zero to more than $1-billion valuation in short order. 

Our current harsher, less stable market environment calls for a different approach. Instead of unicorns, the future will be “camel” startups that prioritize sustainability and resiliency.

Lazarow writes that the camel, “adapts to multiple climates, survives without food or water for months, and has humps to protect itself from the desert’s deprivations. Unlike unicorns, camels are not imaginary creatures… camels are survivors.” 

There will be bumps and impediments in the road ahead. As always, the ability to adapt to changing circumstances, and sustain your business through emerging challenges, will enable you to survive and flourish. Put simply, just like all of us in the face of COVID-19, be prepared to do what you need to do to live to fight another day.

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Darren Climans is a foodservice insights professional with close to 20 years’ experience partnering with broadline distributors, CPG suppliers, and foodservice operators. His practice is to understand issue-based decisions by taking a data-driven approach to strategic decision making.

 


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How will c-store foodservice rebound post-pandemic? 

As the country gets back to business (and school), Jeff Dover, president of fsSTRATEGY, shares 8 best practices for welcoming back hungry customers

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Foodservice is an increasingly important segment in convenience stores.  The impact of COVID-19 restrictions surrounding foodservice has been devastating for many foodservice operators.  As convenience store foodservice is almost exclusively eaten off-site, the impact on stores allowed to remain open has been relatively minimal.  However, foodservice at convenience stores must change to ensure continued success. 

  1. Customer comfort

Most consumers are eager to return to their normal lifestyles as lockdown restrictions are eased and eating food away from home is no exception.  The key to success will be having sanitation and safety practices for guests and employees visibly in place for those less comfortable with convenience store foodservice.  Word of mouth of such practices will result in more people comfortable with using your foodservice offerings.  Being known as “doing things right post-COVID-19” will help.  

2. Masks

Staff preparing and serving food should wear masks. Masks reduce the spread of pathogens from the wearer to others. Instead of plain masks, customize masks that are appropriate for your store (logos, patterns, etc.).  Staff could wear a button with a picture of their faces to provide some personalization, as hiding faces behind masks is counter-intuitive to service culture. Masks with smiles also allow this key aspect of service. 

 3. Wash and sanitize hands 

Prior to serving any food, staff should wash and sanitize their hands (and do so visibly in front of the customer).  Even though we are recommending that staff sanitize hands prior to service, food should not be touched.  Serving utensils should always be used and sanitized regularly.  

 4. No self-service

Ensure that all food is served by an employee.  Other than packaged foods, customers should not be self-serving. Unfortunately, this includes self-service of beverages—to the extent coffee, fountain and frozen drinks are served, machines will have to be moved behind the counter, at least initially. Quick service restaurants are also adapting to this change.  Despite a pre-COVID-19 move away from single-use cups, refillable beverage programs should also be discontinued.  Restrictions on self-service beverages and food will likely be lifted over time.

 5. Reconfiguring the foodservice area

Foodservice spaces need to be reconfigured to ensure proper social distancing is possible.  If not already in place, floor markings for those waiting to order and pay for their food, as well as direction of travel floor indicators, are recommended.

 6. Condiment stations

Similar to beverage stations, condiment stations will be eliminated, at least in the short term.  Cream, sugar, etc. for coffee should be provided and stirred by an employee. Other condiments, such as, ketchup, mustard, relish and hot sauce should be kept in individual packaged servings and provided by the employee with the food.  Employees should wash and sanitize their hands prior to handling the condiments. 

Condiments are more expensive individually packaged than in bulk. Employees tend to over-provide condiments to customers.  I recommend having employees confirm the number of condiments needed with the customer. 

 7. Menu selection

For the most part, food sold at convenience stores should be hand held.  Most convenience stores do not have a dining area. Menus should focus on food that can be eaten on the go.

The menu should also consider food that holds well.  It is important that food is prepared in batches that are likely to be sold before the quality deteriorates.  While prepared-to-order food and self-selecting of ingredients is becoming increasingly popular in foodservice operations, it does not work in convenience stores where employees are not dedicated to foodservice and must also focus on cashier and stocking duties.  Items should be easy to serve quickly.  Speed of service is important.

 8. Quality control

As mentioned, foodservice at convenience stores should hold well and be easily and quickly served.  However, it is important that quality is not compromised.  Customers will not return if they are served food that has deteriorated in quality or is not served at the correct temperature.  To be successful, food should be prepared in batches based on expected demand.  Forecasting demand is key.  Over-producing food that has to be discarded (and food should be discarded when quality deteriorates) is costly.  Similarly, you don’t want to lose sales if food is not ready when needed.

Food safety is also important.  Food should not be held in the “danger zone” of between 4.5 degrees and 60 degrees Celsius where bacteria grows at a rapid rate.  Temperatures of coolers and food in steam tables, etc. should be checked and logged regularly to ensure safety.

 

Screen Shot 2020-07-14 at 4.19.10 PMfsSTRATEGY is a consulting firm specializing in strategic advisory services for the hospitality industry, with an emphasis on food and beverage. Jeff Dover is based in Toronto and can be reached at 416-229-2290 ext. 2 or jdover@fsstrategy.com. 

This article originally appeared in the July/August issue of Convenience Store News Canada.