Flour sales are up 73% as consumers making more food from scratch.
Photo: Gregory Rec/Portland Press Herald/Getty ImagesThe coronavirus crisis has brought massive shifts in how Americans buy and consume food. For America’s major packaged-food companies, which have struggled in recent years, that meant an unexpected upswing in sales. Now the question is which changes will last.
As social distancing took hold, yearslong trends away from highly-processed foods and toward niche brands seemed to suddenly have been thrown into reverse. Since the start of March, shares of General Mills, Conagra Brands and Kraft Heinz are all up by more than 20%. Campbell Soup is up 5%. The S&P 500 by contrast has gained only around 1% over the same period.
A closer look at how shopping trends have evolved over the course of the pandemic gives clues as to which companies will see a lasting benefit and which will revert to hard times.
The initial weeks of the crisis saw an intense “pantry-loading” phase as Americans stocked up on shelf-stable products. In the week ending March 21, sales of canned soup, boxed macaroni and cheese and beans all were up by more than 200% from a year earlier, according to Nielsen data. New Year’s resolutions also went out the window. In that same week, potato chip and ice cream sales were up 63% and 50%, respectively.
These surges in demand put pressure on supply lines. Grocery stores responded by allocating more shelf space to big, widely known brands, at the expense of upstart competitors who had gained ground in recent years. It all added up to a golden opportunity for America’s corporate food giants that had been struggling with shifting tastes and stagnating sales.
But these trends are unlikely to prove permanent. Already, the initial surge in sales of pantry and comfort foods is fading. In the week ending May 16, canned-soup sales were up a more modest 22% from a year earlier and potato chips by just 15%. This suggests Campbell, which specializes in both soup and snacks, may see less enduring benefit from the crisis than others.
Nielsen sales data indicates that consumers are now in a new phase of cooking more at home from scratch. In the week ending May 16, flour sales were up 73% from a year earlier, eggs up 42% and olive oil up 44%.
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There are many reasons to suspect that this trend may be more enduring. Families must economize as the U.S. enters a recession and unemployment has soared—perhaps more than in past recessions. Many people have effectively been forced to learn to cook. Companies are also now making more remote-working arrangements permanent, which means workers will be spending more time at home and thus preparing more meals there.
Sales of from-scratch ingredients are less lucrative to major branded food players, but some have better exposure than others. Spice-seller McCormick is an obvious winner of the home-cooking trend. Bernstein analyst Alexia Howard also points to General Mills, whose portfolio of brands includes Gold Metal flour and Pillsbury frozen and refrigerated dough. Conagra Brands, with Birds Eye frozen vegetables and Duncan Hines cake mixes, could be another beneficiary.
Finally, there has been a surge in grocery e-commerce, whether through home delivery or the “click-and-collect” model of curbside pickup. Here, the coronavirus outbreak has acted as a catalyst for an inevitable long-term trend. This has also worked to the benefit of big brands that can afford to bid up in auctions for top slots on Amazon and Walmart’s pages, says Bernstein’s Ms. Howard.
Stores relying on “click and collect,” or with professional shoppers from services like Instacart crowding their aisles, are finding that they have to keep even more of the most popular, high-turnover items on the shelf to meet demand. Some companies have also simply done a better job preparing for the new e-commerce age: Ms. Howard estimates that just 2% of Campbell’s total sales, including soups and other items like snacks, are through online channels.
The trend toward healthier and fresher food hasn’t been halted. People may be preoccupied with virus concerns at the moment, but other health risks such as diabetes and heart disease will soon be top of mind again for many. Nor have consumer tastes been magically dialed back decades. America’s food companies have been given a financial windfall and a chance to reset their relationships with major retailers. Now they need to capitalize on the moment by boosting investment in innovative and updated products as well as marketing and distribution capabilities suited to the online future.
The coronavirus splurge provided a rare second chance, but for some it will add up to a lot of empty calories.
Write to Aaron Back at aaron.back@wsj.com
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