COVID-19’s Effects on the Consumer Packaged Goods Business

In the short run, the COVID-19 pandemic has changed the way Americans shop. Some changes may be longer-lasting, and to find out what those might be and how they could affect the consumer packaged goods (CPG) business, GLG spoke with Kevin Ryan, Founder and CEO of Malachite Strategy and Research. His CPG experience includes serving as Senior Brand Strategist at Amazon and Director of Strategy and Innovation at General Mills. The interview, edited for length and clarity, follows.

In general, where do you see things now vis-à-vis the pandemic and the CPG business?

Even though some states are starting to reopen, we aren’t going to flip a switch in May, June, or July and see everything return to normal. There will be pockets of the virus around for at least a year until we get a vaccine or herd immunity. Right now, a lot of CPG companies are just trying to stabilize their supply chains, maximize the production of their top-selling SKUs, and get stuff back on shelves. We’ll probably see some shortage issues until that gets resolved. Still, many sales records probably will be broken by the panic buying in March and April. For some, the very short term will look good, but there’s turmoil behind the scenes.

 Who is doing well right now?

The companies that benefited most from panic buying are commodity-based. Flour companies, for example, are doing great, as are canned goods and frozen food companies. Yeast sales – typically very low – have shown something like a 600% rise. Conagra, Campbell’s, and General Mills, as well as several smaller companies in the commodity space, will have a great year. In fact, we’ll likely see bigger companies buying some of those smaller companies over the next six months. Even in the longer term, producers of comfort foods, like Unilever, which makes a lot of ice cream, will probably do well because people will be home and want comfort. But producers of more novel products probably will have a tougher time because impulse buys will be down. Since e-commerce sites are built for spearfishing types of purchases, not for discovery or impulse buying, there is less chance people will bump into something new and decide to try it.

 Are CPGs cutting costs and, if so, where?

The biggest cuts have been in advertising; it’s pretty much on pause across the board as companies try to find their voice in this new realm. The other area is SKU rationalization. Many big CPGs realize that getting stuff back on shelves means cutting most lower-performing products and probably increasing the size of the big ones. Kraft Heinz is doing that with giant sizes of ketchup.

One positive in all this is that these big companies are becoming nimbler, cutting through all the accumulated bureaucratic red tape, and operating with smaller teams. I think you’ll see structural changes in many big companies if this lasts long enough. That said, what’s really saving several big CPGs is having the internal capacity to get things done. A lot of smaller companies use contract suppliers, over which they have little control.

How do you see e-commerce evolving for CPG companies?

This is the time for e-commerce to shine because more things are coming with click and collect, and greater numbers of older people, not just millennials, are shopping online. Since Amazon’s site can get overwhelmed, many people are turning to Target.com or Walmart.com, entering their credit card information, and shopping there. That’s why increases in online grocery shopping will likely continue after the pandemic subsides, probably doubling.

Where do you see private label penetration going?

Its share is increasing now because people aren’t as picky about brands and simply need things, so goods are flying off the shelves. It will remain larger because once people try a private-label brand for the first time and have a positive experience, they keep buying. We saw that after the Great Recession, and we’ll see it again. There’s lots of room for private-label growth. In Europe, it accounts for up to 50% of the total, and we’re not even close.

Any other long-term shifts you see?

Until the pandemic, many people were “circuit” shoppers, meaning they didn’t buy everything at one store, but maybe shopped at five stores over a week or two. In the short term, we’re seeing less of that. The big stores are the winners as buyers concentrate, but so too are some smaller stores in urban areas, like Trader Joe’s and many independents. Winning too are convenience stores, many of which are turning into mini grocery stores. They sell a lot of private-label merchandise, and customers don’t have to be in them very long; I can see them becoming little hubs of e-commerce pickup. I also see a massive amount of innovation coming from CPGs in ways to help people cook and to provide restaurant-style meals at home. One possibility: As restaurants go out of business, there will be a lot of “ghost kitchens” available to put meals together. Will some CPG brands partner with restaurant chains to do that? Maybe.


About Kevin Ryan

Kevin Ryan is currently the Founder and CEO of Malachite Strategy and Research, a CPG-focused insights and innovation agency. He previously was employed as a Senior Brand Strategist at Amazon.com, Inc., overseeing the strategy for Prime, Echo, and several retail brands. Prior to Amazon, Kevin was a Director of Strategy and Innovation at General Mills.


This article is adapted from the April 17, 2020, GLG teleconference “CPG Industry Update: COVID-19 Implications.” If you would like access to this teleconference or would like to speak with Kevin Ryan or any of our more than 700,000 experts, contact us.


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