NielsenIQ investigation: ‘Pandemic pantries’ pressure supply chain amid COVID-19 fears


NielsenIQ investigation: ‘Pandemic pantries’ pressure supply chain amid COVID-19 fears

When COVID-19 became a global pandemic, consumer behavior changed: Shoppers became more willing to spend in the name of value, health, and convenience. 

As retailers increase their reliance on e-commerce to keep their shelves stocked, NielsenIQ looks at the implications of this on future sales, and how changing consumer priorities could shape retail trends and supply chain logistics going forward.

Increased demand for emergency supplies

Consumers around the world are actively stockpiling emergency supplies as concerns grow that the novel coronavirus (COVID-19) could become a worldwide pandemic. They’re also starting to think beyond emergency items, such as basic foodstuffs, including canned goods, flour, sugar, and bottled water. Concerns are having a ripple effect into non-food essentials as well. In the U.S., sales of supplements, fruit snacks, and first aid kits, for example, are all on the rise.

NielsenIQ’s initial investigation across major countries around the world has found that significant spikes in the hoarding of emergency supplies is occurring in China, the U.S., and Italy, where consumers are rushing to build what are being labeled “pandemic pantries.”

Interested in more COVID-19 consumer insights? Visit our content hub.

Supply chain logistics tested worldwide

We expect the rush to stock up to have an almost immediate impact on supply chains for manufacturers of the most sought-after goods. Stocks of hand sanitizers and medical face masks have already dried up in some markets, with no clear indication of when supplies will be replenished. In Malaysia, sales of hand sanitizers hit almost RM1 million (US$237,176) in  the week ended Jan. 26, 2020; that’s more than 800% above the weekly average. And in the U.S., Department of Health and Human Services (HHS) Secretary Alex Azar told lawmakers last week that America could need up to 300 million protective face masks—that’s 270 million more than the current supply. NielsenIQ measures of San Francisco drug stores indicate that year-to-date sales of medical face masks as of the week ended Feb. 22, 2020, have already exceeded that of the entire 2019 year, demonstrating the strain high demand has put on supply chains.

Comments by the HHS and the U.S. Centers for Disease Control and Prevention (CDC) during a press conference led by President Donald Trump on Wednesday, Feb. 26, noted that an escalation of the virus is a real possibility. The news came as the president considered tougher immigration measures to prevent non-U.S. travelers entering from affected countries. Then on Friday, Feb. 28, the World Health Organization (WHO) raised the global coronavirus risk level to “very high.”

In Italy, where the WHO has reported more than 1,120 cases, a NielsenIQ consumer survey found that only 17% of Italian consumers are concerned about the virus and the possibility of a widespread epidemic. That’s not to say the Italian public isn’t monitoring the situation, as 94% of consumers say they check for news updates at least once a day. Additionally, there is a high level of confidence that the outbreak will be contained at the national level, largely due to the proactive efforts of consumers to wash their hands and prevent the spread of germs when coughing and sneezing. In Italy, sales of hand soap are up 29% and sales of thermometers are up 24%.

E-commerce remains poised for growth

NielsenIQ is also monitoring how the situation will affect e-commerce. While it’s too soon to detect any meaningful shifts in online purchasing in the U.S., we do expect online shopping to rise as people become increasingly interested in reducing their exposure to others, as the virus appears to be spread via coughs and sneezes.

By the end of 2019, U.S. online sales of consumer packaged goods (CPG) food products totaled more than $38 billion. Rounded down, that equates to an average of $732 million per week. Amid consumer concerns, we’ll likely see that figure poised for growth in the coming weeks. E-commerce may also be a factor beyond consumer purchasing. In China, for example small- and medium-size retailers are using e-commerce to keep their stores stocked, which wasn’t an option during the SARS (Severe Acute Respiratory Syndrome) outbreak 17 years ago.

“Because shopping behavior is so much different than during the SARS outbreak, and because the government started to control the issue sooner, we think the retail impact cycle will be shorter,” said Ryan Zhou, Vice President, Consumer Packaged Goods, NielsenIQ China. “Store sourcing is also much different today, and online suppliers have reacted very, very quickly by offering store owners, for example, mobile applications for sourcing orders. So online has really helped suppliers react and adjust their supply systems in ways that didn’t exist during SARS.”

It’s a fluid time, and retailers are balancing keeping enough of the most sought-after supplies on their shelves with making contingency plans for longer-term gaps in their product portfolios. Fresh foods, for example, will face challenges as shoppers steer away from anything that may have traveled long distances, such as fruit and vegetables, or may have been exposed to the airborne virus. We also expect products that come off factory lines or go through distribution systems in impacted countries to face challenges.

In a NielsenIQ roundup of the coronavirus impact, here are five key topics we’re tracking.

Tracking the impact of the spread

At the start of March, the WHO had identified more than 88,900 confirmed COVID-19 cases globally, with more than 80,000 in China. The virus has spread to at least 65 countries, with South Korea, Italy, Iran, and Japan among those with most cases regionally. The impact for FMCG manufacturers and retailers is ongoing, and NielsenIQ will be providing regular updates.

Staying healthy

Given that the coronavirus is believed to spread like the flu, demand for health-protecting and health-safety items is rising rapidly. Store shelves in Taiwan, China, and Japan are void of bleach, hand sanitizer, toilet paper, and cleaning pads, while 47% of consumers surveyed in Vietnam say they have changed their eating habits in reaction to the virus.

We’re starting to see similar sales trends in the U.S. During the four weeks ended Feb. 22, 2020, medical mask sales were up significantly (319% dollar growth and 378% unit growth). Hand sanitizer sales are up 73% in the same four weeks, but we can project, based on trends elsewhere, that sanitizer sales won’t peak for some time.

Regionally, the West Coast is definitely leading the growth of medical mask sales. Specifically, drug stores in the Los Angeles and San Francisco metropolitan areas have posted year-to-date dollar growth of 340% and 541%, respectively, compared with this time in 2019. Across mainstream U.S. outlets across the country, medical mask sales are up 239% year-to-date.

Preparing the pandemic pantry

Beyond health preparedness, U.S. consumers aren’t waiting until it’s too late to stock up on shelf-stable essentials, which parallels what we’ve seen in other regions. In Vietnam, 45% of surveyed consumers say they’ve increased what they’re stocking at home, and 25% are buying more items online. And in Taiwan, instant noodles have become a rarity on the shelves at physical stores. The U.S. may experience similar trends if recent sales are an indication of what’s to come.

Passing on produce

As consumers assess their purchasing decisions around what can be stored for long periods and what cannot, there’s little doubt that buying will shift toward shelf-stable and frozen options. In January 2020, produce departments in the U.S. garnered average weekly sales of $1.18 billion. Those sales are clearly at risk in the coming weeks, but “pantry produce” (frozen and shelf stable) could fill the gap if positioned to consumers properly. For example, frozen fruit sales were up 7% in the week ended Feb. 22, 2020.

In the immediate term, it’s not surprising that manufacturers and retailers are keeping a close watch on products aimed at keeping consumers healthy, including sanitizers, vitamins, and medical masks—or that sales of these items are on the rise. Through the lens of CPG, concerns about the coronavirus will lead to increased sales across an array of adjacent categories.

Thinking beyond the bug

In the U.S., sales of aerosol disinfectants, for example, were up 19%, while air cleaners and purifier sales were up nearly 3% in the week ended Feb. 22, 2020. Longer term, we expect similar ripple sales in hand and body lotion—simply because an increased focus on hand washing and disinfecting will have a negative effect on skin.

As this global health crisis continues to evolve, NielsenIQ will provide ongoing updates on the impact COVID-19 is having on consumer purchasing. Visit our content hub for the latest global consumer insights into the coronavirus outbreak.