- Home food consumption is expected to decline during the next 18 months as consumers return to more normalized spending patterns, Moody's said in an Oct. 28 report emailed to Food Dive.
- The firm said starting in 2021, sales and earnings will decline as food companies struggle to match strong retail sales brought on by the pandemic this year. But Moody's said the decline should be short lived. "The residual benefits from the pandemic, especially for large packaged food companies, will support solid earnings growth for 2022 and beyond," the firm said.
- After struggling for years as consumers moved away from processed foods, the pandemic has resulted in a surge in sales for large CPG companies who have seen high-demand for many of their iconic offerings. As shoppers stockpile food and spend more time at home, many manufacturers have benefited, with businesses struggling to keep up with demand at times earlier this year.
While there is uncertainty as to when the coronavirus will be brought under control, when it does CPG companies will find it tough to match the favorable sales figures posted in 2020. Not surprisingly, with consumers spending less time at home, demand is likely to decline for popular items such as soups, pasta and frozen foods.
But Moody's said that some of the "benefits accrued during the pandemic will be lasting, including shifts toward at-home meal consumption, expanded distribution and increased household penetration — even as consumption trends revert unfavorably toward restaurant dining." Restaurants operating under restricted capacity in particular will continue to fuel at-home demand, Moody's said.
Early on during the pandemic, consumers stockpiled everything they could, providing a much-needed boost for center store staples that were out of favor. At one point, all of Kraft Food's U.S. factories were operating 24 hours a day, seven days a week to produce Kraft Macaroni & Cheese, Philadelphia Cream Cheese, Heinz Ketchup, Maxwell House coffee and Oscar Mayer hot dogs. Mondelez said it experienced "unprecedented demand" for its snack offerings in April.
The fact that more consumers are turning to recognizable brands for comfort may not be new, but the pandemic has changed eating habits and made these offerings more deeply engrained in the lives of many people.
More than four out of five consumers said the pandemic pushed them to cook, consume, buy and think about food differently, according to the International Food Information Council. It's possible that consumers have become reacquainted to brands that were once part of their usual shopping trips. Even though they are unlikely to dislodge fresh and better-for-you food that were popular before the pandemic — especially with momentum for healthier eating intensifying during COVID — it's possible these brands have gained much-needed recognition to help spur future growth.
As grocery retailers replenish store shelves, they are returning to more normal product assortments that will include more niche brands and store-branded products, Moody's said. "Meanwhile, the big food producers will be resuming launches of their newest, best product ideas this fall in order to hold onto as much of their market share gains as possible," Moody's said.
George Vindiola, vice president of research and development at Campbell Soup Company's snacks division, said in September that balancing short-term production and sales with long-term growth is a challenge for any company, particularly those mired in the uncertainty and complexity of the coronavirus.
"It's definitely getting sales in the present and building for the future with innovation," he said. "If you look at it from a purely efficiency standpoint that might not be the most efficient approach, but you do need to balance those future growth aspirations and that's why Campbell has continued to innovate during this time."
Moody's didn't mention specific food companies by name, but it stands to reason that large CPGs such as Kraft Foods, Campbell Soup, Conagra Foods, B&G Foods and General Mills, as well as private label manufacturer TreeHouse Foods will be some of the long-term beneficiaries. To be sure, food companies will soon find themselves back to where they started before the pandemic in that innovation and nimbly responding to trends will be key for them to attract and keep customers.