The New Normal

One of our client partners asked us last week, “When or how long do you think it will take shopping behavior to normalize after a crisis like this?”. As innovation leaders we’ve been contemplating this question and what the balance of this year will look like for shoppers, consumers and our innovation clients. We believe there is a “new normal” that will last quite some time which begs the question… what does the “new normal” look like and what can we expect in the long term? Here are four points of view from the Mission Field core team.

• Jonathan Tofel has a point of view of optimistic-urgency on the state of CPG and the need to Battle Test™ new product innovation against the “new normal”

• Carolina Fryer sees a short-term shift to comfort foods with a resurgence towards healthier eating as our “new normal” set in and the initial panic subsides

• Caragh McLaughlin sees opportunities for new products if they can find deep connections with our current stay-at-home lifestyles

• Julie Beck has an eye on the retailer mindset and how they are likely to “pull” CPG innovations in a certain direction based on today’s experiences

Jonathan Tofel, CEO: I have two distinct points of view on what likely happens next to our industry and how it will affect CPG’s innovation efforts:

1) Consumer spending will stay high through the summer of 2020 as the “usage” of private label CPG products that were once consumed in offices, schools and away from home locations will now shift to almost exclusively branded entities for in-home consumption. This is different than a belief that consumers recently “hoarded” and there will be an impending lull in purchasing as they work through their stockpiles. Since half of most consumer’s waking hours had occurred away from home (e.g. kids in school, adults at work) and schools are not likely to resume until next fall – the usage of most every branded CPG category – from coffee to snacks and paper products to food -  will now continue to be used at home and will be shifted away from the non-branded, private label and commissary products that once filled quick serve food locations, office bathrooms and cafeterias, which means that some lucky brands will see *significant increases* in the consumption of those products. Then, once America gets back to work, I can imagine that the shock to the system will cause people to engage in new personal buying patterns driving continued strength for CPG companies but more likely weak spending for higher end discretionary categories (RVs, boats, electronics, etc.). All in all, I think consumer spending on CPG food categories will stay strong in the short term and continue to stay strong afterward.

2) CPGs are not well-served waiting for a return to normal to understand their innovation opportunities. The “new normal” is here, right now, and will be with us for a while. The overall shock to our economy and national psyche is going to result in a fundamental change in how consumers evaluate what matters to them in their consumption patterns, and CPGs have two strategies for testing their innovations against this new normal: either test your innovation against the “new normal” now and get on the front end of understanding what it means, or wait and play catch up. Once America gets back to work and school, consumers will have already settled into new buying patterns that will affect how CPGs must evaluate their innovations’ potential for 2021 and beyond. 

Carolina Fryer, Managing Director: Uncertainty breads a natural contraction – we spend less, buy less, start re-thinking savings plans and nest more. Add forced stay-at-home orders and we’re now in a new world order. I see two changes for CPG companies:

1) There will be a temporary increase in purchase and consumption of comfort foods that will rebound back to healthier choices long before we’re out of the Covid-19 issues. In the initial panic bulk buying in March, we saw consumers doubling down on heritage brands and comfort foods (Oreo’s were sold out alongside toilet paper in my first post CV19 shopping trip). I believe this impact will be short lived and intense but I don’t see it lasting. Fast forward a couple of months and those comfort foods and the extra pounds will bring us back to our earlier habits where we value foods that help us move forward on the continuum of healthier. In recent research we’ve found that regardless of a consumer’s current consumption of vegetables or perceived healthy food intake, all consumers, across all ages, are on a journey to eat better. I recommend our clients keep focused on helping consumers on their journey to healthier foods and snacks through innovation and new products that meet the trends we’ve been seeing the last few years: move from processed to less processing or fresh, fewer ingredients and cleaner labels in foods that still deliver taste and snacks that satisfy cravings.

2) The “new normal” is already here for many of us and I predict that within 2 weeks it will fully be in effect across all of the U.S. I believe that same nature that makes us contract in a time of crisis also makes it possible for us to reset expectations rather quickly. We are already getting used to faster and less frequent grocery trips with minimal contact and moving food purchases to online. That “new normal” reset starts just after the initial panic buying subsides and the fear of store closure passes. Truthfully, there is only so much “load” any one household can hold in their pantries and fresh items will force additional and ongoing shopping. I expect that by late summer and early Fall, we’ll see the “new normal” give way to back-to-normal behaviors including browsing while shopping, in-store sampling and fully stocked stores.

Caragh McLaughlin, Managing Director: I think the new normal of people being at home and providing their whole families with three meals plus (endless) snacks every day presents a real opportunity for CPG. Obviously, there was a stocking-up (or hoarding) bump in March that created a supply chain scramble. But consumers are going to be at home for weeks, if not a few months, or on & off for several months, which is good news for consumer products companies.  I see two big impacts:

1) As U.S. consumers are forced into cooking again, I see people looking for new recipes and new products to try to shake up their usual meals.  Essentially, they’re looking to cooking to replace what eating out used to provide – variety and interest in their meals.  I myself did this last week with a Thai soup recipe. 

2) There is an opportunity to get a new generation of kids into cooking and to offer families content that is engaging. Millions of parents are now at home with their school-aged kids and they are looking for projects for those kids – cooking and baking cover a lot of educational basics (math, science, home economics).  This is an opportunity food brands should capitalize on – think about expanded usage occasions for your existing products.  As examples, I leveraged Jell-O Play’s products with my 2nd grader last week and am looking forward to making a Kellogg’s Rice Krispies Treats Easter Bunny with him this week.  I’ve seen multiple people posting pictures of their kids baking and having in-home “Cake Wars” and “Chopped” contests, etc.  Hook ‘em with the usage content now and hold ‘em with innovations that take them to the next level in the next few months.

Julie Beck, Vice President of Retail Strategy: Retailers are one of the unsung heroes of this crisis. They, like all of us, have never experienced a crisis such as this one and I see clear indications of retailers upping their game operationally, accelerating hiring and transitioning from a 12-months planning process to ensuring products are stocked here-and-now. I see several changes to grocery retailer’s “new normal”.

1) There will be a lasting shift to online food sales for grocery retailers. We are already seeing online business move from about 10% of sales to more than 30% practically overnight. Although many retailers were not ready operationally for this overnight shift, they are quickly figuring it out and will continued to refine their model along the way – the proverbial building the plane while it’s still flying. The end result will be many more retailers with robust online and click & pick services than before the crisis, enabling an ongoing change to consumer shopping behavior. In the current “new normal” expect to see 30%+ in online sales stabilizing to roughly 20% post crisis. Net, 80% of shopping will still be in brick & mortar as people like the routine of going to the store, picking their own vegetables and browsing the aisle for inspiration, but fundamentally behavior change has accelerated for many millions of shoppers.

2) Private label and value brands will continue to grow. Today private label accounts for 22% share of store revenue. With a high unemployment rate, consumers will look to adjust their spending on grocery items. But, with one caveat, the product quality will need to be there. If the private label manufacturers can answer the call, there will be growth in their categories and pressure for branded players to differentiate through innovation.

3) Retailer will continue to have an interest in, and demand, new innovation. Retailers will continue to depend on innovation to drive their growth - without it they would see negligible growth year over year. Retailers count on their CPG partners to bring them new products and define new categories - I don’t see this changing if anything, it will continue to grow.

4) I expect there will be a new sense of partnership between retailers and CPG manufacturers as they were all in the “bunker” together - fighting the fight together against this virus. It will increase partnerships and bring back some of the humanness of this business. This pandemic has reshaped and redefined us both personally and professionally, and I’m hopeful that the “new normal” is even better than before.

While we know this crisis has brought about great change, one thing that hasn’t changed is our commitment to helping our clients continue to build disruptive innovation. At Mission Field, we are open and working hard to help our clients execute in 2020 and be ready for 2021 and beyond.

We hope you and your families are all doing well and staying healthy. We’d love it if you dropped us a line (Jonathan@mission-field.com) to brainstorm about how we can help you keep innovation planning moving forward.