Covid-19 has changed the developed markets of Europe and the US more quickly and more dramatically than what would have been imaginable during the early weeks of 2020. It has changed how and where people spend their time, what they think and feel, and it has spurred massive shifts in what people buy and how they buy it.
For years, we have continuously monitored shifts in consumer behavior across the world to help consumer goods companies get out ahead of these evolving changes. Now, as Covid-19 has forced potentially dramatic new directions in consumption, we have regularly checked the pulse on how consumer attitudes and behaviors are evolving around the world. As part of our ongoing research, we have partnered with Dynata, a leading first-party data and insights platform, to survey on a quarterly basis nearly 9,500 consumers in the US, UK, Germany, France, Italy and Sweden.
The results of our research point to the emergence of a “reluctant” consumer, as we described in “The Great Reluctance” and in follow-on briefs as the sentiments deepened. Despite a lifting of restrictions, 28% of survey respondents in Europe were still shopping in stores less in July than they were before the pandemic. Among those surveyed, 41% in both Europe and the US predicted that life would not return to normal for a year or longer. This is a marked increase from the 29% who felt this way in May (see Figure 1).
Consumers are increasingly pessimistic about when the world will return to normal
Overall, survey respondents anticipate spending even more time at home going forward than they did in May (see Figure 2). Baby boomers and Generation Xers are more reluctant to participate in most activities with close social contact than their millennial and Generation Z counterparts are.
People are cautious about returning to activities that involve human proximity
Looking to define the post–Covid-19 consumer, research firms around the world have extensively covered this upending of consumer behavior. Undeniably, consumer habits have been tossed up in the air, but while new laws of gravity have already begun to define where some of those consumer behaviors will land, for others, the end result has yet to play out.
To make this distinction, we have segmented eight emerging themes into two groups—namely, those hardening into new laws of gravity and those for which the jury is still out (see Figure 3). While these themes are drawn from our research in Europe and the US, they reflect similar findings in other developed markets we have studied.
Covid-19 is accelerating several existing consumer trends, while others have emerged that are less certain
New laws of gravity
Amid the uncertainty brought on by Covid-19, the pandemic has permanently deepened and solidified four key behaviors, creating new imperatives for all brands.
Step change in digital: The most significant and irreversible pandemic outcome for consumers has been the huge uptick in online grocery shopping and other virtual activities. Locked-down consumers spent more time than ever in front of their screens, watching television, participating in social media, playing online games and shopping. Fully 90% of the UK’s primary care clinics now use remote appointments. Fully 80% of the users of one popular fitness app livestreamed workouts in 2020 vs. 7% in 2019. In the first quarter of 2020, Netflix added a record 15.8 million subscribers as many parts of the world began shutting down. The majority of surveyed consumers say they will continue to replace nondigital experiences with the virtual substitute.
Covid-19 has radically accelerated the shift to online commerce, which had been evolving at a slower pace over a longer period of time. In Europe, online grocery shopping made the equivalent of three to four years of progress during the first months of the pandemic. In the US, it made more than two years of progress within those months. Despite restrictions being lifted in some areas, nearly 50% of survey respondents shopped for groceries online in July vs. 39% in May. And despite early challenges with service levels, 30% of new users plan to continue. Bain’s research suggests online grocery penetration rates in the US will increase by up to 1.5 times by 2025 compared with pre–Covid-19 forecasts. Consumer goods companies are getting out ahead by improving their digital offerings. PepsiCo launched two new direct-to-consumer platforms: Snacks.com and PantryShop.com. Kraft Heinz launched its “Heinz to Home” service in the UK, delivering simple bundles of products to consumers. Others are replicating in-store experiences digitally. For example, beauty brands such as bareMinerals and Clarins launched virtual consultations to compensate for lack of in-store services available to their consumers.
In addition, brands are moving product launches online, bypassing physical stores. Ocean Spray launched its Atoka line of herbalist craft beverages online and currently is selling it directly to consumers.
Relentless focus on health: The arrival of this novel coronavirus left people hyperexposed to news about health, hastening the shift toward health and wellness that had already been gaining ground over the past decade. In the US, 53% of consumers are even more concerned about their health now than they were prior to Covid-19. Online searches for health-related words peaked during the pandemic. People report spending more time on physical health–related activities and intend to do more despite gym closures. And they are spending more to boost their mental health. Downloads of the popular Headspace meditation app doubled between March and the end of May.
This has had a direct impact on how consumers are thinking about the foods they eat. In Europe, 50% of respondents said that they are looking for more unprocessed foods than they were before the pandemic. In the US, when consumers were asked about their fresh food purchasing habits, 45% of them said it was now more important to buy healthy, nonprocessed food than prior to Covid-19. The pandemic has sped up demand for plant-based alternatives, immunity-boosting products and so-called “healing” foods. Perhaps the biggest overall change in eating patterns is that consumers are opting for home-cooked meals. One survey found that 50% of consumers in the US are cooking more at home, and in Europe, 20% of consumers are spending more on fresh fruit and vegetables, citing a desire to eat healthy and cook at home as key reasons for doing so.
Redefinition of value: The Covid-19 crisis has accelerated a distinct shift that began emerging prepandemic—namely, the simultaneous flight to low-cost products and more premium offerings. The financial impact and resulting anxiety led many to focus their spending on value-for-money products. As spending has declined in areas such as out-of-home entertainment, travel and automobiles, however, consumers with sufficient spending power are turning to premium products to meet their heightened needs around health, convenience and safety. This polarization has led to the simultaneous resurgence in the US of Spam, a low-cost canned meat product, alongside an increase in the sale of premium plant-based meat alternatives such as Beyond Meat and Impossible Burger.
As consumers redefine value in a Covid-19 world, they are revealing distinct patterns. In food, consumers seek quality in Europe, whereas price is the leading purchase criteria in nonfood items such as household paper products and over-the-counter drugs. And while branded goods outperformed, private label has experienced significant growth, too. Our survey found that 21% of respondents are buying more private label goods, a shift that could stick post–Covid-19, as 16% of people say they will buy more private label than they did prior to the pandemic.
Brands have been making the most of this growth by catering to new price segments, with premium brands such as Beyond Meat moving into the value space by launching value packs. Others are seeking to offer value in new ways, catering to consumers looking for more convenient or nutritious options. Dole introduced premium salad kits at affordable prices. Nestlé launched Life Cuisine to offer consumers the convenience of healthy frozen foods for their at-home eating occasions.
Slow return of out-of-home spending: Before Covid-19, out-of-home food and beverage spending in the US grew twice as fast as grocery spending for at-home consumption, capturing two-thirds of the overall growth in food spending. The pandemic has radically changed that trajectory. With the closure or near-closure of bars, restaurants, cafés, stadiums, gyms, nail and hair salons, and other on-trade sites, the Covid-19 crisis will push back gains made by out-of-home foodservice by three to five years, depending on the length of the pandemic as well as government and social responses, according to Bain analysis. It could be up to seven years in a worst-case scenario.
As we enter a new world, four key factors will influence the speed and degree at which spending returns to out-of-home channels:
- the ease and frequency of performing that activity at home to the point that it has become a habit;
- the investment made that has created stickiness in at-home consumption;
- the ability to effectively substitute the out-of-home experience into the home; and
- the degree of reluctance consumers have in returning to normal activity.
For example, moviegoers have discovered the convenience of watching Netflix from their own couch, Peloton users have invested in a longer-term at-home setup, restaurant occupancy remains low despite restrictions loosening up, and, for many, at-home cooking has offered cheaper and healthier alternatives. On the other hand, beauty will return to out-of-home operations sooner given the challenges of substituting the experience with at-home care.
How out-of-home spending will bounce back over the next few months will vary not just according to product category but also by consumer segment based on considerations around cost, health and convenience. Alcohol is likely to stay in-home for older cohorts due to convenience, lower prices and the risks of gathering in bars. Out-of-home alcohol sales will likely return sooner, however, for younger consumers in pursuit of socializing. By contrast, older and less technologically savvy generations are likely to return to gyms while younger individuals continue using virtual fitness. Understanding the underlying consumer needs will help brands shape their value proposition as consumers explore a return to out-of-home consumption.
Jury is still out
The above four themes represent major developments caused by Covid-19 that require all companies to adapt their game accordingly. But four other themes are still in the process of shaping consumer attitudes, with incomplete evidence that does not yet point to a clear outcome. These themes represent an opening for brands to shape consumer behavior.
Small and local? Or big brands? Prior to the pandemic, one of the biggest shifts in consumer goods was the rise of insurgent brands that serve an unmet consumer need by swiftly developing products to address changing preferences and building consumer intimacy through local activation and digital channels. These brands often start locally, relying on word of mouth and the desire for more tailored offerings to expand. For a decade, these insurgent brands captured an outsized share of growth. In the wake of the pandemic, consumers in Europe and the US undeniably say they want to support local businesses and brands. Among survey participants, 63% of Irish consumers prefer to buy guaranteed Irish brands from local businesses during the pandemic, and 29% of French consumers surveyed report buying more local foods during the pandemic.
The tide shifted during the early months of the pandemic, however, when insurgents’ share of growth fell from 35% to 5% in the categories in which they exist. Much of that lower growth resulted from supply constraints, but consumers were also seeking the safety and trust offered by larger brands. Indeed, few consumers cite local as a top consideration when selecting a new brand. While 51% of those surveyed in the UK say they will proactively seek out British products after the pandemic, only 22% would buy British products if they were more expensive. Meanwhile, in five European markets surveyed, the number of respondents saying that they would continue to buy local products over the next 12 to 18 months has declined since the height of the pandemic. As consumers navigate through the uncertainty, big brands have the opportunity to shape brand choices by better understanding consumers’ unmet needs.
Departure from science? Or return to science? Consumer awareness of health and wellness has increased over the past five years, and consumer goods companies have responded by doubling down on the better-for-you segments, with smaller insurgent brands paving the way with health claims or homeopathic roots. The increased visibility of medical experts during the Covid-19 crisis, however, has translated into a reliance on the clinical expertise of doctors and scientists—80% of survey respondents to the Edelman Trust Barometer trust doctors for pandemic information, and 79% trust scientists. (By contrast, company CEOs are trusted by 57% and journalists by 48% of consumers.)
This confidence in science plays out in purchasing decisions. Looking to reduce both risk and anxiety, 35% of consumers in Europe increasingly are seeking out products with health claims that are rooted in science. They are specifically looking for science-backed endorsements in over-the-counter drugs, baby care and pet care categories. This may open the door for established brands to leverage their scale and R&D expertise to build consumer trust in the propositions they offer.
Sustainability or safety? Sustainability has been such a significant force in consumer goods over the past few years that we refer to it as the “next digital.” Many business leaders had hoped that Covid-19 would serve as an inflection point for sustainability. But the course is muddled. In May, 35% of survey respondents in Europe told us that they cared more about sustainability in food and beverage purchases than they did before the pandemic. That opinion was validated in July, when an equal percentage said buying socially responsible brands is more important to them. Despite these findings, only 8% cite sustainability as a key purchase criterion across categories.
Across countries, consumers are expressing a heightened preference of safety over sustainability. They are prioritizing such safety-related factors as “keeps my family protected against bacteria” over factors such as “sustainable ingredients.” There are other signs of a shift to safety over sustainability. For example, governments around the world are lifting bans or taxes on single-use plastics as consumers seek the safety of plastic food wrapping. Consumer products companies need to balance these two objectives in thoughtful ways that meet consumer needs today and in the future.
Urbanization vs. de-urbanization? For years, people have been flocking to the major urban areas of Europe, the US and other developed economies—to the point at which it felt like a law of nature. Then, Covid-19 arrived, convincing some who could afford it to move, if only temporarily, to quieter and more spacious places—a relocation made possible by remote working. The phenomenon varies greatly by income, with 29% of high-income survey respondents in the EU temporarily relocating vs. 10% of low-income respondents. Consider that 40% of prospective homebuyers in the UK now find a village location more attractive than they had before the pandemic. As a result, home prices are rising in suburban and exurban locations. Will this quest for a calmer, slower life reverse years of urbanization? The answer is unclear. Yet it has potential implications for brands as they consider how the consumer base is shifting and what their needs are.
How to shape your future
This mix of the predictable and unpredictable makes it especially challenging for decision makers seeking a clear path forward. Planning feels impossible. For consumer goods executives writing plans for 2021 and 2022, there are two straightforward messages.
- First, don’t defy gravity—recognize where there is undeniable evidence of changing consumer behavior, and double down.
- Second, take into account the uncertainties, and shape possible outcomes rather than waiting and seeing where things will land.
The best companies will balance adaptability, predictability and resilience as they focus on three areas.
- Shaping at-home consumption: With consumers continuing to spend more time and money at home, winning brands will invest to create great at-home occasions to keep consumption at home for the longer term. Knorr created Knorr@home, with store-cupboard recipes and tips that help consumers address in-home cooking needs and make nutritious, restaurant-quality meals. The move serves the growing consumer need for convenience, addresses more occasions and helps the brand gain an increased share of wallet in the process. Jack Daniel’s introduced canned cocktails to cater to consumer desires for convenience and to replicate the bar experience with premixed cocktails. Brands will also invest in digital to create great at-home experiences, collaborating with an ecosystem of players such as Uber Eats, Deliveroo and Instacart to make these experiences as seamless as possible.
- Breaking reluctance barriers: Out-of-home consumption has always been a critical consumer touchpoint for brands. Now, accelerating the recovery of out-of-home foodservice while also helping grocers mitigate the challenging economics of online is a new imperative for consumer goods companies. Recently, in Brazil, eight leading consumer goods companies collaboratively invested nearly $70 million to support more than 300,000 traditional small trade outlets. Procter & Gamble has worked with Dunkin’ and other foodservice partners to ensure that a safer environment will encourage consumers to return more quickly to eating out of home. Brands that invest in the ecosystem around them will benefit from having built stronger commercial relationships for the longer term.
- De-averaging the consumer: Consumer behavior has always been diverse. Yet it is easy to forget that just as there has been no single, uniform response to Covid-19, there will be no single post–Covid-19 consumer. Differences in segments are meaningful. For example, the biggest difference in comfort level to outside activities can be seen across age groups. In Europe, only 42% of baby boomers have shopped in physical stores since Covid-19 started vs. 72% of Generation Z consumers. More than ever, given the uncertainty regarding how the consumer landscape will evolve, this is a time to listen and learn from consumers so that we understand the motivations behind their attitudes and behaviors, tailoring messaging and propositions accordingly.
Above all, consumer goods companies must stay alert to the shifting winds. Consumer response to the Covid-19 crisis will change repeatedly over the course of the pandemic and beyond. As the future unfolds, we will continue to monitor and share our findings on consumer attitudes and behaviors as they take shape during this uncertain journey.
The authors would like to thank Rachel Friedman, Luke Secosky, Will Henshall, Tom Burton and Tendai Moyo for their contributions to this work.