In our previous article, developed from a Mundo PMMI survey, we defined three scenarios that CPGs could face after overcoming the COVID-19 pandemic. The analysis published at this article addresses some particular aspects determining those scenarios, such as the impact of the crisis on consumers and markets, the most important challenges currently facing brand owners, and their forecasts for a return phase to usual work dynamics.
Without a doubt, the months we have spent protecting ourselves from the possibility of contagion by coronavirus have modified many of our life habits, some due to the economic disruptions the emergency has created, and others due to the search for greater safety and a more specific awareness of health.
That is why we sought to identify from our survey participants’ responses, what have been the pandemic’s most relevant effects on packaged goods consumers and market dynamics?
Decreased Purchasing Power Leads the Impacts
The responses to our survey clearly pointed out that the decrease in purchasing power is the aspect that has hit consumers the hardest. Faced with diminished incomes, many households have had to rationalize their purchases, and prioritize more basic and essential products.
That this decrease in purchasing power leads the list of impacts on consumers largely reflects the scant preparation we had to face the current pandemic. “The crisis has shown we need to make changes in our forecasts, since the savings habit is not widespread in our Latin American region, and a situation like this leaves many people unprotected," said a Mexican survey participant.
The loss of jobs has also had a strong impact on deteriorating economic conditions experienced today by many Latin American households, and future expectations are not very promising. According to a report by the, this year could bring an increase of at least 3. 4% in unemployment rates, which would translate into a cumulative total of 11.5% by the end of 2020.
Another factor affecting the purchasing power of many people in Latin America has been the absence of strict measures to control unauthorized increases in product prices. “Purchasing capacity and price sensitivity have been impacted; due to the shortage of various products some suppliers and merchants have increased costs by up to 100%," stated another producer of packaged consumer goods we consulted.
But the impact on purchasing power is not the only aspect the pandemic has affected. As a result of quarantine measures and compulsory isolation, means of purchasing have changed, and there is now a boom in home sales and electronic commerce. Likewise, greater attention to health and safety issues is influencing household purchasing decisions today, and the decision to purchase products from known and reliable sources begins to be evident among consumers. “The search for local products and decisions that support economies in the nearby environment will be reinforced,” affirmed a food industry professional surveyed.
Markets Adapt to Needs
For a post-pandemic scenario, the expectations of participants in our Mundo PMMI survey are largely based on consumer and market behaviors they observed during these months. The widespread use of e-commerce and home sales has demonstrated their effectiveness, not only in terms of health protection, but also of convenience, efficiency and reliability.
This fact is evidenced in the responses received, which place the increase in electronic commerce as the main expected market impact, even above an increase in costs and a reduction in demand for goods. Euromonitor International, for example, claims that online acquisitions will become the world's fastest growing sales channel in 2022.
The months many consumers have spent under isolation measures have served as a testing period for the advantages of electronic commerce. E-commerce had been showing dynamic growth in Latin America in previous years, as reported by an eMarketer Business Intelligence Center study, revised to include the effects of the COVID-19 crisis, which estimates this year’s growth in digital purchases at 11%, reaching a turnover of $83.6 billion dollars and 19.4% growth. Ways of selling and buying seem to be changing dramatically; we will need to live with these new scenarios and make the most of them. "As long as the coronavirus is not controlled, many things will change in our lives, and it will be necessary to adapt to the new normal," says a survey participant with conviction.
Learning on the Go
Given the conditions described for consumers and markets, the outlook for the remainder of this year poses important challenges. Overcoming the pandemic alone will not be the solution to problems faced by the processing and packaging industries. The lessons learned are being capitalized, and before companies’ productivity and marketing approach their 2019 levels, new strategies must be implemented to counter the effects of this emergency and shield firms against possible relapses or the emergence of similar events.
We therefore wanted to hear directly about the actions that our survey participants identify as essential protection measures for their safe operation, particularly those related to supply chain management. Their responses reveal a clear intent to implement actions where supply sources take on a highly relevant role. In particular, strengthening local supply indicates a trend clearly attributable to COVID-19’s effects, reflecting convenience for companies in sourcing from nearby vendors and optimizing process steps in the chain, such as transportation and communication with suppliers.
The stated intent to expand the supplier base and establish more solid and proactive relationships with vendors, through measures such as the preservation of their financial health, an increase in the number of active supply companies, and regular purchase orders is also very significant.
Backdrop for the Near Future
Today, imagining a post-pandemic scenario results in more uncertainties than certainties. However, the voices of those facing the daily challenges of working in the midst of such an emergency offer valuable insights and guidelines. Likewise, the opinions and results of studies carried out by researchers and specialized entities provide expectations with solid elements for analysis. PMMI recently conducted a comprehensive study of the current situation, Economic Impact of COVID-19, Guidance in an Uncertain Economy, which offers insights from our survey a backdrop for future projections.
In analyzing short-term perspectives, the PMMI study predicts a normalization of global industrial production indexes once the COVID-19 crisis has passed. This report states, “The most logical way to think about the situation is to consider its end. A vaccine will have been developed, either this year or next; we will overcome the effects of the pandemic and begin to return to the normal foundations of the business cycle.”