Coronavirus: Company results reveal shift to indulgence among consumers
UK-based Premier Foods, which makes traditional cupboard favourites such as Bisto gravy, Ambrosia rice pudding, Super Noodles and Mr Kipling cakes, said it was currently experiencing high levels of demand for its grocery products due to Covid-19 impacts.
It reported that sales in the final quarter of the year that ended on March are expected to have grown about 3.6% year-on-year, with a 10.5% rise in March. It expects trading profit for the period to be at the top end of market expectations.
Grocery sales have seen the largest spikes in demand, it added, with the likes of Batchelors, Nissin, Cooking Sauces, Bisto, Oxo and Ambrosia seeing particularly high volumes. Foodservice and B2B has been softer, it said.
March saw a sharp peak in volumes throughout the month reflecting consumer panic buying. Premier expects to see volumes in FY20/21 Q1 lower than seen in March but higher than usual levels of demand reflecting increased levels of eating in home by consumers.
The update said: “The Group experienced a dramatic short-term peak in volumes across many of its categories during March. Volumes have started to reduce from the exceptional levels seen in March, although are still expected to continue to be higher than average patterns of demand. This reflects more meals being eaten at home than usual due to recent measures set out by Government and hence increased demand for the Group’s product ranges.”
‘A return to family values, more home cooking and family meals’
Will the shift to pantry buying among consumers prove permanent? Charles Hall, head of research at analyst Peel Hunt, told FoodNavigator he was positive on Premier Food’s outlook.
“I’m sure sales will be stronger through this summer (more people at home, less going out, children at home) and fairly sure there will be a benefit (but smaller) longer term as I think there will be more focus on family values and food occasions and less on snacking and separate meals.”
An investor note written by Hall detailing Premier Foods’ ‘strengthening business performance’ added: “The current year has started well with demand higher than usual due to the increase in sales through food retailers, combined with a return to more home cooking and family meals.”
Nicola Mallard, an equity analyst at Investec Bank, said she expected demand for home foods to gradually fade as lockdown measures ease. “With people not going out to eat anymore or being in an office for lunch, home consumption of food is up and they [Premier Foods] are benefiting,” she told FoodNavigator.
“I assume this will continue to be the case while we are in lockdown but will gradually wane as we are allowed greater freedom. Then it will be down to their new product development and marketing efforts to drive revenues.”
Danone reports sales boost owing to ‘pantry loading’
French firm Danone also reported resilience amid Covid-19. It withdrew its financial guidance for 2020 owing to the disruption caused by the coronavirus pandemic, but also posted higher first-quarter sales as shoppers bought more dairy, plant-based and nutrition products to eat at home.
Sales rose a stronger-than-expected 3.7% to €6.242 billion in the quarter, Danone said as it noted a “pantry loading benefit in Europe and North America in March”.
Finance Chief Cecile Cabanis said that consumers were opting for “indulgence and bigger formats” in dairy and plant-based goods, while brands like Actimel yogurt - with immune system support claims - were in strong demand in Europe.
Strong performance on the dairy, plant-based and nutrition categories was offset by a 6.8% fall in water division sales, where demand was hit by the closure of restaurants and cafes. Around 40% of the division’s sales are normally consumed away from home, Danone said.
The pandemic will ‘change the way we live and do business for a long time ahead’
Explaining the decision to withdraw its financial guidance for the year, Danone chairman and chief executive officer Emmanuel Faber said in a statement. “The first quarter of 2020 will long be remembered as the time of an unprecedented pandemic, which may change the way we live and do business for a long time ahead.
“Q2 demand and supply conditions will be broadly and deeply impacted by a global lockdown. Beyond the initial pantry loading trends we observed in March, we are unable to predict how the lockdown may affect both supply and demand, with significant differences depending on food habits and lifestyles and people’s income, all in a context of diverse local and national government lockdown strategies and exits, as well as their unknown success rate.”
