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In the face of changes in consumer priorities as a result of the pandemic, food, beverage, and cleaning product companies have shifted production to high-demand commodities, leaving other categories behind.
In the face of changes in consumer demand as a result of the pandemic, mass consumption companies have had to respond quickly to new demands. They have prioritized the production of some essential products such as oils, rice, among others, over other varieties and categories.
Consumer analysts warn of drastic changes in the purchasing decisions of Peruvians as a result of this pandemic, which could last all year or longer. After more than fifty days of the first panic purchases, today we are faced with a consumer who buys the essentials, with other hygiene habits, less income in his pocket and even unemployed. In addition, due to the difficulties of supply, he is trying other brands and, of course, consuming more at home.
Rolando Arellano, general manager of the Arellano consulting firm, even points out that, according to his latest study, concern about COVID-19 has moved the attributes that consumers value most. The price and the hygiene of the product are today’s main concerns.
This new consumer profile demands that companies reinvent themselves at speed. Have mass consumption companies known how to respond as they go along? According to Arellano, some have already started to review their portfolio.
BACK TO BASICS
“A major challenge is the production plan, demands are changing in volume and priority so quickly that recalculation becomes more complicated,” says Marco Vidal, director of UCAL’s marketing and innovations.
Patricio Jaramillo, vice president of mass consumption of Alicorp in Peru, says that the firm is already adapting to this new reality. The challenge, he believes, is to understand how demand evolves in a complex scenario such as that of the coming months.
“We have reorganized the teams to concentrate on manufacturing products with greater demand due to this situation, such as oils, pastas and flours -in foods- and bleaches, soaps, gels and multipurpose cleaners, in cleaning items”, he comments to Día1.
Thus, they have prioritized varieties within the same brand to meet the needs of the basic food budget. For example, they have ceased to produce waxes, metal cleaners, among other lines that are not essential but that they still have in stock.
The AJE group (owner of the Cielo, Bio or Volt brands), for its part, has also modified its production in response to consumer demand. Augusto Bauer, VP of Strategy and Business Development of the group, says that there has been a migration towards more basic products and family formats. Water, he says, is the star, followed by bottled juices.
“This forces you to redirect production and adjust projected demand to those categories and formats,” he says. That is why Aje reduced the production of Volt (energizer), one of its most important products, whose sale has fallen due to lack of demand. The same with Sporade, whose sales have stagnated. This trend, Bauer estimates, will continue throughout May.
From Costeño Alimentos they point out that they have prioritized and increased the production of bagged formats rather than those of 50 kg (in bulk) to take care of the same security of the products in the market, says Jorge Alfaro, general manager of the company. Sugar, oil and rice are products in which the demand grew in two digits.
Although the impact on the hotel and restaurant sector has been significant for Costeño, the demand has been covered by the other channels.
The companies that have already initiated the changes in the portfolio, assures Arellano, will take the lead when the quarantine is over.
E-COMMERCE, THE WAY
Thinking beyond this social isolation and in view of the closure of several of their points of sale, companies have decided to strengthen (and in many cases to release) their presence in e-commerce to reach the consumer directly.
Jaramillo mentions that Alicorp has several channels, through alliances with marketplaces such as Lumingo, Juntoz and Linio, in addition to its own Ali Daily platform. And, since last week, they have launched a model of direct sales to consumers through a call center and Whatsapp, with deliveries in 48 and 72 hours. It now serves three districts and is expanding.
In Bauer’s words, AJE has also made the leap into the digital world, since before the pandemic, on multi-category platforms, and recently launched its own: Ajedelivery.pe. Although the response has been positive, he confesses that online and modern channel sales do not compensate for the impact of the reduction of points in traditional sales.
Meanwhile, Costeño still hasn’t gone digital. Alfaro says that for now the company will keep its same marketing system and sales force, but they are in contact with companies that are implementing e-commerce to see how to work with them. Thinking about the next stage, the executive notes that they will have to be attentive to adapt.
According to Arellano, if before the purchase of food via online was 3%, now it has tripled. These consumers, he points out, would keep the habit of using this channel at 6%, after the quarantine.
ABOUT PRICES AND RELEASES
Being present in the media has been the most important and challenging part of the brands these days. If you are not there, the consumer will try another one. But besides a supply issue, Peruvians today have less income and are looking for many more affordable prices. The companies consulted for this note agree that they have products in all price points. But what about those that don’t?
Both Alicorp, Costeño and Aje say that they have had to vary, on a different scale, their launch plans for this year. Jaramillo explains that Alicorp is working on the re-planning process, giving priority to certain categories, knowing that the return to normal will take some time and will be gradual.
On the side of Costeño and Aje, they agree that they will maintain their releases, but will adjust the dates according to the situation. To do so, Aje has created a committee that monitors the situation week by week. “What has to be rushed, will be rushed and what has to be delayed as well,” Bauer points out. The decisions and reconfiguration of the business, today more than ever, must be fast. Preparing for the new normal will be key for everyone.