Consumer packaged goods brands soared in the pandemic—but how will they keep flying when it’s over?
The virtual pandemic edition of the Consumer Analyst Group of New York (CAGNY) wasn’t in New York or its usual Boca Raton, Florida haunt. But much of it focused on what the world will be like when people are no longer forced to live largely on Zoom.
For most of the companies presenting, that’s bad news in a sense. The pandemic has been kind to marketers of food for home consumption, cleaning products and toilet paper, so they have to convince investors they’ll still be worthwhile bets after COVID-19 fades.
Talk of innovation was relatively light compared to prior years. But some marketers were making the case that pandemic habits like eating at home and cleaning obsessively will stick post-pandemic. On the other hand, others were predicting a “Roaring ‘20s” post-pandemic rebound for the 21st century, which will include plenty of lipstick and condoms.
Below, some trends that emerged during the 4-day virtual confab.
Tailwinds of at-home consumption
COVID-19 has largely helped packaged goods makers, as people stuck at home have been buying more products for at-home meals and stockpiling, or trying to, lots more toilet paper and other household goods than usual.
Since mid-March 2020, Conagra Brands gained the equivalent of 4.5 years of incremental new buyers, said CEO Sean Connolly.
Now, brands are trying to hold onto as much of that increased usage as possible, and re-ignite growth in places such as convenience stores as more people begin to leave their homes for work and school. On the flip side, COVID-19 has diminished their sales in away-from-home channels, from airports to cafeterias. Gum, in particular, was hard hit, noted Mondelēz International CEO Dirk Van de Put. Coca-Cola has been hit hard by fewer soda sales at stadiums and other off-premise venues.
As consumers say they are more interested in buying products with a better environmental footprint, consumer goods makers are trying to catch up to respond. Sustainability, from recycling efforts to products with lower carbon footprints, was mentioned by lots of executives. Nestlé devoted nearly its entire Friday morning presentation to its sustainability initiatives, including plans for a few main brands to hit carbon neutrality by 2022, and some others by 2025. And 10% of its R&D scientists are working on plant-based products, says CFO François-Xavier Roger.
Sustainability is a key driver to deliver growth and will be earnings neutral, Roger says. Laurent Freixe, executive VP and CEO of Zone Americas at Nestlé, joked that only one group doesn’t benefit from sustainability efforts: packaging suppliers. Executives from Kellogg Co., Unilever and L’Oréal were among the others who made sustainability efforts key parts of their presentations. Coca-Cola pledged to begin including diversity stats in its sustainability reports.
Online shopping has soared during the pandemic and packaged goods makers are eager to capitalize on that momentum. Unilever saw e-commerce grow 61% globally in 2020, growing at twice that pace—121%—in the U.S., though it’s still only 9% of global sales. But L’Oréal, which already gets 27% of its sales online, expects that to grow to 50% eventually. Food marketers saw large increases in online sales, but it still represents a much smaller percentage of overall revenue. Kellogg’s online sales doubled as a percentage of global retail sales to about 8.5% in fiscal year 2020.
Companies including General Mills, Kellogg and Kraft Heinz (a presenter at CAGNY after years of ignoring the conference) touted plans for increased media investments. They are focusing more on targeted digital messages rather than big mainstream ad buys. Mondelēz already increased its working media spend by 17% last year and is focusing on digital efforts and “personalization at scale,” said Van de Put. Buoyed by the pandemic, Clorox Co. will spend close to $150 million more on advertising for this fiscal year, which ends June 30, after already hiking ad spending significantly last year, said Chief Financial Officer Kevin Jacobsen.
Marketing “efficiency” remains a buzzword, especially at Coca-Cola, whose CEO James Quincey touted the beverage giant’s new marketing model that involves consolidating agencies through a massive global media and creative review that is still ongoing. He pointed to a forthcoming global campaign for Sprite—its first one—as an example of how the company will reach more markets with the same campaign. The effort, called “Let’s Be Clear,” from independent global shop Gut, will run in 50 countries. “We’ll deliver the magic of marketing through the lens of more efficiency and more effectiveness,” Quincey said. “No stone remains unturned in this process.”
The CAGNY conference is typically a great place to sample drinks and foods from around the world and to see some of the new products brands are introducing. Brands also often show new or recently introduced ads. This year, innovation appeared to take a bit of a back seat. There was talk of some new products, but not at the rate seen in recent years, as brands are placing fewer bets on products they hope will be big wins.
Hershey CEO Michele Buck pointed to plans including sugar-free and organic versions of Hershey and Reese’s, and said the company will make Kit Kat Thins, expanding on a platform that has already been in place for products such as Reese’s.
There was also a lot of talk from food marketers around expanded line-ups of plant-based and better-for-you products. Conagra, for example, has a Marie Callender’s pot pie where the crust is made from cauliflower.
Marketers of food at home, cleaning products and toilet paper all have clearly been helped by the pandemic, which created opportunities for more ad spending. But it was their job at CAGNY to convince investors that their companies can still grow as the pandemic fades and they face comparisons to all those quarters where their brands benefited. Unilever CFO Graeme Pitkethly pointed out how the loss of food service business globally had reduced the company’s organic sales growth 1.6 points to 1.9% last year, even if the U.S. business did accelerate. Executives from marketers including Procter & Gamble and Church & Dwight pointed out that the pandemic was a mixed bag, hurting some of their categories—including razors and dry shampoo—among people staying home more, and those businesses will bounce back, they said.
Lockdown habits will stick
Almost everything Clorox sells, led by its namesake Wipes, has been boosted by the pandemic. But CEO Linda Rendle pointed to research suggesting that people will stick to their heightened awareness of germs and cleaning practices well after the crisis passes. “The role of home has changed. People are investing significantly in their in-home experiences,” she said. “It’s also unlikely people will fully return to their pre-COVID work routines. We’re seeing the emergence of flexible work, meaning more time at home. That means more meals, more water, more trash and more products being consumed at home."
Connolly’s presentation shows Conagra is eager to hold onto at-home trends; It is introducing popcorn kits for movie nights, and with people cutting back on restaurant visits, it has plans for some fast feeder-inspired meatless products under the Gardein line.
Get ready for roaring ’20s: condoms and beauty
Some products hurt by the pandemic will bounce back, at least Church & Dwight hopes. “Social interaction categories,” such as dry shampoo, is one category poised for a rebound, said Britta Bomhard, chief marketing officer of Church & Dwight. “An even more eagerly awaited bounce-back of sales is in the condom category,” she said. “Eighteen to 24-year-olds can’t wait to get their social lives back, and with college campuses re-opening, 2021 looks promising.”
Beauty, too, is poised for a comeback, said Nicolas Hieronymous, L’Oréal deputy CEO, who will take over as CEO in May. “Like a flower after winter, beauty is ready to blossom again as soon as the COVID goes away,” he said. “We are confident that, like in the 1920s, there will be a big beauty party once the pandemic is over.”
Contributing: E.J. Schultz