After a year like 2020, would anybody dare to predict what might lie in store for 2021? Maybe not, yet we can take bearings in order to plot a route into the future, and understand that true prophets have insight, not second-sight. It is by looking back over the course of realised events, analysing the forces at play, and observing their unfolding consequences, that we can best begin to make out in the fog the shape of approaching events.
This article is an attempt to compile a simple list of important areas that independent retailers should think about as the year turns and the industry deals with not one but two momentous upheavals. First, the ongoing drama of Covid-19, which has caused so much disruption in retailing, and second, Brexit – which will manifest itself at the end of the transition period, on January 1.
According to recent research by Barclays Bank, these two things – the disease and final withdrawal from the EU – have had an effect on each other in an oddly beneficial way, namely that many business were well-prepared for Covid because of the Brexit measures they were already taking:
“For many businesses, major events in recent years meant they had no choice but to adapt,” says Karen Johnson, Head of Retail, Wholesale & Healthcare at Barclays Corporate Banking. “To prepare for Brexit, for example, many firms had altered their logistics (31 per cent), diversified their supply chains (28 per cent) and began stockpiling (24 per cent). As a result, one in four businesses felt that getting ready for Brexit enabled them to deal better with Covid-19.”
At the same time, the impact of panic-buying, or at least the dramatic changes in demand brought on by the pandemic and lockdown, had massive impacts on supply chains that have fore-armed companies so that Brexit may be less painful to deal with by comparison, had Covid-19 never appeared.
“For both retailers and wholesalers, a key impact of Covid-19 was on supply chains,” Johnson revealed. “Before the pandemic, the average supply chain took five weeks from start to end but this has since doubled to ten weeks. Now, firms do not expect supply to return to normal until at least March 2021.”
If Brexit brings chaos, it might not be so different from what is already happening – and being satisfactorily dealt with and adapted to by suppliers and retailers.
In short Covid-19 sends us as battle-hardened veterans into the Brexit trenches, steeled and ready to fight another day. Happy Christmas!
We have canvassed opinion from a panel of industry experts and figures, who have kindly given us their thoughts on what the new year might bring. What is striking, when comparing their ideas, is how certain themes recur among them and start to show definite shapes of what is coming up in the near future.
Following Lockdown Two, it is now being rumoured that up to three-quarters of the on-trade and restaurant sector is in danger of shutting-up shop permanently – an almost unimaginable situation just a few months ago, when the nation’s bars and eateries eagerly re-opened after the summer with the support of the government’s “Eat Out to Help Out” campaign.
But the tragedy of the on-trade is to the benefit of the off-trade, and a large part of the massive increase in revenues and foot-traffic for the independent grocery sector (now up around 8 per cent overall after peaking at 40 per cent) has come from people, shut in at home, buying alcohol from C-Stores instead of pubs.
This switch has been accompanied by up-trading, as customers treat themselves to a night in instead of a night out – and in turn that benefits the finest branded products and helps boost retailers’ margins.
“Whilst it has been an unpredictable year for the alcohol sector in the on-trade, the off-trade sector has been bolstered by more in-home occasions,” confirms Norbert Jozsa, Head of Category and Insight – Europe, at Accolade Wines. “What is clear is that brands remain important and are key to attracting people to the category, offering familiarity and trust … Convenience saw a huge surge in sales throughout April and alcohol over-performed with +70.1 per cent driven by an increase in shoppers, so it is a huge opportunity for retailers to make the most of.”
Jozsa points out that wine and several relatively new drinks formats have done well in 2020: “Single serve and can formats will continue to grow in popularity – these have been particularly successful in the convenience channel indicating that health, moderation, and sustainability (with reduced chance of waste from small formats) remain a priority for consumers,” he says. “We expect to see a growth in wine of tap (bag-in-box) options, driven by the combination of increased demand and the wider and more rounded choice available to shoppers. Rosé will continue its evolution with further growth expected, whilst we also expect that both Sauvignon Blanc and Malbec will continue to be strong throughout next year.”
Jess Markowski, Convenience Sales Director at Budweiser Brewing Group UK&I, has seen a great increase in beer sales in C-stores, the obvious result of pubs being closed. But she says along with this increased consumption, there has been a trend toward well-being that has been detectable in zero-alcohol sales – what is becoming known as NABLAB (for “No Alcohol Beer + Low Alcohol Beer”).
“Since the pandemic hit, many of us have looked to pursue a more balanced lifestyle, and 31 per cent of adults agree they are now putting a greater emphasis on healthy eating since the outbreak began,” she says. “We have seen a rise in consumers decreasing their alcohol consumption, with one in three claiming they are moderating their alcohol intake.”
Budweiser’s response was the launch of Budweiser Zero and Stella Artois Alcohol Free – taking advantage of top brands’ reputations to replicate the brand experience without alcohol.
Wholesaler Cotswold Fayre’s CEO, Paul Hargreaves, agrees that “non-alcoholic drinks are seeing a resurgence,” and that there is a defined up-market trend, suggesting direct substitution of zero alcohol drinks for their branded alternatives: “With the introduction and success of speciality brands like Seedlip, posh non-alcoholic drinks for adults are now starting to come through as serious contenders,” he says.
That is not to say that alcohol is being avoided; on the contrary, more than ever is being sold through independents, and one of the biggest trends for 2021 is apparently going to be the galloping market for hard seltzers. These flavoured sparkling waters, beefed up with alcohol, are a recent arrival from the USA, “Packaged in slimline cans, fairly low in calories, with a similar strength to beer, at around 4 per cent – and very much aimed at the young female market,” says Hargreaves.
“2020 saw a boom in the trend for Seltzers, offering a lighter alternative to traditional drinks such as beer or wine,” Jozsa says. “Blurring alcohol categories is becoming more popular and hard seltzers will likely witness the highest growth rate within the UK’s ready-to-drink category over the next five years.”
Accolade’s Echo Falls brand accordingly launched its first ever Rosé Seltzers in August 2020. It also released more low alcohol “botanical” wines as a hybrid between traditional and softer, flavoured (Melon & Mint or Raspberry & Lavender anyone?) alternatives: “Echo Falls Botanicals caters to the current consumer trend in botanicals, driven primarily by Gen-Z and Millennial audiences,” says Jozsa. He notes that research shows 73 per cent of No/Low drinkers buy wine and, at 5.5 per cent ABV, it caters to the consumer demand for fruitier and sweeter wine styles with a lower ABV intake.
“We also launched Hardys 0.0 per cent Chardonnay in 2019, which has been a great success and resonated with those looking for a no-alcohol wine option,” he says. “It has delivered 11.3 per cent YOY volume growth within the latest 12 weeks.”
“We recently launched Mike’s Hard Seltzer,” Markowski adds “It’s gone down incredibly well with shoppers, with Mike’s achieving the number one repeat rate within the Hard Seltzer category.”
“I think we’ll be seeing a lot more of these brands and variants enter the market over the coming months. We are introducing a couple of [hard seltzer] brands to our portfolio in 2021 so I’m keen to see how the market develops,” Hargreaves summarises.
A paradox of hard times is premiumisation and the fact that brands fare best under it. Many people have lost their jobs during the pandemic, but many others have saved money and found themselves with furlough time on their hands.
“I know first-hand from 2008 that whilst it’s a tough time for businesses and consumers, it also offers opportunity,” says St Pierre Groupe’s founder, Paul Baker. “Premium brands should not shy away from being premium. Yes, people look to spend less, but it goes further than that. When it comes to food and drink, consumers just become a little more discerning with their spending. Times are hard, but if you’ve got to spend the money – which, when it comes to food, you have – then you might as well buy premium. This means people will ‘trade up’ like they did 12 years ago.”
Campari noticed a national trend over the summer for amateur baristas at home – and responded to the growth in demand for cocktail ingredients, for example.
“This year has seen consumers start to become more adventurous with their at-home drinks choices, with spikes in cocktail searches in recent months and 39 per cent looking to try different alcoholic drinks to pre-lockdown,” says Nick Williamson, Marketing Director, Campari UK.
“This creates an opportunity to encourage shoppers to try creating classic cocktails with this flavour profile, such as the Negroni, at home,” Williamson adds. “A simple combination of Campari, gin and red vermouth – the Negroni allows retailers to take advantage of the growing market for making uncomplicated, two- to three-ingredient cocktails at home. By merchandising a trio of premium spirits together, retailers can inspire consumers to try creating simple cocktails at home, with product suggestions to meet their flavour demands, thereby increasing basket spend.”
They found that customers, far from retreating into isolation, were meeting for drinks online, and that there was a whole new market that needed catering for, much of it fizzy – for which Campari’s Aperol has been the perfect solution, alongside a surge in rum (+11.5 per cent YOY) and more bitter tastes exemplified by Campari itself. Bitter tastes for bitter times, perhaps?
“Perhaps in a move to balance some of the uncertainty caused by the pandemic, we have seen 60 per cent of consumers claim to be turning to brands they know and trust, with the biggest beer brands seeing the most significant shopper gains over the initial lockdown,” notes Markowski, who also says that they are moving from 500ml to 560ml “full-pint” cans – another consequence of pub-drinkers quaffing at home.
The upmarket trend is not only in alcohol but to brands and to quality ingredients in general. A nation suddenly released from the purgatory of the daily commute has re-acquainted itself with looser Continental-style days, and has even begun to experiment with Continental-style eating habits, such as the relaxed breakfast and elegant lunch – but at home.
“Most of us are very habitual in our choices, with an ‘at home’ menu that we recycle based on the day, the season and the guests around our tables,”says Baker.“The way people eat, the times they eat and the sense of occasion around each meal time has changed this year.”
This affects the consumption of all kinds of products and ingredients, with customers looking out for interesting items and “curating” their dinner table even on ordinary weekdays. Paul Baker says the bread category overall has developed at an astonishing rate, for example, and that speciality breads are at +11 per cent YOY.
“In part, this is due to consumers looking to recreate restaurant quality food at home and our St Pierre brand’s 36 per cent growth reflects this upward trend,” he says. “To ensure the continuing success of brioche and other speciality breads, it’s important to educate retailers and consumers about how to enjoy them as part of everyday meals. To highlight the versatility of brioche, we have launched a 360-consumer campaign that is also reflected in-store and on-pack to help our retail customers sell the St Pierre range.”
Paul Hargreaves calls it the “new-look lunch” (or breakfast)explaining that Covid-19 has impacted the look of the workplace and with much of the workforce still working from home, breakfast, lunch and snacking is already looking very different.
“2021 may become the year we say goodbye to the traditional meal deal style lunch of sandwiches, crisps and a drink, replacing this with more prevalence of soups, hot food to go and snacking platters. We’re all looking for something a bit different to brighten and break up the day, and with a whole host of kitchen appliances available at home, I think we’ll see some new and inventive products breakthrough,” he says – and with the increase in shopping locally, the convenience sector has found itself perfectly positioned to take advantage of this.
Home on the range
Hargreaves has a concept he calls “restaurant food at home” that will have consequences for what C-stores both stock and deliver.
“I wouldn’t expect typical out of home, restaurant dining to be back to ‘normal’ until the end of 2021,” Hargreaves says. “The pandemic really has been habit changing, with consumers recognizing that they can buy good quality, tasty food for less, and enjoy it in the comfort of their own home!
As a result, he also expects to see home delivery of restaurant-quality food continue to gain in popularity:“With companies like Deliveroo leading the way with Deliveroo Editions, I’d expect to see this trend continue with new cuisines and restaurants with pop-up style limited edition offerings to create excitement. I would also expect to see more quality ready meals coming into the market to rival COOK who already do this incredibly well, but as yet have had very little competition.”
C-stores can stock these and invest in their own delivery runs to breathe new life into food-to-go or any combination of restaurant or dark kitchen co-operation. And they will increase their range to discourage locals travelling further afield to the mults.
It’s about keeping and growing the footfall gained during the pandemic.
Mults for the big shop, discounters for the cheap shop, and C-stores for the top-up – used to be the formula. But it is changing. 2020 was the year of the small, local shop for obvious reasons. Winter may continue this trend as queuing outside supermarkets loses whatever charm it originally had.
C-stores have begun to respond to this opportunity to steal custom from the chains and mults by starting to stock a broader array of goods (gifting at Christmas may well be a test of initiative to see how much further indies can bulk up their basket), which might just persuade shoppers that there is no need to suffer the experience of the supermarket under social distancing.
Sainsbury’s has caught on to the idea, with the recent opening of two “Neighbourhood Hub” stores, with another half dozen scheduled to open each year for the next three years. The 12,000 foot stores are quite a bit larger than almost all indies but the idea is obvious: customers are being wooed away from big boxes to nearer and smaller venues, perhaps to shop with more frequency, leaving bulky items to be ordered online for delivery along with specialist items.
It is a vision that might eventually see the big supermarket model rendered marginal or even obsolete.
At the Sainsbury’s Neighbourhood Hub there are Argos and Tu clothing collection points, much larger veg sections, homewares and beauty as well as grocery, and 10 self-service checkouts alongside three staffed ones – the company says the basket spend is twice a Sainsbury’s Local and three-quarters that of a full supermarket.
The Sainsbury’s experiment is reminiscent of Tesco’s Jack’s venture, but without the emphasis on bargain value. Jack’s took on the discounters while the Hub is aimed more at the independent sector, and they both appear to be toe-in-the-water experiments rather than full-on cavalry charges into enemy-held territory. But both show that the Big Boys know where the real competition to the traditional supermarket model lies: discounters and C-stores are the threat, and if C-stores can start to fight their way inland from the beach-head they have established during the pandemic, they can permanently capture a lot of business from the mults.
With a better range and a service that can compete with the mults, 2021 has great potential for independents. “I expect to see more independents getting involved with click and collect, ecommerce and moving online,” Hargreaves says, introducing us to our next 2021 theme. “There’s a real opportunity here and I’m surprised some haven’t been faster to act already.”
Spending time online
Office for National Statistics (ONS) figures for November say that in the UK ecommerce is now 40 per cent of retail (excluding cars/fuel and bars/restaurants), up 50 per cent from before lockdown – and grocery delivery doubled in lockdown. Who does this benefit and who does it hurt?
The supermarkets have seen massive increases in online sales, but there are big difficulties in making profits out of vast delivery operations. As Paul Hargreaves mentions, perhaps this is a fruitful area in 2021 for local shops to deliver more, locally, for local people. Online ordering and delivery is a process that has been a long time coming but has been given a massive heave over the pandemic period.
“Changing consumer preferences over the past decade have pushed businesses to go online, with the UK now home to the third largest percentage of online shoppers (80 per cent) in the world,” says Barclays’ Johnson. “Retailers have also been ‘going local’, responding to over half (55 per cent) of UK consumers who want to shop closer to home. Covid-19 has accelerated this transition. One in three retailers (31 per cent) have reduced their physical footprint this year, especially in city centres (29 per cent) and nearly a quarter (24 per cent) have moved into more local areas.”
As the lockdown continues to devastate much of the brick-and-mortar retail estate, the ecommerce opportunities for surviving shops (independent grocery, this means you) are enormous, especially as PoS apps merge with click-and-collect and delivery options.
“Ecommerce enjoyed consistent growth in recent years and the lockdown period really fast-tracked this trend,” agrees Accolade’s Jozsa, who believes that online will be a defining theme next year. “During this period, the [wine] channel delivered as strong as 162 per cent YOY value growth within alcohol sales, driven mainly by an increase in new shoppers. Some of the changing shopper behaviours caused by the pandemic are temporary. However, the accelerated shift towards online shopping is without a doubt here to stay.”
“Even though online shopping has risen by 79.3 per cent since the first national lockdown, we have also seen consumers shopping locally, with the convenience channel seeing the second largest share gains of total grocery spend over lockdown after online,” says Jess Markowski, neatly tying together two important 2021 trends. “To help independents tap into the growing trend for online shopping, Budweiser and Uber Eats partnered earlier this year to create an online “Budweiser Store”, in celebration of the return of the Premier League. Powered by convenience stores, the “Budweiser Store” also helped boost basket spend around a significant consumer moment
There will come a point – perhaps soon – where ecommerce ceases to be a thing and is simply a seamless part of the act of shopping: probably the customer will order instantly online via phone app and either pick up or accept delivery depending on the immediate situation – one that perhaps favours local distribution and less formal booking procedures. “Looking ahead, retailers must provide a simple, well-rounded shopping experience to continue to appeal to in-store customers,” Markowski says.
Everybody has witnessed the enormous increase in vegetarian and vegan products over the past year, many developed by the big, processed food companies in what looks like a move to make them the “new ambient” as fresh food and changing tastes lessens the presence on the shelves of traditional pantry ingredients.
The new vegan outlook chimes with the sustainability gospel and the drive to use less plastic, generate less waste, and recycle more, so plant-based and sustainability seem to rhyme quite nicely in the market right now.
Think of everything meat and imagine it replaced with something made from pea protein and veg fibre: “Jerky is a big hit in the UK, and in the next year I think we’ll see more vegetable snacking options enter the market,” Paul Hargreaves say. “ More recently we’ve seen mushroom jerky – and with increased noise around veganism and meat-free products, I expect this to be the first of many!”
He believes the veg-disguised-as-meat trend will mature into a proud veg identity before long. “So many vegetable products are dressed up as ‘meat’ or other traditionally non vegetarian/vegan foods – perhaps 2021 will be the year we celebrate the great taste of vegetables without disguising them as other products – and enjoy them as they are meant to be!”
Right next to vegetables is recycling in the sustainability mantra.
“Sustainability is a key focus for us,” says Accolade Wine’s Norbert Jozsa, “and this year we announced that our core branded portfolio –including Hardys, Mud House, Jam Shed, Banrock Station, Echo Falls and Kumala– has been certified carbon neutral, with the aim to complete 100 per cent portfolio neutrality by the end of 2020. We know that there is demand from shoppers for greener products, with 62 per cent of consumers saying they want to buy from sustainable brands, and the wine category is no different.”
Soon it will be hard to find any company that does not brandish its sustainability credentials as an essential element of its consumer appeal. “The pandemic hasn’t reduced our sustainability concerns. Reducing plastic waste is high on the agenda for shoppers too – 82 per cent feel it is important to reduce the UK’s plastic consumption,” says Jess Markowski, revealing that Budweiser Brewing Group has removed 850 tonnes of plastic waste – the equivalent weight of 67 double decker buses – from their supply chains.
“This idea that ‘plant based’ food or ‘veganism’ can be a part-time commitment has opened up a whole new audience for brands. It’s not so niche as it once was and it’s a market that will continue to grow,” Paul Baker concludes.
Imagine demand for “green” products to remain strong in 2021, as the expectation of care for the planet becomes normalised, partly through what we eat, partly through what we no longer throw away.
On a slightly less grand level than saving the planet, consumers are also going to be concerned with saving money in 2021 as a recession of unknown dimensions descends on the UK. How best to help them, and how best to help yourselves to help them, was a question addressed by Costcutter Supermarkets Group Marketing Director, Sean Russell, who notes that in the coming year retailers will be searching for “the right retail partners to help them strengthen their support for their local community, as well as expanding their shopper base and continuing to grow their sales.”
Costcutter has had a pretty fabulous year in 2020 as its strategies for growth and profitability – striking deals with Coop and Nisa, beefing up its field sales team and ensuring BDMs look after only 25 stores each, came to fruition under pretty favourable pandemic circumstances for the sector.
Still, Russell makes a key point about merchandising to the convenience shopper under current and soon-to-be conditions, where people are closely watching every penny. “An estimated 47 per cent of shoppers are changing their spending habits to focus on value and 25 per cent are shopping more often at their closest, most convenient stores,” he says, and this has implications for the kind of offer a retailer should be making.
He explains that switching to value will be fundamental for retailers to adapt to changing shopper needs and that storeowners need to understand more about the new needs of shoppers and what that means for their range, promotions and marketing.
“One size doesn’t fit all,” he says.“Multi-buy promotions can be great value, for example, but for some shoppers, price reductions are more popular, particularly on single items to minimise waste. For other shoppers, offering products at round pounds, half price or better, is the best option.”
It’s all about promotions, price cuts and PMPs. BOGOFs might not be sufficiently appealing to people who simply don’t have the money to splash out on that sort of bargain. Crowds are already beginning to descend on yellow sticker shelves at the end of the day, on the other hand, and a slash reduction might be a better tactic for maximising day-long sales in 2021, perhaps with a loss-leader as an entrance magnet. And PMPs will probably be king.
It might seem a contradiction to say that value will be paramount at the same time that premium brands can expect to do well – but this isn’t so. They will both do well, just with different customers (with a good overlap between them). Remember, a stock market goes up and down at the same time. The key is to make sure that value and premium shoppers both find what they want in the same place, locally.
And again it is not only price that counts, but range too. As Russell says: “Shoppers are also looking for more than top-up and impulse from their local convenience store. They’re more prepared to do a full shop in-store and are looking for meal solutions and fresh ingredients for scratch-cooking.
Related to price and value is a whole new cultural experience that we can probably expect in 2021, and which could be with us for a long time: recession living, with all the economic micro-decisions and psychological attitudes that living well with less brings along.
People economise and spend less, but cheer themselves up with small treats and irrational expenditures.They can save and spend at the same time and expect what they want to be available. “We’re a generation of shoppers who know what they want and then want it immediately. There’s no reason to compromise quality for convenience or vice versa anymore,” says St Pierre Groupe’s Paul Baker.
Paul Hargreaves says: “In January I expect we will be entering the second dip of a double dip recession, and I think we’ll see food and drink trends and shopping habits in line with what has happened in previous recessions.
“When times are tough, confectionery and chocolate products perform incredibly well acting as comforting treats at home. Patisserie and small luxuries will also be at the top of everyone’s shopping list for the foreseeable!”
So value will be sought just as small treats and luxuries boom –especially in categories like confectionery that always do well in a downturn.
“St Pierre can attest to this,” says Baker. “Brioche is now widely recognised as a way to elevate everyday meals – recreating restaurant quality at home. It’s the number-one brioche brand in America and growing fast in the UK too, up 33 per cent year on year.”
Up by a third in a pandemic year is good going, but we hope that everybody can be up a good way in 2021 with the help of our experts’ insights into where things are headed.
And in the meantime, to all our readers, do have a very merry Christmas and a happy new year.