How Will the Online Grocery Surge Change Premium CPG?

The longer the pandemic lasts, the more time Instacart, Amazon, Kroger, and Walmart have had to hire up and improve service quality. In March and April, though, we witnessed a pretty horrendous advertisement for grocery home delivery. Waiting days for a slot. Lots of picking errors by inexperienced shoppers. Had the pandemic eased quickly in June, many of the new households would have abandoned the service. Then, we witnessed one of the more fantastic HR feats in modern times, especially from Instacart.

However, tracking data from Bricks Meets Clicks indicates a sustained household penetration increase on a one-time 30-day basis. More than twice as many households have been ordering online groceries vs. the same seven-month period in 2019. I believe that a substantial # of these folks will abandon the service more or less once they are vaccinated.

Why? They simply don’t value their time enough, even though they’ve now experienced the very real time savings involved in home delivery specifically.

For premium CPG founders, though, online grocery spending has not only accelerated. It will stay elevated and may even accelerate more. The reason is that the premium CPG heavy buyer tends to be very educated and much more likely to be upper-middle class. These are folks who DO value their time a lot and tend to fill their time with lots of activities, even when they don’t have children. This is the subpopulation most likely to ask themselves now, “What on Earth was I doing running around town all weekend to get this stuff?”

Service quality still varies from shopper to shopper and remains a significant uncertainty in how much post-pandemic shopping volume will stay online. Family pantry-stocking is still more likely to be happening in person, even for the premium heavy buyer group I just mentioned. More importantly, the larger the online order, the more likely there will be wrong substitutions, communication challenges with the shopper.

Online grocery has really accelerate for educated, smaller households where less fresh produce is at risk of being selected poorly by new shoppers in a highly transient, gig sector. And I believe it is the larger group of educated HHs, who will continue to grow their percent of online grocery purchasing.

This all leads to a high likelihood that eight and nine-figure premium brands need to work hard to service online sales channels as a fundamental practice unrelated to the pandemic. And for younger premium brands, there is substantially more market share available to capture through these channels, especially if you already sell at Kroger or Whole Foods. And this, in turn, changes your trade marketing priorities.

All told, if you sell premium CPG items, even fresh and frozen, the pandemic is a wake-up call to transition from online-curious to online-serious.

Dr. James Richardson

admin@premiumgrowthsolutions.com