Supermarkets ready for a new week of rising to the virus’s challenge

The wave of stockpiling triggered by the arrival of coronavirus on British shores means that many people will never take full supermarket shelves for granted again. And the week ahead will be another nail-biter for the country’s food retailers as they try to make good on their promise to “feed the nation”.

On Saturday the government started delivering emergency food parcels to thousands of people it has identified as being particularly vulnerable due to illness – something that would not have been contemplated even a month ago. It will be delivering supplies of essentials such as pasta, toilet roll and teabags to front doors at a time when online grocery services cannot.

The stress put on the British food industry by the disease’s spread, and the way it has shifted consumption patterns, has been more dramatic that any boardroom wargame dreamed up during peacetime – and the response of retailers has been impressive.

One thing it has done, however, is expose the limitations of the online grocery services, which make up just 7% of the UK’s £200bn grocery market. They have not been able to cope with an avalanche of new shoppers too frightened to visit a supermarket. Instead, in the hour of need, old-fashioned superstores, with their more flexible distribution models and click-and-collect services, have proved to be much more adaptable to the seismic shift in demand.

To ease the online logjam, Tesco has started limiting online shoppers to 80 items per order. The change means it can get more “on to each van” after worried shoppers started placing much larger orders than usual. Sainsbury’s and Waitrose have also started prioritising slots for elderly and vulnerable shoppers.

Bruno Monteyne, the influential food-industry analyst at Bernstein, describes the wave of stockpiling seen in recent weeks as the initial hamsterkauf phase of the pandemic.

Hamsterkauf is a German phrase inspired by hamsters stuffing their cheeks with as much food as possible,” explains Monteyne. “Despite the empty shelves, there is plenty of food. People simply buy to fill their fridges, freezers, cellars and bedrooms. We will soon hit physical storage capacity, which will lower the level of pandemic buying.”

The panicked behaviour is a symptom of phase one, according to Monteyne, and the pressure on stores partly down to the closure of schools, restaurants and bars, which means an extra £15bn is being spent in food shops than is usually the case.

To meet this extra need, supermarkets have embarked on an incredible recruitment drive, hiring more than 40,000 “coronavirus temps” at a time when other industries are shedding workers at an alarming rate.

Their supply chains have also cranked up a gear, with shoppers – whose numbers are increasingly being restricted in stores due to physical distancing measures – now more likely to be able to find the items they want than they could a week or so ago.

Shore Capital analyst Clive Black says the industry has done a “heroic” job meeting the demand challenge, as some stores experienced weekly takings that were 50-75% higher than in 2019. “The magnitude of the adjustment is remarkable, and a credit to the adaptability and pure capability of the domestic supply chain and its army of employees for keeping the nation fed,” he said.

The next big test will come if there is a move to “phase two”, which Monteyne says is when high levels of staff absence start to affect the ability of the supermarkets to operate properly. The government has already relaxed competition regulations to enable retailers to work more closely together, including allowing them to cooperate to keep shops open, as well as share staff, distribution depots, delivery vans and even data on stock levels.

So, for the time being anyway, food retailers are coping – aided perhaps in no small part by several years of preparing for the worst, which at the time looked like a no-deal Brexit. Along with doctors, nurses and carers, the low-paid people that keep their food cupboards have earned a new-found respect from the public. The chief executives of supermarket chains have, after years of major job culls, also started dishing out praise – and bonuses – to their hardworking staff. May it continue in these uncertain times.

Source: Read Full Article