Coronavirus and the rise of panic buying

Reports on how the COVID-19 outbreak is impacting global supply chains and disrupting manufacturing operations around the world are increasing daily, and these effects may not yet have reached their peak, at least not in North America.

This could happen over the next few weeks, and grocers and food retailers are likely engaging with vendors to make sure their supply chains won’t let them down. On the other hand, stores across Canada are also rationing the number of each food item customers can buy. Regardless, “panic-buying” is happening and will bring its own complexities.

Some retailers are much better equipped than others to address this disruption. Most regions in Canada are serviced by retailers which have emphasized investment in logistics and supply chains over the years. The prospect of some areas of the country running out of food is highly unlikely. But more remote regions are, and always will be, more vulnerable with, or without, an outbreak.

But often, rationale gives way to anxiety. The sight of empty shelves and line-ups at stores will suggest resource scarcity. We have already seen some empty shelves across the country. Interestingly, some reports suggest non-gluten and organic products in Canada are running out faster than conventional food products. This is hardly surprising. Inventories for these items are typically lower, of course, but it also gets people who want and need these products to feel the urge to stockpile early. It’s simply human nature.

We estimate about 25% of all Canadian households have enough food supplies to survive independently for 3 to 4 days, whether there’s an outbreak or not. But the other 75% will take time to think about it. In fact, since the virus started to spread, more than 20% of American households have started to stockpile food. The percentage in Canada is likely not that high, but it is probably higher than 10%.

But panic-buying spurs opportunity. Alibaba, the multi-billion-dollar online giant in China literally grew out of the SARS outbreak back in 2003. The company saw an opportunity to sell products online, given that people were avoiding physical interaction with others. This could very well happen in Canada, where grocers are just starting to embrace the virtual nature of their business. Outside disruptors such as Amazon, Walmart and Costco are already doing well since the virus started to spread. Conventional grocers will need to think about ways to get more traffic on their websites during times when a growing number of people want to stay home for the sake of feeling safe. It’s not just about convenience, but more so about allowing customers to cope with public health risks. Same solution, but the psyche and motivations are completely different.

As well, the products sold will be different. The most popular items since the start of the outbreak have been dry goods, frozen foods, comfort snacks, power beverages and of course, water. Grocers could sell survival kits for a family of four online, to be delivered safely.

The bottom line: we should brace for a major effect on food supply chains worldwide. It will begin to hit full force in two to three weeks and could last for months. More than 50 central banks around the world have reduced their overnight base rate, including the American Federal Reserve and the Bank of Canada. But this does not mean we need to panic, either. We have some time to get ready, so get the food you need, one shopping trip at a time, and do leave some for others.