We’ve never seen a year like 2020. In March of last year, Canadian stores registered close to $2 billion of additional, unplanned sales. Consumers pantry loaded food like never before. Many categories showed growth unheard of in years. Household cleaners, bathroom tissue, utility cloths, first aid kits, etc.—all saw triple-digit percentage growth. Hand sanitizers, the Holy Grail, were up 833%.
Fast-forward a year: while we no longer expect double-digit growth, the market is still breaking records. Channels are delivering fast-moving consumer goods (FMCG) sales of more than $2 billion weekly, with volumes up 8% by dollars and 3% by units. A recent update from NielsenIQ Canada reveals some opportunities and challenges ahead for the industry. Here are seven trends worth watching:
1 THE NEWLY CONSTRAINED ARE ANXIOUS ABOUT THE FUTURE
We track four segments of the population: existing constrained (financially insecure pre-COVID); newly constrained (COVID had significant impacts on their financial and social situation); insulated cautious (financially secure, but planning for an uncertain future); and insulated unrestricted (less concerned about COVID and haven’t had to modify their spending habits). In the past year in Canada, all four segments spent more on FMCG categories. As of March 2021, fully 30% of Canadian households are considered newly constrained. These consumers will revert to mass merchandisers, dollar stores and online options to fulfil their shopping needs.
2 KEEPING UP APPEARANCES
While purchases of “survival” staples are down, it’s a different story for some key health and beauty aid (HABA) categories. Our personal appeal is more top of mind as we emerge from hibernation. In health and beauty, face care, women’s fragrances, cosmetics (eye), men’s cologne and lotions, hair accessories and bath additives are all growing.
3 SELLING GROCERY CATEGORIES ONLINE IS A REALITY
The grocery aisle is in the palm of Canadians’ hands. In the past six months, 25% of Canadians have ordered groceries online. Another 25% would consider it in the future. Grocery categories remain underdeveloped in e-commerce sales in Canada, but they’re growing the fastest. From 2019 to 2020, online sales were up 148% for food, 60% for non-grocery items, and 63% for health and beauty. Drill down on food, and we find that 20% of Canadians bought fresh categories online last year. The penetration of perishables online was up 30%.
4 CANADIANS ARE TURNING TO DISCOUNT FOR VALUE
Conventional stores have fared better since the beginning of the pandemic, but discount stores have gained market share back in the Maritimes, Quebec, Ontario and Alberta. In the last 12 weeks we studied, discount stores made gains nationally in most FMCG groupings.
5 KEEP AN EYE ON THE DECLINING NUMBER OF OCCASIONS
Working from home and lockdowns had an impact on the visits made to gas outlets and convenience stores last year. This isn’t specific to those retailers; Canadians have made fewer trips to all stores (except online). Looking at rolling 12-week figures, occasions per buyer were at 32.3 in March 2021 versus 37.5 a year earlier. The decline is evident across all regions.
6 LOWER POPULATION GROWTH WILL PUT MORE PRESSURE ON THE INDUSTRY
A pandemic baby boom didn’t end up happening. In 2020, Canada had the lowest population growth rate since 2016, at just 0.4%. This has a direct impact on baby categories. Diapers and infant formula are declining, and total baby care was down 7%. As well, COVID halted international immigration to Canada, which had accounted for more than three-quarters of Canada’s population growth since 2016. Keep an eye on urban areas, where immigrants are overrepresented, and focus on Quebec, where lockdown measures curbed the number of cases and optimism is driving growth above the national average.
7 DON’T JUST RELY ON VACCINES FOR AN INDUSTRY BOOST
Will COVID vaccines be a shot in the arm for spending? When the jabs were starting to get in full swing, 53% of Canadians told us it will have no impact on loosening their purse strings. But the vaccines will be sufficient to stimulate some other consumer spends for luxury, non-food and big-ticket purchases.