There’s no need to wait for the official recession announcement.
The nation is already in a recession, and the baking sector has the opportunity to “seize the moment” by driving creative growth strategies, according to retail insights expert Todd Hale, who spoke during ABA’s webinar on COVID-19 Crisis & the Great Recession: Historic and Current Trends Analysis.
“We seemed to be far from a recession at the start of this year, but that has changed because of the coronavirus outbreak,” said Hale, who is principal of Todd Hale, LLC. “We’re in a recession,” he said, even though it’s too early to confirm based on the traditional definition of two consecutive quarters of negative GDP growth.
Hale urged the baking industry to be proactive about its economic future, even as it continues to combat day-to-day operational hurdles sparked by the pandemic.
“Don’t sit on the sidelines,” he said. “Companies that invest during a recession come out ahead. You need to consider cost-cutting, but you also need to come up with ideas for driving growth and innovation.”
Economic Outlook Highly Uncertain
Hale said the latest economic data points to a likely acceleration of challenges.
“The government just released 1st quarter GDP, which was an annualized rate of minus 4.8%,” he said. “Next quarter’s rate of decline could be to the tune of minus 30%.”
Hale said it’s hard to compare this situation to prior recessions, partly because of the rapid and severe number of job losses this time around.
“This one’s going to be a lot different,” Hale said. “We’ve just had a game changer. During the last five weeks we’ve seen 26.5 million job losses,” which is far greater than the jobs lost during the Great Recession, he said.
Hale said the best case scenario is for a V-shaped recession, which indicates a rapid decline and relatively quick recovery. However, that more upbeat outlook would rely on how quickly the COVID-19 situation gets under control.
“If we can get a handle on the virus, we could see economic growth returning pretty substantially in 2021,” he said.
Sales Data Tells Graphic Story
Consumer fear and uncertainty has driven unprecedented levels of purchasing during this pandemic period. Hale, who previously oversaw consumer and shopper insights at Nielsen, shared the latest Nielsen sales data with the webinar audience. He said the categories impacted by consumer buying surges tended to shift each week of the crisis, from cleansers to food basics.
Bread and baked goods was a key contributor to stockpiling. Total bread and baked goods sales outperformed during the buying frenzies in March, posting the fourth highest share of growth of any segment in food retail. The overall strong performance in bread and baked goods was driven by grocery department sales, and offset by fresh bakery. The home baking trend also fueled retail sales growth.
For many of the top performing bread and baked goods categories, absolute dollar sales gains in March alone outdid total growth for all of 2019, Hale said. In a striking example, sandwich bread during March showed a sales lift of $194 million, compared to a decline of $40 million for all of 2019, which Hale termed an “amazing turnaround.”
A Time for Proactive Action
How can the baking industry absorb the consumption lessons from this period to increase momentum for the future?
The industry will need to help maintain consumer confidence, stay flexible on strategies as states open up, and keep its sights on growth, Hale said.
One solution is to further build on the bread category’s momentum.
“Consumers have been reminded of the benefits of the commercial bread aisle,” he said, pointing to attributes such as longer shelf life and packaged products. “How do you keep that trend going?” he asked. “It’s going to be very important to think about how to do that.”
Boosting Hard-Hit Segments
Bakers will need to tread carefully but strategically in the sectors hardest hit during the crisis period, he said. This includes foodservice, self-service products at retail, and in-store bakery, all of which took back seats to retail packaged goods during the pandemic.
“The bakery department is going to return to normal at some point, but it’s going to take time,” he said. “So if you’re in that space, how do you think about maybe getting offerings outside of the bakery department?”
Hale also urged the industry to enhance ecommerce capabilities and digital engagement with consumers, and to revisit traditional media engagement platforms that may be well suited to home-bound customers.
“Make the most of the fact that people are still at home,” he said. How can you relay creative messaging and ideas in new ways.”
This webinar is now available on ABA’s On-Demand Webinar Portal. There, you can find other past COVID-19 webinars as well.
For questions about accessing the webinar or for the partner discount code, please contact Sydney Langer.