Following the release of its annual results yesterday, Tesco warned that the full financial impact of the coronavirus crisis was “impossible to predict”. Whilst the chain said additional operating costs involved in ‘feeding the nation’ could reach nearly £1bn, analysts highlighted that retailers and FMCG producers are also facing longer-term changes in consumer behaviour.
Carmen Bryan, a consumer analyst at GlobalData, said Tesco was right to be cautious about giving a profit forecast for this financial year. “Although shopping habits have certainly stabilised across the UK, uncertainty for the future still persists,” she commented.
A survey carried out by GlobalData this week showed that 86% of British consumers believe that the situation will get worse before it gets better – this is much higher than the global average of 62%. “This is indicative of a volatile shopping landscape, something that brands and retailers alike should take into account”, said Bryan.
“As demand does finally stabilise however, FMCG producers may find a more challenging scenario. The UK public has been hit hard by the loss of jobs and general anxiety plaguing the country. Value consciousness, as such, is once again at the forefront of everyone’s minds, and just as retailers must take a wary approach to the future, it would be prudent for FMCG manufacturers to expect some fallout in a post-stockpiling world.”
However, Bryan suggested it’s not all doom and gloom: “A notable change COVID-19 has shown us is the effectiveness of online and remote shopping; it is unlikely that the new shopping habits that consumers have picked up will return to pre-COVID-19. FMCG manufacturers can take this into account by working closely with retailers to offer more interactive promotions, traceability and information of their products, empowering the consumer and helping to create a better point of differentiation for themselves.”
NAM Implications:
- Who would persist with a pre-coronavirus forecast?
- Anywhere…
- Better a pragmatic, conservative approach to business forecasts.
- Accepting in uncertain times, shares will be marked down…
- ‘We ain’t seen nothin yet…’
- For practical ways out of the darkness see our latest podcast
