Increased demand for shelf stables could stick: analyst

Clive Black, head of research at Shore Capital, a broker, told FoodNavigator he had witnessed a big jump in pantry and freezer staples amid the Covid-19 lockdowns.

“Families are now at home having breakfast, lunch and dinner day in day out, so it's a big shift in calorific intake,”​ he said. “So those cupboard fillers and comfort foods have become more important along with ambient groceries and frozen food.”​

Meanwhile, there had been a ‘big slump’ in demand for convenience food, food for now, food to go and chilled prepared food, he said.  

“Railway stations have lost 95% of their traffic, so those making sandwiches and sushi and salads for railway stations have seen a big decline in their trade. There's also been one or two peculiar stories, such as a shortage of flour and eggs.”​

That shift will continue for as long as the out of home food and beverage sector remains closed, he said. But he added there could be some ‘follow through’ in future trends.  

“I think an awful lot of people, particularly those in offices, aren't going to go back from homeworking. Therefore, there'll be a shift in calories from city centres to neighbourhoods and that by definition supports demand for ambient fresh foods, but less so prepared chilled food as people have more time to prepare their own breakfast and lunches. They won't be buying coffees and bacon rolls in Greggs to the same extent. There could be very considerable and lengthy behavioural changes for the UK food market.”​

While that was potentially bad news for the out-of-home food sector, it was better news for ambient frozen and household goods sectors, he said. “Anything involved in ambient and frozen foods - Nomad Foods, Goodfellas pizza, Aunt Bessie's, Findus, Iglo and Birdseye -- those are the categories that are gaining share and will probably have a nudge and a follow through ​from the crisis.”​

Dublin-based analyst ResearchAndMarkets.com predicted packaged food to rise by 377% as consumers look to long shelf life foods.

“Long-life foods have experienced a surge in demand as consumers stock up on staples out of fear of shortages and to limit the need to venture out for food. Sales of processed, canned and frozen foods are rising as many consumers are moving away from fresh foods in favor of stockpiling foods with a longer shelf life,”​ it said.

“Products that require little preparation such as ready meals and instant noodles are also seeing rising demand as more consumers move to preparing meals at home. Several large companies like Nestle, Kraft-Heinz, Hormel Foods, Kellogg's and Mondelez International are experiencing a surge in demand because consumers are reaching for familiar brands in this time of uncertainty.”​

Nestle cautious despite strong first quarter

The trend towards shelf-stable and frozen foods among consumers has been illustrated by recent company results from the likes of Premier Foods, Danone​ and Nestle.

Last week, Nestle reported its best quarterly growth for nearly five years as customers stockpiled food to deal with coronavirus shutdowns. It posted a 4.3% increase during the three months to the end of March, noting that​ "ambient culinary grew in high single-digits, supported by increased demand for cooking aids, sauces, noodles and soups". ​It added: "Frozen and chilled grew in high single-digits. Vegetarian and plant-based food products continued to deliver strong double-digit growth. Confectionery declined, mainly due to reduced impulse buying and gift-gifting, particularly in China and Japan. Waters saw negative growth, reflecting lower demand in the out-of-home channel, offsetting increased growth in retail channels."​

Nestle Chief Executive Mark Schneider, however, warned against reading too much into the company's first-quarter results.

"It is important not to get carried away by the strong organic growth​," Schneider told an analyst call. The situation remained "highly volatile​" he said, with significant ups and downs across categories and regions. Nestle was not able to forecast the financial impact of the COVID-19 epidemic on its business, Schneider added.