COVID-19: Impacts on the U.S. Food Industry

Corporate Finance & Restructuring | Agriculture

April 28, 2020

Tractor

The rapid spread of COVID-19 and the equally rapid government response to confine the majority of the U.S. population have dramatically changed consumption patterns, which has rippled through the food and agriculture industry.

The macroeconomic factors impacting a business will depend on the position of the company in the food and agriculture value chain, however, the response to these factors must be tailored to address short term realities, while preparing for the new steady state post-pandemic.

Understanding these factors, then preparing and executing a focused response will enable companies in the food and agriculture industry to preserve cash flow and then thrive in the post-pandemic economy.

Changes in consumer purchasing behaviors are transforming the food industry

The key factor for food company success today is to understand consumer behavioral responses to COVID-19, then adapt the operating plan for the short-term changes, with an eye toward expected long term impacts on food consumption patterns.

With the continuation of shelter in place restrictions, the food and agriculture industry will be impacted by changes in food buying behavior tied to fear, health policy and social distancing.

As unemployment claims reach historic highs, the impact of a recession will fundamentally change consumer buying habits. Lower disposable incomes will increase consumer frugality, shifting to a combination of value and taste, which will result in higher purchases of trusted brands and comfort food.

Most consumer food buying behavior had been influenced by the long economic recovery period, which created a focus on high quality, organic, fresh, convenience, and new flavor profiles. Food consumption is now returning to a more traditional pattern where food eaten at home will be more than 50%, but not necessarily prepared at home, with greater emphasis on comfort, food safety and shelf life.

In addition, consumers are increasing their use of online and digital technology to purchase from retail grocery and food service. This trend is leading to fewer SKUs, reduced new product offerings, more trips to the store with less time for the in-store experience of comparison shopping, leading to a marketing advantage for established brands.


More Info

Share this page