Making predictions in the year 2020 is about as tall an order as they come, but Dominic Miles (global co-head of L.E.K. Consulting's consumer practice) has admirably stood up to the test with his forecast for the Food & Drink industry. 

Miles bases his outlook on three themes in consumer behaviour:

1. Existing trends prior to the Covid-19 pandemic;

2. Habits learnt in lockdown; and

3. Behaviours which typically arise in periods of recession.

Existing trends

We want it and we want it now. Lack of time together with a lack of ability or confidence in cooking means we require convenient on-the-go food, be that in the form of takeaways or recipe box deliveries. This is something which is not going away.

There is however a greater focus on 'better for you' foods. We are more conscious about what we are putting in their bodies, from awareness of dietary requirements (e.g. gluten free) to lifestyle choices (e.g. veganism), personalised nutrition is on the rise.

Lockdown habits

Remember when you had to do a supermarket sweep to find the last tin of beans, the shelves were empty of toilet roll, and there was a restriction on how many bottles of antibacterial hand gel you could buy? Then there was the phase where you couldn't get a supermarket delivery slot for 6 weeks and we all ordered takeaways (offset by Joe Wicks' YouTube fitness classes using bottles of wine as hand weights). Entertainment became entirely home-centred as we replaced going out with baking sourdough (for those lucky enough to source flour) and binging on Tiger King and Selling Sunset. 

Miles attributes all of these behaviours to 6 trends which have emerged; the first 4 are what he calls reaction behaviour to containment, and the final 2 are typical of economic contraction:

1. Initial preparedness for disaster (the hand gel rush)

2. Stockpiling essentials and non-perishables (the toilet roll hunt)

3. Increased online/ on-demand purchases (grocery deliveries, takeaways and exercise equipment)

4. Increased streaming services/ at-home entertainment (Netflix, YouTube yoga and virtual quizzes)

5. Cessation of out-of-home leisure (cinemas, gyms, concerts, sports matches, travel and tourism)

6. Elimination of non-essential/ luxury products (e.g. cosmetics, fashion)

Typical recession behaviour

Miles warns that we are not feeling the full recessionary behaviours yet as, so far, government support has cushioned the blow to household income. He points to typical behaviours which have historically arisen in periods of recession, which could be on the horizon:

1. Priority spending in core categories (dairy, bread, fruit, alcohol) but withdrawal from expensive ranges (e.g. organic). The saving grace for organic food however may be our strengthened focus on health, nutrition, product provenance and convenience. 

2. Promotion hunting, value packs and fewer impulse purchases. This kind of environment, where retailers are competing for consumer spending, puts pressure on manufacturer's costs and has historically caused food manufacturer consolidation and M&A activity. So far, food manufacturers have generally enjoyed a "margin pressure holiday" due to the absence of promotional activity whilst consumers stocked their pantries and ate at home over lockdown. This is likely to end soon and so Miles anticipates a step up in price competition and promotional pressure on manufacturers from retailers.

Likely winners?

Miles is backing "food manufacturers with benefit of scale that can provide reassurance to grocery chains that they can maintain security of supply". Other winners might arise from the growing trend to shop locally (following the shift away from structured weekly hypermarket shopping), such as vertical farmers and food manufacturers who are able to adopt a more local focus rather than sourcing regionally. 

It might seem a long way off yet, but for those wanting to get ahead of the curve once we are out of the other side of recession, Miles predicts that recovery will be driven by the following:

1. Acceleration of digital consumer engagement (e.g. food companies launching direct-to-consumer box delivery services, cutting out the middle man retailer). "There is a substantial potential economic benefit for brands going directly to consumers. The tricky bit has been the home delivery, but that is a model likely to continue to evolve", says Miles.

2. Consolidation of health and wellness driving purchasing decisions.

3. Supply chain resilience with the uptake of local sourcing.

4. Sustainability and ensuring the alignment of values with consumers to maintain loyalty.