COVID-19: Impact on CPG
4 min. read

COVID-19: Impact on CPG

Coronavirus spread has left businesses around the world, counting costs. This is how Fractal is looking at COVID-19 impacting the consumer goods companies.

In a matter of just a few weeks, the COVID-19 threat has escalated to an unprecedented global health crisis.  As of March 17th, there are over 180,000 people infected across the world and over 4,000 in the US. Containing this global threat, governments are taking extraordinary measures, unseen in modern history – closing borders, putting communities, cities, and countries under the lockdown, and effectively shutting down entire industries.

Along with the escalating health crisis, there are also skyrocketing economic implications and uncertainties about the impact of COVID-19. While travel, entertainment, hospitality, and restaurants came to screeching halt, business leaders across other industries are trying to assess what COVID-19 will mean to their business.

Impact on Consumer Goods companies is likely to be nuanced, involving both the demand and supply sides of the equation. And unlike other industries, a shift in consumer behaviors is leading to the growing demand for many food, beverage, and home care categories, as well as to changing brand preferences. At the same time, manufacturers need to assess how to best address likely supply chain disruptions and capacity limitations that may prevent them from meeting changing consumer needs.

Below are some emerging insights on how pandemic worries are changing consumer behavior.

Changing consumer behaviors:

  • Hunkering down at home: with accelerating mass shutdowns and the looming possibility of a lockdown, consumers are huddling at home and minimizing all social contacts; discouraging travel, parties/social gatherings; eating outcomes to a screeching halt as multiple states mandating restaurants/bars closures
  • Stockpiling:  sales a broad array of items from cleaning/disinfecting and preventative health products to food staples. While some of this is pantry-loading, much is likely to have significant incrementality
  • Turning to comfort foods and comfort brands: during times of stress, consumers tend to turn towards their comfort foods and old favorites,
  • Back to trusted brands: preference switches switching back to trusted national brands and away from natural/organic and Private Label, particularly in cleaning, disinfecting, health products,
  • Ecommerce acceleration: ordering online to avoid extra trips,
  • Eating all meals at home – all week: with all kids and adults huddled at home 24/7, all meals will be consumed at home,
  • More time: more cooking from scratch, more baking – “projects” to occupy kids,
  • More snacking: stress, Netflix, boredom, proximity to the pantry – all these are likely to drive snacking, at least temporarily,
  • Providence awareness: avoidance of products from impacted regions,
  • Food safety worries: concerns about produce and fresh products that may have had exposure to the virus.

Anticipated impact on demand by category type:


Supply chain issues and concerns:

  • Product availability and capacity constraints – particularly in key stockpiled categories such as hand sanitizer, branded high efficacy cleaning products – demand exponentially exceeds available supply,
  • Lack of clarity about future demand– traditional forecasting models, will not be accurate for the next 6 -12 until things at least marginally go back to normal,
  • Potential long-terms import gaps for products made in impacted countries and regions – as well as transportation and shipping disruptions,
  • Risks of domestic supply chain disruptions – reduced manufacturing capacity and shipping constraints, shortage of workers if lockdown is implemented, or areas of the country are cordoned off.

Implications to CPG firms:

Most firms are now in the Crisis Management mode: ensuring employees and consumer safety and scrambling to keep critical goods on the shelf. Beyond this, issues that need to be addressed are:

  1. Assessing and modeling impact on demand: what will the next 1, 3, 6, 12 months look like? Forecast models need to be retooled to reflect consumer behavior as it progresses through the situation and to pick up a field signal rapidly.
  2. Optimizing manufacturing: balancing diminished capacity due to employee safety and lockdowns with increased demand.
  3. Optimizing delivery logistics: increased volume will require higher transportation capacity; however, flexibility is needed to meet the volatility of demand as the situation progresses.
  4. Evaluating pricing and trade investments – normal price sensitivities no longer apply. Moreover, subtleties will be highly dynamic, changing as we progress from pantry-loading to home confinement stage, and as the economy likely deteriorates.
  5. Accelerating e-commerce and DTC sales – product shortages, shifting to the online and more vigilant consumers with more time on their hands can create an opportunity to drive traffic to your website and start selling directly to the consumer.
  6. Re-assessing marketing investments – advertising investment, messaging, channels.
  7. Addressing longer-term supply chain implications: target safety stock and inventory levels, supplier diversification.

To add a historic perspective, we compared how COVID-19 is impacting consumer behavior vs. another major shock: 2008 recession

2008 great recession vs 2019 COVID

The insights/analytics team is all set to witness a new ‘Normal’. How can we predict the new behavior from the consumer. Find out hereConsumer insights/analytics leading in defining new normal



Lana Klein

Lana Klein

Client Partner, CPG Practice