Saturday, July 4, 2020

Nielsen Study Sheds Light on Puerto Rico Consumer in Times of Covid-19

By on June 18, 2020

Nielsen Business Director Tatiana Irizarry Hilera (Courtesy)

Stocking up Leads to Huge Sales of Canned, Refrigerated Goods

SAN JUAN — As Puerto Rico enters its third phase of reopening on the heels of the most recent executive order issued by Gov. Wanda Vázquez—movie theaters, restaurants, bars, stores inside and outside of malls are not quite sure of profit to their bottom lines. Will it necessarily signify an up-clip in the sale of all items or will it simply alter consumer behavior in their priorities at the point of sale? Case in point, it is highly unlikely that consumers will hoard toilet paper as they did days prior to the “Wanda-stay” lockdown.

“I believe that the fact that we were staying at home and not consuming the toilet paper at the office is a factor. People don’t know [if it is enough] and that uncertainty perhaps drives a panic purchase,” explained Nielsen Business Director Tatiana Irizarry Hilera, who spearheaded a study obtained by Caribbean Business of Puerto Rico’s consumer behavior prior to and during the Covid-19 shelter-in-place orders. “And I think that our experience after [Hurricane] Maria, where we went to stock up on items only to find that there were too many empty shelves, had an impact. We entered a different mindset in our stocking up of goods.”

The study, titled “First Quarter Tendencies 2020,” which was conducted by Nielsen’s Global Connect division in Puerto Rico, analyzed monthly comparisons (year-over-year) of purchases made by consumers across 17 weeks using direct data provided by a universe of 272 stores. The findings—beyond the great toilet paper raid—are eye-opening.

“Canned meat, milk, crackers, juices and bread are the categories with greatest growth” during the lockdown, explained the Nielsen executive, adding that during   earthquakes and after Maria, batteries were a big item because there was no power. “When there is no electricity, refrigerated products are extremely affected. By the end of 2017, refrigerated products had dropped by double digits. We are talking about cheese, milk, ice cream—those were affected. Yet in 2018, they bounced back. 

“Right now, in the middle of the pandemic, refrigerated products are performing well at the point of sale because you have power at home and no problem refrigerating. It has generated what we are calling a ‘stay-at-home’ economy. It is an economy that is very much driven to have consumers learn at home, exercise at home and cook at home. And the categories that have grown are very much those that are geared to be consumed at home.” 

Tellingly, there were spikes in consumption—mad dashes to the cash register, really—tied to events occurring during the pandemic (see chart below). A first spike was registered on March 20, days after Vázquez issued an executive order requiring “all businesses, with the exception of those dedicated to the sale of food and the wholesale distribution of medical equipment, pharmacies, supermarkets, gas stations, banking or financial institutions and those related to the chain of distribution of food, medicines, medical articles and gas” to close, along with the establishment of a 9 p.m. to 5 a.m. curfew through March 30. Tellingly, the biggest jump occurred during week 10, when Gov. Vázquez declared a state of emergency and during week 11 (March 15), when the the curfew and business restrictions commenced.

The shopping frenzy that ensued in the wake of those decrees by Gov. Vázquez led to skyrocketing sales of groceries, refrigerated groceries, canned products and household goods. A subsequent report of year-to-date sales shows a massive 725 percent increase in the purchase of hand sanitizer. Likewise, such home cleaning products as bleach, bathroom cleaners and cleaning wipes helped the category jump 25.3 percent. It is noteworthy that alcoholic beverages in May jumped a whopping 39.4 percent year-over-year and remained one of the big performers in a comparison between April and May this year, with 19.5 percent, while all other categories with the exception of health and beauty (24 percent) dropped from their astronomical highs. The big loser in the year-over-year report shows cosmetics and beauty products plummeting 69 percent.  

Broken-down time

Nielsen broke consumer behavior into thresholds of Covid-19 concerns—call them phases of consumers coming to grips with life under lockdown. The first two stages, Proactive Health-Minded Buying and Reactive Health Management, are precursors to Pantry Preparation (weeks nine and 10), followed by Quarantined Living Preparation (weeks 11 and 12), Restricted Living (weeks 11 through the third phase of reopening) and Living a New Normal (starting June 16). 

Although the words “before, during and after” underpin stages in the Nielsen report. it is too early to tell whether we will be using “before, during, after and during again” to put into context the stages of this new “abnormal” with which societies across the world are coping.

During the tail end of the Restricted Living threshold—which covers weeks 13, 14 and 15—there is a dramatic drop in Nielsen basket value sales compared with the huge spikes during week 11 and 12 due to the fact that consumers have already stocked up anticipating the three-day shutdown during Easter week. 

“We then saw an up clip on week 16, what we would call a restocking week as talk of disbursement of fed funds commences to circulate leading to a boost in consumer confidence to spend at the cash registers,” explained Nielsen’s Irizarry. Although the Nielsen Global Connect study compares year-to-year across 17 weeks, an April to May comparison reveals spikes in purchasing tied to executive orders and those fed funds coming down the pike followed by a drop in purchasing.

“You are going to see a deceleration because you already had very high levels of purchasing during the spikes in sales. Hygiene and cosmetics recover from April levels; groceries and canned goods come back down because those sales had gone through the roof,” the Nielsen Connect business director added. “Interestingly, if you look at the year-to-date numbers, those categories that performed well still show double-digit growth.”   

Data-driven

In gathering its data for the study, Connect uses Scantrack, a weekly registry of activity from certain chain stores. Others send their information monthly, have weekly breakdowns of some point-of-sale info that is gathered and verified by Nielsen directly through data and through brigades that go out into the field to verify information.  

Nielsen complements that data with figures compiled by small- and midsize businesses down the trade. Although Nielsen Connect’s business model provides retailers with intelligence in exchange for raw data, there is an important part of the company’s business model that provides service for manufacturers and distributors. “This is different, than perhaps the retailer. The manufacturers might use the info to know that they are on the right track knowing their strengths, perhaps leading them to seek greater shelf space,” Irizarry explained. “Likewise there could be a tradeoff benefit between manufacturers and retailers. It is often a common language, the basis for negotiation to help brands in categories grow.”

Nielsen Connect also uses Home Scan, a different methodology, to enlist a group of households that register their purchases across time. “It doesn’t matter what you buy or where you buy it. You have a scanner at home and you basically register the barcodes of what you bought, where you bought it and how much you spent on the entire invoice—even whether you purchased the items on sale,” explained Irizarry. 

This scan, Irizarry said, is representative of all homes—demographically speaking—in accordance with what is reported by the Census Bureau. 

More than an accurate reflection of peaks and valleys in consumption during the Covid-19 pandemic, the Nielsen Connect study sheds light on a shift in messaging with consumers. “We are seeing campaigns that are focusing differently in communicating with consumers. Make the most of this situation to stay at home. The message with consumers has to be more genuine to the times that they are living,” Irizarry punctuated.

An in-depth look at the findings in the Nielsen report will be discussed during a webinar to be hosted by the Chamber of Marketing, Industry and Food Distribution (MIDA by its Spanish acronym) on June 25 at 9:30 a.m.