Virus fears fuel online grocery sales as supermarkets enforce further product restrictions

Pasta shelf in a Sydney supermarket

Concerns over exposure to large crowds in the wake of escalating fears over the spread of Coronavirus has seen a dramatic spike in online grocery sales.

Research from Nielsen Homescan found that online grocery sales increased by over 45 per cent in the past few weeks, putting logistical pressure on retailers’ delivery networks alongside increasing pressure to keep shelves filled as consumers continue to stockpile grocery and medical items.

Supermarkets and pharmacies have seen stocks of hand sanitisers, medical face masks, toilet paper and many long life food items dry up, with manufacturers working around the clock to meet demand.

Sales of basic foodstuffs including pasta rose by over 76 per cent, while eggs, canned meals, tea, rice, flour and shelf-stable milk all recorded significant jumps in dollar sales during the four weeks to February 22, compared to the same period last year.

Nielsen said Australia is following in the footsteps of China, the US and Italy, where they have seen significant spikes in the hoarding of essential supplies.

“The rush to stock up on these goods will have an almost immediate impact on supply chains for manufacturers of the most sought-after goods,” Bernie Hughes, managing director, Nielsen Connect – Pacific.

“And while we expect that replenishment will eventually catch up in most categories – especially where production is local; there are some instances where shortages could hang around – particularly for products manufactured in, or where packaging is sourced, from China. Products that come off factory lines or go through distribution systems in virus-impacted countries could also face logistical issues.”

Hughes described it as “a fluid time” and said that retailers are balancing between keeping enough of the most sought-after supplies on their shelves while making contingency plans for longer-term gaps in their product
portfolios.”

“Managing stock levels will be critical as continuous out-of-stocks will result in shoppers store switching to get the products they need; while brand loyalty could be affected as shoppers are forced to select items outside of their usual repertoire or manage their household budget to sacrifice impulse spending and non-essential items.”

As a result of pantry stockpiling, Hughes said there will be a “mid-term sales trough” as these products are gradually consumed. Other categories, particularly shelf-stable foods, will experience expansion as households potentially consume more in-home than they usually would.

Purchase limitations in place at Australian supermarkets

On Thursday afternoon, Woolworths announced further purchase limitations on household essentials, beyond toilet paper.

Large packs of rice, 2kg and over, will be limited to one per transaction, while hand sanitiser, now at the Customer Service Desk, has been limited to two per transaction.

In a letter to customers, Woolworths CEO Brad Banducci described it as “unusual and challenging times” and hasn’t ruled out further purchase limits.

“We know it can be frustrating when we don’t have the products you need, or when delivery or pick-up windows are filled more than usual,” Banducci said.

“We’re constantly monitoring the situation and will do our best to keep all products freely available to everyone. However, if we see new shortages, we may introduce other limits. We’ll only do this if we think it’s absolutely necessary and to help make sure all customers can access the products they need.”

On Wednesday, Woolworths became the first supermarket to enforce a quantity limit on toilet paper purchases with Coles and Aldi following suit the next day.

Coles said the temporary purchase limit of four packs per transaction is to ensure “all customers have access to toilet paper”.

“This will help us maintain stock levels in stores while our suppliers increase local production and our distribution centres increase deliveries,” a spokesperson told Inside FMCG.

“While there may be some temporary stock shortages, the vast majority of products in our stores and via Coles online remain available for customers.

Toilet paper manufacturers have stepped up production with Kimberly-Clark and Sorbent now operating 24 hours a day, seven days a week. The makers of Quilton have tripled production across factories in Queensland, NSW and WA.

On Thursday food processor SPC called out the Australian Manufacturing Workers Union (AMWU), saying that industrial action by members at its Victorian factory could leave customers ‘exposed’ amid coronavirus panic.

AMWU members plan to take an hour off work to strike on Friday and not work the public holiday Monday as they try to negotiate a pay deal with the factory’s new owners.

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