Cheese wedges.
July 16, 2020

Due to COVID, Consumer Market Shift To Continue for 12 to 18 Months

 |  By: Jim Dickrell

The complete upheaval in consumer behavior due to the COVID-19 pandemic, shifting away from restaurants and food service to in-home cooking and dining, is likely to continue for the next 12 to 18 months.

That’s according to a market assessment prepared by Blimling and Associates, Inc. for CoBank.

 “We are experiencing a ‘back-to-basics’ moment unlike anything most of us have experienced in our lifetime,” says Phil Plourd, Blimling president. “Most profound, perhaps, is a massive shift where consumers eat.

During the week ending March 29, restaurant sales fell 67 percent year year-over-year while grocery store sales jumped 29 percent. According to other data, nearly three quarters of Americans are preparing 80 percent or more of all meals for family members from scratch, double what they were pre-pandemic, says Plourd.

This has resulted in a 30 percent increase in dairy aisle volume between mid-March and late May, with processed cheese up nearly 20 percent and whole milk sales up more than 10 percent.

But it’s not all good news since so much dairy, particularly cheese, is consumed through restaurants. “Amidst the pandemic, we believe retail demand for cheese is up 35 percent, food service demand is down 25 percent and institutional demand is down 60 percent. If accurate, aggregate [cheese] demand is down 35 million pounds per month,” says Plourd.

Government buying and exports have filled some of the gaps, but not enough to make up for overall consumption declines, he says.

Another concern is rising retail food prices. Some of it is due to extra labor moving food products through the supply chain. Plus higher wholesale prices for dairy products, with block cheese hitting $3/lb recently, will also drive retail prices higher. “Higher prices would ostensibly have a negative impact on dairy product demand,” he says.

Also concerning is the rising unemployment rate and consumers’ ability to afford food and other necessities. Still, says Plourd, “don’t underestimate the laziness of the American consumer.”

Consumers still demand convenience. Evidence of this is that 60 to 70 percent of restaurant sales are coming via drive-through windows at quick serve restaurants. Pizza sales have also out-performed pre-pandemic levels, with Domino’s reporting same-store sales up 21 percent year-over-year from April 20 through May 17.

Over the longer term, the dairy industry outlook remains uncertain has consumer tastes and habits adjust to the on-going pandemic and its impact on the economy. “It seems likely that consumer behavior will be different for the next 12 to 18 months than it was pre-pandemic,” says Plourd. “As that behavior takes route, dairy supply chains will need to adjust from farm to fork.”

You can read the full CoBank report here.