Girl pouring milk into glass.
August 11, 2020

Surge In COVID Cases Impacts Pattern of Dairy Sales

 |  By: Jim Dickrell

The spike in COVID-19 cases in the South and Midwest this summer is likely to impact the pattern of where dairy is sold and ultimately consumed.

The number of people who were “very concerned” about COVID peaked at 67% in April and then started trending downward through the rest of spring and into early summer, according to Datassential. But as summer wore on and COVID cases came back with a vengeance in states such as Florida, Texas, Arizona and California, consumer concern ramped back up as well and re-peaked at 58% in mid-July.

Two-thirds of consumers avoided eating out when the pandemic first hit. But as states opened up and restaurants were allowed to host in-person dining, even at reduced, social-distanced levels, consumers gradually felt more comfortable and began eating out again.

That trend has been reversed with the surge in COVID cases, with more than 50% of consumers saying they are again uncomfortable eating out. Restaurant industry recovery has been stagnant for the past six weeks, and for the third week of July, was down 12% from year-ago levels.

These concerns will likely impact dairy sales as consumers refrain from eating out and continue to consume most of their meals at home. Tom Gallagher, CEO of Dairy Management, Inc., presented the data last week to about 350 dairy farmers and industry personnel involved with dairy promotion and research.

Retail grocery sales of dairy products spiked in the early weeks of the pandemic, and have remained above year earlier levels since. “There are multiple reasons why people bought what they bought during the pandemic,” notes Gallagher.

A big driver is breakfast cereal consumption. Gallagher notes that 30% of retail milk sales are tied to cereal consumption. As consumers eat more breakfasts at home, they turned to cereal which in turn drove milk sales, he says. The following table shows retail/grocery store sales changes during the pandemic.

 

Food type                                           March 9 to July 19                           Week of July 19

Natural/processed cheese                           29.9%                                                    12.4%

Milk                                                                     8.5%                                                     0.5%

Yogurt                                                                  5.4%                                                    6.4%

Ice cream/sherbet                                          15.8%                                                    -1.6%

Butter                                                                46.2%                                                   31.1%

Cottage cheese                                                  9.1%                                                     6.3%

Non-dairy beverages                                      24.4%                                                    20.0%

Cold cereal                                                        16.3%                                                      5.0%

Frozen pizza                                                      34.1%                                                    14.0%

Souce: IRI syndicated data base

 

David Mounts, CEO of Inmar Intelligence, says how consumers are making purchases has also changed radically during the pandemic. Supermarket sales are up nearly 10% during the pandemic. Consumers are making fewer trips to grocery stores, but buying more when they do.

This has positive implications for dairy sales, says Mounts. Dairy is a core part of grocery lists, and is a key driver to go back to the store and re-stock. Consumers also see dairy as a good value and providing key nutrition.

Moving forward, dairy companies will have to create supply chain networks with retailers to track and predict sales, and also create highly targeted promotions. Creating such networks will make dairy companies essential partners in driving both dairy but grocery sales.  

On-line food sales soared 6-fold during the height of the pandemic in spring, and are two to three times higher than normal year-to-date, he says. Mounts believes that in 3 to 5 years, on-line sales will account for more than half of retail dairy sales. That fact will present its own challenges and opportunities, so building networks now is key.

Barb O’Brien, DMI president, says DMI has been working diligently with Amazon to help the on-line giant fully understand the dairy category and what drives sales. In turn, Amazon has named DMI as its dairy category “captain” to help advise the company on dairy sales.