Never mind the hummus or halloumi. As shoppers have stocked up during various versions of lockdowns, they have been filling their carts with old brands such as Hot Pockets, long spurned in favor of healthier, hipper fare.
Isolating consumers who settle in on the sofa are giving new life to labels that once advertised alongside the likes of “Magnum P.I.” and “Cheers.”
The trend is reinvigorating Nestle’s microwaveable meals, as well as Unilever’s Hellmann’s mayonnaise, Campbell Soup and Kraft Heinz’s Oscar Mayer hot dogs.
As sales of these stalwarts stagnated in recent years, their owners turned to niche acquisitions in areas such as vegan dining to seek growth. The shift in demand is helping consumer-goods giants weather the crisis.
Nestle reported its fastest quarterly sales growth in almost five years on Friday.
Kraft Heinz said earlier this month surging demand drove a 6 percent increase in organic sales in the first quarter.
“At these times, consumers do seek the reassurance of big, familiar, trusted brands,” Unilever CEO Alan Jope said on a conference call Thursday.
Premier Foods, a U.K. food manufacturer that has been struggling to manage its debt as consumers turned away from its sugar- and salt-laden brands, said this week that products like Smash instant powdered mashed potatoes were selling well.
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It’s not just food that’s benefiting. L’Oreal SA’s mainstream brand of makeup and shampoo, available in supermarkets that mostly remain open amid shutdowns of hair salons, is buffering a decline in sales of the company’s luxury cosmetics, which had been driving such as in recent years. Luxury retailers are featuring loungewear on their websites.
“Consumers go back to the brands they know,” L’Oreal CEO Jean-Paul Agon told analysts on April 16.
“It will probably be more difficult for some small players. It’s unfortunate, but it’s the Darwinian side of this industry.”
Consumer-goods giants have the scale to navigate the logistical and supply-chain hurdles thrown up by the pandemic, including travel and border restrictions.
So far they’ve stood up to the challenge of feeding shoppers’ renewed enthusiasm for baked beans or macaroni and cheese.
Whether the trend back to mainstream labels outlasts the virus is unclear. Consumer giants say it’s hard to keep abreast of demand shifts, given the pace of change.
“We are not coming to the end of it any time soon,” Jope said on Bloomberg TV Thursday. “Everyone that’s tried to second-guess what’s going to happen has regretted it.”
The shift back to mainstream brands is no panacea for their owners because they’re often priced below niche offerings. A worsening economic situation could fuel demand for even cheaper alternatives.
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Hershey said Thursday consumers were shifting to cheaper snack options. Nestle’s pricing dropped by the most in at least two decades, according to Vontobel analyst Jean-Philippe Bertschy.
Consumers who greeted the advent of lockdowns with a burst of enthusiasm for the kitchen are flagging. A surge in online orders suggests Americans are sick of cooking, according to Chipotle Mexican Grill CEO Brian Niccol. Recent sales data from Domino’s Pizza appear to back him up.
Whether the trend toward big brands will outlast the virus is unclear.
Yet even in China, where lockdowns have been eased, consumers seem to have developed a taste for more comfort food. They bought significantly more nuts and chocolate online in February and March, according to Index.1688, which collects data from Alibaba Group Holding’s shopping sites.
Even after the epidemic waned, they have stayed away from restaurants and stuck to home cooking. That’s forcing restaurant operators such as KFC and Pizza Hut owner Yum China Holdings and ho-pot chain Haidilao to shift to offering delivery of raw or ready-made meal kits to people’s homes.
With so many people working at home elsewhere around the world, refrigerators need to be filled. Perceived health benefits are boosting sales of some products that have been in the doldrums for years.
After struggling with sluggish demand for yogurt in Europe, Danone this week reported a big uptick in sales of its Actimel brand as consumers buy probiotic drinks in the hope that they might boost their immunity.
The French company had been challenged by the rise of upstarts such as Chobani.
“The food revolution that propelled all these small, nice brands on the shelves may be put hold,” Danone CEO Emmanuel Faber said Tuesday. “This is a time for big brands, if we act properly.
“The simplification of stock-keeping units, assortments and ranges in the trade is very significant. They need reliable partners that can act at scale.”
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