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12/11/2020

Pandemic retailing’s secret weapon

Dan Ochwat
Executive Editor
Dan Ochwat profile picture

As 2020 — a year that will go down in history as one of the toughest for the retail industry due to the global significance of COVID-19 — nears its end, some product and shopping trends impacting the private label and store brands segments are expected to bleed into 2021 and beyond.

One of those trends is a continued increase in supply of such pandemic-related products as hand sanitizer, disinfectants, OTC medicines and personal protective equipment like face masks. However, as a result of shoppers buying in bulk and panic shopping, some products that may not seem like a “pandemic product,” per se, saw unprecedented levels of growth worth noting, too. Products like meats, alternative meats and even oat milk (both branded and store brand offerings) sold at unprecedented levels and continue to do so heading into the new year.

According to Nielsen figures, shared with Store Brands, sales of pandemic products from January into late October skyrocketed during the first round of COVID-19. It’s a reflection of just how turbulent 2020 has been. 

And no category saw a bigger impact than hand sanitizers. For the 34 weeks ended Oct. 24, hand sanitizer sales were up nearly 700% compared with a year ago. In the May and June months, early pandemic, hand sanitizer sales were up 1,280% and 1,339%, respectively, dipping down to a 986% increase in July. Total sales for the 34 weeks were well over $1 billion.

With numbers like those, product supply was clearly an issue in stores and some retailers even began carrying new own brand hand sanitizer to keep up with demand. Delivery service Instacart developed its own brand of hand sanitizer to help keep its staff safe.  Additionally, some manufacturers not normally producing sanitizer began developing it for private label, including  regional food and alcohol supplier LiDestri Food and Drink,  based in Fairport, N.Y. Producers in the category such as Clenova, headquartered in Troy, Mich., upped production lines of hand soaps and hand sanitizers to 160 million uses a week.

And then there were companies like Perrigo that produced hand sanitizer products to help keep hospital staff and front-line workers safe. “Given our close ties in the communities where we live and work, we became aware of a hand sanitizer shortage at local area hospitals,” said Murray Kessler, president and CEO of Perrigo. “Our team in New York sprang into action and developed a formula, quickly scaled production, and donated 1 million bottles of hand sanitizer within an extraordinarily compressed timeframe to local hospitals and first responders.” 

PPE Products and More
Hand sanitizer was not alone. Not traditionally a store brand product, the popular category of masks sprung up during the pandemic and some retailers responded. Walgreens, for example, sold its own brand of masks that could be customized via the retailer’s photo department.

The service joins what the photo department has been doing for quite some time with apparel, books, gifts, ornaments, and more, said Heather Hughes, group vice president and general merchandise manager of seasonal, general merchandise and photo, who heads up Walgreens Photo.

“As we know that masks are becoming more prevalent in society, we think you should have a little fun when wearing your face mask,” Hughes said. The masks are two-ply with an inner lining that is 100% cotton and the outer shell is 100% polyester. The masks feature a pocket to add an optional carbon filter and two silicone fasteners to adjust black elastic ear straps for a custom fit.

Amazon offered private label masks and many from third-party suppliers to help meet the demand during the pandemic, but the retailer primarily stepped up to try and serve hospitals and front-line workers with face shields and masks. Bill Kopitke, head of healthcare for Amazon Business, said PPE producers in general had to overcome a multitude of challenges to keep their own operations safe and meet the demand from businesses, healthcare systems and government operations.

“These were truly desperate times for buyers for their front-line responders,” Kopitke said. “For many PPE manufacturers, identifying and reaching these organizations who needed supplies was incredibly frustrating, as government and healthcare procurement can be a complicated process rife with time-consuming barriers. Without the right resources and tools, getting supplies into the hands of essential workers can take weeks and sometimes months.”

Another category that hit serious demand hurdles were disinfectants. Nielsen showed that at their highest points in March, aerosol disinfectants and multi-purpose cleaners were up in sales year over year 294% and 141%, respectively. Sergei Baranoff, operations executive at Los Angeles-based Purple Antimicrobial, said he saw shipments of his cleaning products grow 100x since the early part of March.

“In general, no one could really predict what was going to occur during the early months of the pandemic. As a sense of the ‘new normal’ has emerged, manufacturers have been able to have a better sense of outbound forecasts,” Baranoff said. “However, what we have learned from this is the need to manage and in essence own supply chains and rely less upon outside variables.”

Perrigo, a leader in branded and store brand self-care products, prioritized production of its essential products during COVID-19, including acetaminophen, famotidine, and infant formula electrolytes to meet massive demand in late February and early March. “At one point, demand for our acetaminophen spiked to five times normal levels,” Kessler noted.

For several months during the pandemic, Perrigo prioritized products that were deemed most essential for consumers in lieu of more profitable items, Kessler said. Count sizes of products were deprioritized on some products so others like infant formula could be maxed out in production, for example.

Kessler said the company has once again began producing many SKUs that were once deprioritized, but the entire exercise helped show just how quickly Perrigo’s plants can successfully adjust to a dynamic environment.

Working with retailers on store brand items in need, Kessler said it was a matter of communicating weekly to maintain stock levels and manage surges. “We have embraced the philosophy of ‘overcommunication,’ during these unprecedented times.”

The company still is looking to develop new products in the year ahead, too, aiming to produce a new store brand infant formula, a naturals line of products with a branded partner and other innovations within OTC. “Also, the pipeline of Rx-to-OTC switches seems to be reemerging as an opportunity to increase access to needed remedies and we are eagerly mining this area for attractive new products,” Kessler said.

Pandemic-impacted Products
While not COVID-fighting products, many other categories also saw large increases in sales during the pandemic, according to Nielsen. Fresh meat alternatives, for example, saw sales increase 114% for the 34-week period and oat milk has spiked more than 204% for the same period.

Todd Maute, partner at New York-based brand strategy and design agency CBX, said that as much as six months into the pandemic, products like paper towels and frozen foods still were hard to find on grocery shelves and those store brand suppliers needed to adjust allocations per customer, consolidate offerings to create manufacturing efficiencies and extend lead times to better manage their ability to fulfill.

“Other suppliers actually stopped packing retail brands altogether,” he said. “They wanted to avoid having to start and stop their manufacturing lines, which reduces their efficiency. By making their own packer’s label, they could keep their lines running and better meet the enormous increases in demand.”

Private brands as a whole did very well during the pandemic, according to Nielsen, reporting total private label sales of $114 billion for those key 34 weeks — a 14.3% rise in sales that came close to matching national brand growth, which was 15% for the same period. 

Jason Stull, vice president of sales and marketing for Chicago-based Mold-Rite Plastics, saw a huge increase in sales in its specialty food category, where they develop closures for spices and seasonings, condiments, dressings and sauces. But the biggest sales growth came from closures and products it produces for its health and wellness clients such as vitamins and supplements, OTC items and personal care products, which grew by 70% during those peak pandemic months.

This trend isn’t going away, either. Stull said sales of items like hand sanitizer and vitamins and supplements should remain high. “People are adapting to more of a healthy lifestyle, and they’re going to probably implement that as part of normal behavior,” he said, adding that a continued need to help supply to front-line workers will stay high.

A Look Ahead
It’s true that even with news of potential COVID-19 vaccines on the way in 2021, America won’t be healed overnight and sales of pandemic-related products should grind on.

“For the rest of 2020 and heading into 2021, we remain focused on improving our service levels and continuing to fully replenish our U.S. supply chain,”
Murray Kessler, president and CEO, Perrigo

“For the rest of 2020 and heading into 2021, we remain focused on improving our service levels and continuing to fully replenish our U.S. supply chain,” Perrigo’s Kessler said. “Some raw materials continue to see high demand and we are working hard to return Perrigo and retailer inventories to normalized levels. We remain confident that Perrigo is well-positioned to capitalize in the ‘new normal world’ where self-care, value and e-commerce are more important than ever before.”

Maute echoed the increase in e-commerce sales going forward, while Kopitke of Amazon Business stressed how sellers over e-commerce should be looked at as a way to support the supply chain. “For e-commerce stores, they should stay on the pulse of scarce supply and backorder needs to be a ready consistent source for customers unsatisfied with traditional channels,” he said.

“The impact technology will have on the procurement process will only be more pervasive in 2021. Selling supplies through an online store provides suppliers with more direct access to thousands of new customers, streamlined purchasing processes and analytics into buying patterns that can help determine inventory needs,” Kopitke said. “These features have allowed many PPE manufacturers to respond to record-high spikes in demand and supply issues. There will be both small and big opportunities alike in the future for suppliers.”

Maute said retailers and manufacturers will embark on a brand- and SKU-rationalization process to ensure that they can meet consumer demand going forward. “The distinction between need-to-have and nice-to-have will prevail,” he noted.

As for product trends adding to those directly impacted by the pandemic, Maute said to look at meal-kit solutions, as cooking from home has increased as an overall consumer behavior.

Indeed, retailers like Giant launched a new meal-kit called Cook-in-Bag, and Albertsons expanded its free-from own brand Open Nature’s meal-kit offering with a dozen new meals called Open Nature Savory Skillet Meals. ShopRite has begun piloting a complete meal-solutions concept shop in select stores that includes delivery of meals and a focus on its store brand products. Kroger has been strengthening its Home Chef meal-kit solution, too.

It’s an example of retailers innovating to meet shopper needs around the pandemic, and how they innovate with private brands will need to continue, too, helping consumers adjust to life in “the new normal,” as often referred to above.

“Store brand sales grew significantly over the past year and so did online shopping,” Maute said. “Retailers will continue to scurry to make sure their e-commerce chops are up to the ‘new normal.’ They will need to continue to manage high demand for the foreseeable future.”