Will Covid-19 enlarge consumption in Ice cream?

Covid-19 has been changing Chinese consumer’s behaviors across aspects; from spending, lifestyle, shopping channel to media consumption. Many industries, including FMCG, have been experiencing negative impacts of the virus due to the quarantine regulation and the shift of priorities in consumer’s perception.

17 years ago, when SARS hit China, Packaged Ice cream struggled to maintain in home, lagging behind the development of Food and other snacking. 

However, in 2020, when negative news kept popping up after the announcement of national outbreak and consumers could not help feeling anxious, depressed and lost*, IH Ice cream enjoyed 18% growth in the first two weeks of the outbreak, and accelerated at 37% in the next fortnight, outshining FMCG Food and Snacking. 

This does not only reflect the differences in how people react to similar events under evolving macro landscape, but also proves that the ability to connect and motivate consumers emotionally during epidemic is highly appreciated.

With the willingness to support Packaged Ice cream manufacturers during and after the epidemic, Kantar Worldpanel hereby gathered updated observations from purchasing perspective to provide food for thoughts on future development of this category.

01. The emergence of In-home consumption

Compared with other countries (including neighboring Vietnam and Indonesia), eating ice cream at home is not a common activity for Chinese people. In fact, there are less than 50% of Chinese families buy ice cream for in-home indulgence and family sharing every year.

In three years of 2017-2019, volume contribution of IH during Chinese New Year month is less than 25%. Yet in 2020, this number increased to 37% under the impact of quarantine regulation. Despite the rising priority for fresh food, staples and hygiene during this time, the love for Ice cream is still there, and people are satisfying their need in home when eating out is not encouraged.

Breaking down the source of growth for this category, the development of Ice cream last year strongly relied on the increase of average price, thanks to premium trend and manufacturers’ price raising. 

However, during the first and most crucial month of Covid-19, the growth of in-home Ice cream was backed by more shoppers, more frequent purchases and bigger trip size. 

This healthy movement clearly reflected the role of Ice cream in satisfying the need of mood lifting among individuals when they study/ work from home and of family sharing when people spend more time at home.

Tips for manufacturers

• Although the sustainability of IH consumption for Packaged Ice cream is still to be seen and we cannot expect this category to maintain the growth as well as Hygiene categories could do after SARS, investments to explore in-home occasions will pay off hugely.

• In short term, it is essential for Packaged Ice cream players to redistribute media support towards indoor touchpoints, especially on online platforms, and ensure sustainable stock in brick-and-mortar stores. Small Modern trade formats and Grocery are top priority of distribution during this special period. Meanwhile, Gifting and Online are less relevant to this category due to its dependence on temperature to maintain original quality, texture and shape.

• In longer term, besides trade and marketing efforts, innovations to offer more healthy products will help brands and total categories prevail in the future, as rising health/ beauty concern could be the biggest constrains to build up Packaged Ice cream consumption.

02.  White gap for non-summer consumption when in home

Unlike other FMCG categories, Ice cream experiences the peak of consumption in summer, when hot weather triggers the need for something cool.

In 2019, 55% OOH volume and 72% IH volume of Packaged Ice cream was consumed within only 4 months of the year, from mid-June to early-September. It means during summer, Packaged Ice cream consumption increases by +80% for OOH and by +133% for IH, much higher than the uplift of Treat and Snack in their peak season. 

This comparison demonstrates the crucial role of summer to Packaged Ice cream but also shows a fact that in IH market, low season generates less than half of volume compared to peak season regardless of double time length. 

In fact, the contribution of IH in peak season is up to 43%, much higher than 28% in low season. Such a strong bias of time and consumption for IH market definitely indicates white gap for cool seasons and raise the question of the how much brands have leveraged low season to grow when IH.

Tips for manufacturers

• To capture IH occasions in low season, Packaged Ice Cream players can consider the triggers of purchase in different time of the year. When setting aside the preference of taste (the key reason for consumption of more than 30% purchases), “refreshing” is more likely to trigger purchases during summer while “want something rich” and “to treat myself” are more appealing reasons in low season. Ice cream players can customize their communication in different time of the year to capture different needs of consumers.

• Finally yet importantly, global warming is now one of the biggest trend worldwide and affecting many aspects of life. While Packaged Ice cream could be one of the industries to benefit from it (both IH and OOH, during both high and low season), actions to enhance eco-friendly image would help brands win in competition and ensure sustainable growth.

After tremendous efforts to contain the virus, China started to see a cool-down in the spread of Covid-19 by end of February. 

According to experts in medical and health care, the epidemic is forecasted to end by Q2’2020. Until then, players of Packaged Ice cream should well leverage this opportunity to convert and educate consumers about in-home pre-summer consumption, not only to compensate the loss of OOH in short term but also to open a new development area in the future.

 At the same time, we should be well prepared for the upcoming hot season when things get back to normal and OOH consumption revives. The outdoor F&B competition this summer is expected to be fiercer than ever.

Reference

https://cn-en.kantar.com/business/health/2020/health-awareness-and-behaviors-during-covid-19-epidemic/

Note

Treat and Snack = Biscuit, Crispy Snack, Confectionery (Chocolate, Gum, Mint, Fruity Candy)