Turning more food shoppers into online customers represents a $58 billion growth opportunity for grocery retailers and CPG companies, according to NielsenIQ research released today at the FMI Midwinter Executive Conference.
Citing the online grocery explosion ignited by the COVID-19 crisis, Elizabeth Buchanan, head of consumer intelligence for North America at NielsenIQ, outlined an augmented outlook for omnichannel food spending in a virtual session titled “The Digitally Engaged Pandemic Food Shopper: Now What?”. The presentation was hosted by Doug Baker, vice president of industry relations for FMI-The Food Industry Association.
Online food and beverage sales — including grocery plus restaurant online delivery — jumped 125% to $106 billion over the 52 weeks ended Nov. 30, accounting for 12% of overall dollars spent in those categories, NielsenIQ data shows.
“This is an incredible acceleration of the online food and beverage space. It shattered all of our projections,” Buchanan (left) said. “Something unusual happened to the industry with the impact of COVID-19 in bringing more digitally engaged food shoppers into the mix,” she explained, adding that the upsurge accelerated online food and beverage market growth “by multiple years.”
As a result, food and beverages have become the largest online CPG segment, representing 44% of dollar sales over the 52-week period. That compares with 38% for health and beauty, 8% for home and kitchen, 8% for pet supplies and 2% for baby care. In the total “online food universe,” CPG food and beverages were a $66 billion market versus $40 billion for restaurant delivery.
“This firmly planted CPG food and beverage now as the No. 1 online CPG department as of 2020, overtaking health and beauty, which is a huge finding,” Buchanan said. “Food and beverage, as we know, had been slower to gain traction online, but the very unique circumstances in 2020 left many [consumers] without other viable options. The desire to avoid crowds or queues at checkout, restrictions on store hours — very significantly, an abrupt change in people’s daily patterns meant that e-commerce for grocery went from sort of niche to necessary.”
Fueled by the shift to food-at-home spending, beverages rank first among edible consumables categories in terms of absolute e-commerce dollar growth, followed by wine, coffee, candy/gum/mints, health and performance, salty snacks, cheese, cookies and crackers, spirits, and cereal and granola.
“Out-of-home occasions shifted to in-home consumption. A huge percentage of the population is on the go less and have replaced restaurant and bar occasions with in-home consumption of beverage and alcohol products, coffee and small indulgences like candy, cookies and snack foods,” said Buchanan. “This list, I imagine, surprises no one in terms of the top 10 food and beverage categories online based on dollar growth. But the overwhelming opportunity here is to continue to think about how those behaviors are going to continue to evolve this list as we think about 2021.”
Pickup has been the clear on-ramp for consumers’ online food and beverage purchases. Click-and-collect orders surged 130% in the 52-week span, reflecting a 113% gain in the number of people who used that e-grocery fulfillment method.
“Trips that are initiated online and then picked up in store continue to power CPG e-commerce,” according to Buchanan. “This provides shoppers peace of mind on things like delivery fees and on scheduling and timing — not having your groceries show up during the middle of your conference call, for example, and sitting on your porch for an hour.”
And on the delivery side, Instacart has been a key entry point for food retailers looking to quickly get online and scale their e-commerce business, Buchanan noted. The same-day delivery giant saw a 17% increase in merchants on its platform during 2020, accounting for $15.7 billion in food and beverage sales over the 52 weeks, just behind $17.4 billion for Amazon and ahead of $6.5 billion for Walmart, $6.1 billion for The Kroger Co. and $2.2 billion for Target.
“Instacart is sort of an avenue for merchants to get online,” she said. “We saw a significant rise in smaller, local retail participants in the Instacart marketplace, but we continued to see some of the stalwarts of Instacart — those like Costco, Aldi, Publix, Kroger, even Wegmans — have significant contributions to the Instacart model.”
Almost a year into the coronavirus pandemic, online food and beverage sales remain elevated, averaging $3 billion more monthly versus 2019, NielsenIQ figures indicate. The spend per online CPG buyer came in at $501 for 2020, jumping from $348 in 2019 and $321 in 2018. More than 20 million new CPG customers entered the online arena in 2020, boosting the share of households buying online to 32% from 19% for food, 60% from 45% for nonfood and 40% from 27% for CPG overall.
Looking ahead, NielsenIQ forecasts CPG food and beverage online sales of $103 billion, with a low estimate of $94 billion and a high estimate of $109 billion. CPG online food and beverage dollar sales totaled $66 billion in 2020, more than double the $31 billion generated in 2019.
“The good news is, as shoppers became more comfortable and engaged, they increased their spend. Dollars per buyer for online CPG have grown every year, and they’ve grown substantially in 2020. So now the question for brands and retailers is to look at this for their business in the context of omni, consumers operating both online and offline. As the pandemic [situation] improves, people will return to stores and continue to shop online. So the work is now to understand the trips and baskets that are most profitable for you in an omni context, understanding your shopper’s alternatives and activating the right kinds of trips and baskets.”
FMI’s Baker underscored the disruption brought by COVID-19 in how the pandemic transformed expectations for the growth of the online grocery market.
“Nielsen and FMI looked at this just last January, right? A year ago, we put out a five-year forecast. When we came back together and said, ‘We need to revisit this number,’ it was really difficult to say, ‘Let’s look further than this year,’ simply because there are so many factors that are going to impact this year. To think that we’ll be just shy of probably about $8 billion a month in online e-commerce, that’s pretty aggressive. But the possibility is there,” Baker said. “One thing that comes to my mind is that before the pandemic, we talked about the fact that the Millennial demographic was somewhat mature, and so the growth opportunity was increasing in the [Baby] Boomers and the [Generation] X’ers. Now we’re finding that the Boomers are actually the fastest-growing [customer] category in e-commerce. So their maturity level is growing as well.”