10 minute read 17 Mar 2021
EY - Young girl standing in subway station

Future Consumer Index Cycle 6: How a year of pandemic changed consumers

By Kathy Gramling

EY Americas Consumer Industry Markets Leader

25-year consumer products and retail veteran. Integration and teaming advocate. Passionate mentor and transformative leader. Wine enthusiast.

10 minute read 17 Mar 2021

Explore consumers’ feelings about the COVID-19 vaccine and life a year into the pandemic, and what that means for retailers and brands.

In brief

  • Could the COVID-19 vaccine bring a renewed sense of consumerism?
  • After 12 months of pandemic, what changes in the consumer are permanent and not just temporary reactions?
  • Are CPG brands 2021 strategic growth agendas consumer-centric? 

It’s been a year exactly since quarantine orders and lockdowns rolled across the United States. Last March, consumers were met with uncertainty as they began to stockpile toilet paper and hand sanitizer, shifted almost immediately to online shopping for everything from clothes to essentials to groceries, and moved to working virtually. A year later, so much and so little has changed.

In the sixth edition of the EY Future Consumer Index, we explore consumers’ feelings about the COVID-19 vaccine, where they feel they are in life at almost a year out from the start of the pandemic and the inception of the Index, and what that means for retailers and brands. We also touch on the recent Consumer Analyst Group of New York’s (CAGNY) annual conference, where many of the major CPG brands gave us a peek under the hood of their growth strategies, and how those strategies align with where the consumer is going.

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Chapter 1

Is vaccine the answer to consumerism?

The impact of a largely vaccinated population and a renewed sense of freedom on consumerism.

With a third viable vaccine in play and with a few states rolling back mask mandates, the light at the end of the tunnel seems closer and closer. It’s no secret that a vaccine could have a marked impact on people’s ability to get back out and do things — from sporting events, social gatherings and shopping more comfortably in stores. And many Americans, though not all, have plans to get the vaccine.

EY - View of Americans on taking the vaccine for COVID-19

Consumers’ top reasons for taking the vaccine center around protection for themselves (77%), but also others (75%). In fact, more Americans say that COVID-19 will stop impacting their life when most of the population is vaccinated (56%) versus when they are vaccinated (29%). That said, as much as health and safety is a main reason to get vaccinated, US consumers are almost equally as ready for the possibilities it could bring.

Some suggest that we’re in store for another era like the Roaring ‘20s, while others believe that it will take time for some to feel comfortable setting aside social distancing practices. Interestingly, 39% of US consumers expect that life will be the same after receiving the vaccine and 15% think life will be worse. Perhaps, because there’s still a significant level of discomfort doing everyday activities, as more than half of all Americans are still uncomfortable exercising in a gym (57%), going to a theater or cinema (62%), going to a bar or pub (64%), going to experiential events (64%) and traveling on public transportation (66%).

Still, the world may again look much different in a year’s time. What might the impact of a largely vaccinated population and a renewed sense of freedom be for consumerism?

It’s true that some categories, like mall-based retailers and restaurants, could see a marked impact from herd immunity. However, it’s also clear that some shifts, like shopping online and at-home consumption, may not dissipate anytime soon. Humans are inherently social creatures, and while the shift to online will likely remain, the desire for post-pandemic social interaction and validation may drive us back to the store, either temporarily or to seek something new and different.

Future consumer

38%

of consumers intend to do more shopping online and only visit stores that provide great experiences

The retailers and brands that have been able to shift supply chains to deliver through direct-to-consumer channels will continue to win. When consumers come back to stores, it will be for entertainment, for experience, for a purpose. Staples — no matter which — category should prepare for a permanent shift in an increased volume online. These issues, perhaps, provide an additional incentive to continue building up digital capabilities, enhancing the consumer experience across the entire journey and investing in alternative revenue streams.

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Chapter 2

Consumer trends that have become truths

What changes in the consumer are permanent and not just temporary reactions?

Now that we’re settled into this new normal and have been measuring consumer sentiment as a result of COVID for almost a year, we can look back on the last 12 months and answer the question that matters most – what changes in the consumer are permanent and not just temporary reactions?

  • Consumers’ focus shifts from the here and now to the bigger picture

    EY - Change in consumer focus from April 2020 to February 2021

    Retailers and brands will need to be much more intentional about how they look at their consumer holistically, not just how they shop and buy, but how they live and how their purchase decisions are driven by the most important parts of their lives, like finances and family.

    Because of the longer-term impacts of COVID-19, consumers are also much more price sensitive. In April 2020, 43% of US consumers saw price as more important than before the pandemic. That number has slowly climbed and in February 2021, came in at 56% of Americans who see price as more important.

  • At-home consumption is here to stay

    People are not just consuming more at home, they are building their entire lifestyles around their household. In the future, 26% expect to work from home more often, 28% expect to spend less on travel than before, 43% will cook more often at home, 50% will exercise at home more often and 40% will be less inclined to be involved in experiences outside the home.

    This shift in consumption has driven significant changes in the way companies interact with the consumer. Companies must now consider how their product and service assortment caters to a home environment, and potentially premiumize those offerings.

  • Online reigns supreme

    Eighty percent of US consumers are still changing the way they shop. Even though most stores are now open with safety measures in place, 60% are currently visiting brick-and-mortar stores less, and 43% will shop more often online for products they previously bought in stores. We saw, almost overnight, e-commerce strategies shift from a perpetual top priority on every retailer’s three-year plan to a desperately needed lifeline that could enable companies to survive a global pandemic.

    In order to be successful in e-commerce, you must think bigger than e-commerce. The core question retailers must ask themselves first is not “what e-commerce investments do I need to make?” but rather “what consumer experience do I want to offer?” The secret is creating a connected journey relevant to your target consumer and structuring your channel ecosystem, e‑commerce included, in such a way that provides value across that journey.

    Janet Balis said it best in her recent piece in Harvard Business Review: “Old truth: You are competing with your competitors. New truth: You are competing with the last best experience your customer had.”

  • Consumer trust is still fragile

    Trust is hard won from consumers in a normal environment, and all the uncertainty the last year has brought with it has even further tested that notion. When we first launched the Index in April 2020, nearly a quarter of US consumers said they completely trust brands (23%) and retailers (24%). Fast forward one-year later, and the trust picture is much worse. Only 10% of US consumers completely trust online-only retailers and chain retailers. Thirteen percent completely trust CPG brands.

    And once trust is lost, companies risk losing the consumer completely. Forty-seven percent say when an organization damages trust, they decided not to purchase from them at all. At the same time, 28% of consumers will pay a premium to buy from brands they trust. The onus is on companies to earn and maintain trust with consumers through transparency, authenticity of message and brand, shared purpose and a consistent experience that delivers on the brand promise.

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Chapter 3

What’s in store for consumer goods companies in 2021?

In February, CAGNY hosted their annual conference, where executive leaders from CPG companies gathered to present their growth strategies for 2021 and beyond.

In February, CAGNY hosted their annual conference, where executive leaders from some of the world’s largest CPG companies gathered (virtually) to present their growth strategies for 2021 and beyond. This year, the theme was around sustainable growth for the future, and it’s clear that CPG brands are keeping a pulse on the post-pandemic consumer to drive their strategic agenda and create long-term value.

As we look to what the consumer will want in the future, we must understand what they will prioritize. Beyond the pandemic, larger segments of Affordability First and Health First consumers indicate the importance of price and safety. But issues like the environment, societal change and experience can’t be discounted. Are CPG brands investing in the priorities that consumers are demanding?

EY - Consumer segments beyond the pandemic

The answer is, in large part, yes. Consumer brands are evolving their value propositions to meet consumer needs, and several of the key themes coming out of CAGNY closely align with where the Index finds consumers are evolving for the future. Here are three main takeaways:

1.  Accelerating the transformation agenda

Transformation was always on the agenda for many CPG brands, but COVID-19 acted as a catalyst to accelerate those transformational initiatives.

Where will those transformations focus? Consumer-centric innovation – a thread woven throughout many of the CAGNY presentations.

For most manufacturers, this means aligning product innovation, new business models and operational execution with new consumer needs, whether that’s affordability, health or experience.  This means operating model transformation to become more cost efficient while driving growth. This means digital transformation to enable ecommerce and direct-to-consumer, and a more rigorous focus on data and analytics. This means portfolio transformation to strengthen the core and invest in high growth categories.

2.  Sustainability as a strategic imperative

Many of the brands at CAGNY discussed sustainability not as a compliance and reporting exercise, but rather a strategic imperative to drive long-term stakeholder value. Companies are facing increasing pressure from all sides to become sustainable, especially from the consumer. With more than 30% of consumers identifying as Planet or Society First, ESG must be at the top of the company agenda.

Forty-four percent of consumers will pay more attention to environmental issues in the future, Another 43% say environment and climate change will be a top priority in how they live and buy and 1 in 5 will value sustainability among their most important shopping criteria in the long-term. 

Sustainability is now a matter of trust. Manufacturers must consider its role in every part of the business, from sourcing and packaging to operations and investments.

3. Supply chain transformation

The supply chain fragility and added cost pressure that emerged at the onset of COVID continues to challenge many manufacturers, but they are making the investments to transform their supply chain operations to expand capacity and agility. If CAGNY is any indication of the future of the manufacturing supply chain, automation and end-to-end planning to support real-time demand and increase speed-to-market will be the priority moving forward. 

Consumer demand for transparency, availability and delivery will continue to drive the need for agile supply chains. Forty percent of US consumers say product availability will be among their most important purchase criteria in the future. The last mile is also a key component in supply chain transformation as 1 in 4 consumers say the most frustrating part of online shopping is slow delivery and 1 in 5 are not forgiving of brands who can’t deliver on their promise.

If you could see your supply chain, would it clear the path from first mile to last? Greater visibility and transparency across the supply chain can build resilience and yield opportunities to meet rapidly shifting consumer demands and better respond to supply chain disruption.

There’s been a massive amount of change in the last year, both for consumers as well as retailers and brands. As we assess where consumers are going and how companies say they plan to adapt, brands and retailers must:

  • Deliver consistent direct-to-consumer experiences
  • Do more than build a communications strategy around ESG, and truly build it into the ways of working that consumers value
  • Leverage a broader set of ecosystem partners to add in resiliency, take out cost and show transparency of the product flow
  • Build consumer journeys, not transactions
  • Work together like never before to capture value

These areas will determine who wins the consumer of the future.

Summary

In the sixth edition of the EY Future Consumer Index, we explore consumers’ feelings about the COVID-19 vaccine, where they feel they are in life at almost a year out from the start of the pandemic, and what that means for retailers and brands. We also touch on the recent Consumer Analyst Group of New York’s (CAGNY) annual conference, and how CPG brands’ growth strategies align with where the consumer is going.

About this article

By Kathy Gramling

EY Americas Consumer Industry Markets Leader

25-year consumer products and retail veteran. Integration and teaming advocate. Passionate mentor and transformative leader. Wine enthusiast.