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INDUSTRY INSIGHT GROWTH THROUGH PREMIUMISATION AND PRICE PROTECTION How the COVID-19 pandemic is impacting consumer behaviour and spending patterns. PBy IRI Insights Director Daniel Bone. remiumisation reflects the ability to command a higher price per volume. Given the maturity and high penetration of most FMCG product categories, as well as the stunted population growth that will occur as a result of COVID-19, the industry is even more incentivised to pursue strategies and tactics that yield higher net prices. The challenge is the diminishing willingness/ability to pay higher prices among recession wary Australian shoppers. The so-called COVID quarter coincided with circumstantial premiumisation whereby promotional plans and routine discounts gave way to a laser-like focus on optimising on-shelf availability above all else. Fluctuations in the price of fresh food due to drought, and challenging growing conditions also contributed to a significant share of FMCG volume being converted to a higher dollar value (the essence of premiumisation). This was particularly apparent during peak stockpiling in late March and April when IRI recorded a pronounced widening of the gap between supermarket dollar and unit growth on a weekly basis. At least five percentage points difference existed between the two measures (dollar growth being higher) from peak stockpiling through to mid-May. Our macro shopper panel metrics reinforce this: in the four weeks to 24 May, grocery prices were up 7.2 per cent. Ongoing COVID-19 themed primary research conducted with more than 5000 of our Australian shopper panellists shows that these rises have not gone unnoticed. Sixty-three per cent of surveyed Australians were highly aware of “price increases because of the coronavirus” in the first two weeks of April. Fifty-four per cent felt the same way in May. Across both waves of research, under 10 per cent of respondents had not noticed. Higher (perceived) prices have been more palatable when the convenience of proximity has topped the hierarchy of factors shaping shopping destinations. When shoppers were asked to reflect on the previous month (April 2020), 59 per cent indicated shopping decisions had been driven by locational convenience. Far fewer (26 per cent) cited “lowest prices or best deals”. This shopper narrative chimes with the impressive share gains accumulated by Metcash amid the government’s stay- at-home mandates/advice. The 36 per cent value growth amassed by Metcash in the quarter to 24 May amounted to a 1.3 percentage share point uplift versus the previous quarter and a 1.1 percentage share gain versus the same quarter last year. The price per unit growth recorded through our shopper panel has been higher in Metcash than the grocery average on both a quarterly and four- weekly basis. And that’s on top of average Metcash prices being 18 per cent higher than the grocery industry average on a cost per unit basis (NB: this is a total level and also reflects different range and store format mix). Convenience (location and list fulfilment) has been driving decisions about where to shop Fear of missing out due to scarcity of product, along with the unprecedented uncertainty and magnitude of a global pandemic, underpinned this circumstantial premiumisation. But these 34 RETAIL WORLD AUG, 2020