New consumer habits are impacting domestic dairy demand
According to a much quoted rule, a new habit is formed over 21 days while it takes 90 days to make a permanent lifestyle change.
Although the science behind this claim is difficult to substantiate, the consequences of new habits have probably never been quite as apparent as during 2020.
With people stuck at home more than ever before, consumers are fundamentally changing their behaviour, as well as the products they buy.
The latest Dairy Australia Situation and Outlook report, released on October 7, reveals how consumers’ new habits are impacting domestic dairy demand.
Through the roller-coaster that was the first wave of COVID-19 infections, dairy demand remained relatively resilient, in part demonstrating the industry’s ability to quickly adjust.
In many instances the supply chain was flexible and able to adapt, for example by shifting products destined for foodservice channels into the retail sector.
This helped to mitigate revenue loss when foodservice demand was virtually wiped out overnight.
Data from Dairy Australia’s domestic sales database shows that sales of cheese through grocery channels surged during the first three months of the pandemic, before reverting back to longer term averages.
The strength in demand also showed just how valued certain products are, as consumers were willing to change purchasing behaviours when pandemic-induced restrictions upset supply chains.
As people no longer travelled to work or school, sales of products usually purchased on-the-go, in convenience or petrol stores, decreased.
Flavoured milk was one example, with the volume sold through non-grocery (route trade) channels down 19 per cent in 2019-20.
Fortunately, many consumers turned to supermarkets for their flavoured milk fix.
This resulted in an increase in sales in grocery outlets, with Dairy Australia’s domestic sales database showing sales grew six per cent in 2019-20.
While consumers were quick to change purchasing habits, the increase in grocery sales did not manage to completely offset the loss from non-grocery outlets. Nationally, flavoured milk sales ended three per cent down for the financial year.
While flavoured milk has been one example where a significant shift in consumer buying behaviours between channels largely protected sales, there have been winners and losers from the COVID-19 pandemic.
Not surprisingly, as consumers spend more time at home, restaurant revenue has fallen. While takeaway sales grew and food ordering apps have been a go-to for many, the home kitchen also received a solid workout. Cooking (and baking) has experienced a renaissance.
As consumers eat more meals at home, dairy products used in cooking (and baking) are the ones that have grown the fastest since the start of the pandemic.
Sales of butter, everyday-style cheese and plain yoghurt have grown strongly since the initial COVID-19 outbreak.
Demand for larger pack sizes of these products especially increased, as consumers appear to be stocking up fridges at home.
Before the pandemic, premium dairy products, usually sold in individual or small pack sizes, were a major growth driver for the industry.
This included sales of single-serve yoghurts or single-serve cheese packs consumers grabbed on-the-go.
As people have settled into new habits, working from home and moving around less, convenience has taken a back seat.
A key focus instead seems to be buying products to be consumed at home.
It is encouraging that dairy is a key ingredient in many recipes since consumers are cooking and baking more than ever before.
This helps support domestic demand for dairy and shows growth opportunities available for the industry.
As the pandemic is cementing new consumer habits over many months, it is likely some of these new behaviours will become permanent lifestyle changes.
If realised, the industry’s ability to capitalise on new growth trends will be key to ensure strong ongoing demand for Australian dairy, as we settle into a new normal.