New headaches emerge as retailers and manufacturers get ready for the Great Return

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The global snack giant that owns Cadbury, Oreo and Sour Patch Kids has been making Halloween candy and chocolate at its factories in Hamilton and Toronto since May, aiming to produce about 10 per cent more than it did in 2019, the last time trick-or-treaters were free to load up their bags.

“We’re all out on Halloween,” said Martin Parent, president of Mondelez International Inc.’s Canadian operations. “I’m preparing all retailers for the biggest Halloween ever.”

The extra candy is part of a wider flurry of preparations as the retail, manufacturing and hospitality sectors brace for the country to emerge from 16 months of economic restrictions. But it’s not all good news, because the recovery phase will likely send demand shockwaves through supply chains not seen since the start of the pandemic, and companies will face a consumer base whose habits and expectations are more fragmented than ever.

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The phrase I hate the most is ‘back to normal. That normal is dead. It doesn’t exist anymore

Leger executive vice-president Christian Bourque

Consumers won’t simply go back to the way they were, according to the market research firm Leger Marketing Inc. A small portion of them are desperate to return to life exactly as it was before the crisis and others are clinging to their lockdown lives, but most have cherry-picked consumption habits from both, making it harder for companies to figure out how to serve them all.

“The phrase I hate the most is ‘back to normal,’” Leger executive vice-president Christian Bourque said. “That normal is dead. It doesn’t exist anymore.”

Leger, in collaboration with creative agency lg2, on Friday released a report that segments the population into six consumer profiles, forecasting how each segment will react to the recovery phase.

Those six segments range from high-spending adventure seekers at one extreme to “shattered” consumers on the other, with the vast majority of Canadians somewhere in the middle.

“It’s not going to be this crazy year of shameful consumerism that some people may think,” Borque said, adding that 28 per cent of respondents in the survey were worse off financially than they were before the pandemic.

Leger surveyed 4,007 Canadians online, from April 12 to 25, about their behaviours and attitudes to gauge how they feel about their financial situation, how much time they spend at home, their level of fatigue and how much optimism they have about the coming year.

The survey found that 53 per cent of Canadians believe they’ve changed for the better and want to maintain the habits they’ve formed in the pandemic.

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Only a small segment, representing about 13 per cent of the population, are eager to return to an exact replica of their pre-pandemic lives. These consumers, which Leger called “steadfast,” skewed male, with “a very strong proportion of retirees.”

Within this category, 80 per cent said they want to get back to shopping in a mall, and 64 per cent said they did not discover any new hobbies during the pandemic. This segment also has an “over-representation in francophone Québec.”

Similarly, only a small segment of the population wants to splurge, using the money they’ve saved during the pandemic on the sorts of activities and experiences they were doing before COVID-19 struck.

This segment of younger, wealthier consumers — Leger calls them “euphoric” — represents around nine per cent of Canadians. Bourque suggested these consumers spent heavily during the pandemic on virtual entertainment, and will be the first to buy tickets when concerts and other attractions open up again.

“For a lot of marketers, thank God, these consumers exist, because they jump on trends like it’s a train,” Bourque said. “They all went and bought paddleboards last summer because they could only go to the lake. They went for high-end sports equipment because they hiked maybe once.”

A larger segment of the population is more interested in spending the extra money they’ve accumulated on products and services that will help them maintain the balance they’ve found during the pandemic, such as at-home exercise classes and equipment, meal kits, sportswear, furniture and home improvements.

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This “comfortable” segment — about 21 per cent of Canadians — tends to be overrepresented among office workers who worked from their suburban homes during the pandemic.

“That 12 hours in transit (per week) that I used to have, now I’ve got my new hot yoga class,” Bourque said. “That’s a part of their new lifestyle that they don’t want to give up.”

Such changes in consumer habits will have major impacts on retailers and manufacturing, particularly in the initial reopening phase.

For example, Mondelez Canada is anticipating the consumer dollars that abandoned the hospitality sector will come barrelling back, so the company will need to quickly shift from mainly supplying supermarkets to supplying restaurants again, which means making different products in different quantities and different packages.

“We’re getting our supply chains ready for that,” company president Parent said. “We’ll need to adjust in a matter of days and weeks in order to meet the demand on one channel versus another.”

The pressure that I think a lot of heads of retail are feeling is: How are we going to get them back?

McGill University’s Anwar White

The largest segment in the Leger study, however, is made up of consumers who are still worried about their health and plan to spend most of their time at home, avoiding restaurants, cinemas and travelling.

The so-called apprehensive segment — representing 24 per cent of consumers — tend to have an average-to-high household income, children at home and 81 per cent of them said they didn’t want to spend the money they saved during the pandemic.

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“They lost a lot of their confidence,” said Sophie-Annick Vallée, vice-president of strategy at lg2, who worked on the study with Leger.

The report found 30 per cent of Canadians are coming out of the pandemic in better financial shape, while 42 per cent are staying the same. The rest were in worse financial shape and the report split them into two main segments.

The first, 21 per cent of the population, were dubbed “self-starters” who likely lost their jobs in the pandemic, but are eager to work their way out of debt as the economy reopens. They still want to socialize as restrictions are lifted, even if they can’t afford to socialize as they did before.

This group skewed toward the 25-54 age range, is slightly more female and has a high proportion of households making less than $40,000 per year. Nearly two-thirds said they had to change their food choices due to a loss of income, which the report suggested could drive up traffic to discount retailers.

The other segment of consumers with financial issues were described as shattered.

“This is the one who’s broken,” Vallée said.

Representing 10 per cent of consumers, they still display “heightened fear” of the virus, and experienced enough financial and emotional struggles during the pandemic that emerging from isolation will be more difficult.

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This wide range of expected consumer behaviours as the economy reopens particularly puts retailers in a challenging position, since they have to meet new expectations centred on the heightened online services they delivered during the pandemic while also meeting old expectations about in-store experiences.

“If (customers) can just do everything at home, what is the incentive for them to actually come to the store?” said Anwar White, a lecturer at McGill University’s Bensadoun School of Retail Management and director of its master of management in retailing program. “The pressure that I think a lot of heads of retail are feeling is: How are we going to get them back?”

Retailers were forced to become more efficient during the rolling lockdowns and restrictions, shedding staff and closing store locations. They’ll be under pressure to stay that efficient as they reopen. But the pandemic also accelerated the popularity of e-commerce and drove 12 years’ worth of retail innovation into 12 months, White said, and some of those things may be here to stay.

For example, the popular trend of having customers book appointments online to shop via video or in-store is expected to persist into the recovery, helping bridge the gap between online and in-person shopping.

Still, getting customers back into stores could be even simpler than that.

“In general, people have missed it,” White said. “People are having this feeling of freedom, and they’re going to want to compensate for the things they feel like they’ve missed in being a human being.”

Financial Post

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