Coronavirus: As consumers stockpile, can grocery supply chains meet demand?

Following an emergency Cobra meeting yesterday, prime minister Boris Johnson said the UK was still in the first ‘containment’ phase of a four-part plan to tackle the virus, although he conceded it was “going to spread in a significant way”. At the time of writing, there were 373 confirmed cases across the country.

The secretary of state for environment, food and rural affairs, George Eustice, held a joint call yesterday evening with representatives from supermarkets and food industry bodies. Eustice outlined a number of measures the government would take to ensure that people would remain fed in the event of the virus spreading more widely.

Among the measures discussed were relaxing rules on grocers delivering stock from warehouses to stores during “antisocial” hours such as early in the morning and late at night. Defra also indicated it would like to see food retailers ramp up online deliveries, as well as click-and-collect services, if more people self-isolate.

While there may be an initial, short-term sales upside for grocers, the concern now is what might happen if this level of demand continues and even grows.

Supply chains holding

Despite a spike in sales over the last week, Retail Week understands that most grocery supply chains are holding up well to the sudden increase in demand, even across lines where purchases have suddenly risen.

One grocer said there had been a huge spike in demand for “anything to do with personal hygiene” over the last week or so, including hand sanitiser, toilet roll, liquid soap and antibacterial wipes. Despite that, the source said supply chains were coping.

“Sales uplifts are significant, but manageable,” the grocer said. ”There are still good levels of stock coming through. We might have the odd availability issues coming through on some lines, but they generally replenish the following day and are back to full availability again.”

Alongside sanitary and hygiene products, a source at another national supermarket chain said that customers had also begun stocking up on longer-life, ambient food products as well as frozen food.

“We might have the odd availability issues coming through on some lines, but they generally replenish the following day and are back to full availability again”

Grocery source

The source thought that was because people “may be told to isolate themselves at home at some point in the future”.

The source said that, “while nothing is actually in short supply at present”, customers may notice “emptier shelves” as the retailer picks online orders overnight in stores and it takes time in the morning for that stock to be replenished.

While store shelves remain fully stocked for the moment, one source at a big-four grocer said a growing challenge is ensuring that product gets from warehouses to shelves.

She flagged that certain products are being replenished two or three times a day, rather than just once, which in turn has presented challenges in rostering staff in order to maintain availability.

Marketing and insights director at Springboard Diane Wehrle expects that out-of-town retail parks with supermarkets will remain more resilient as consumers look to stockpile. 

Rationing and online

Over the weekend, Tesco imposed a limit of five items per person on dried pasta, long-life milk, water and tinned vegetables both in store and online.

While most grocers have placed limits on products such as hand sanitiser and antibacterial gel, the majority have yet to ration food products.

A spokesman for Waitrose confirmed it had placed “a temporary cap on certain products” such as anti-bacterial soap and wipes. 

Iceland managing director Richard Walker says the frozen food specialist has placed a “temporary cap” on sales of antibacterial soaps and wipes, to “ensure our customers have access to the products they need”.

However, he says Iceland is “working extremely closely with our suppliers and our supply chains remain robust overall” across all categories.

Another grocery source says it has yet to place “any firm restrictions in place” on items other than hygiene products, but says it does have certain bulk-buying policies in place.

“For example, if someone came into a store and tried to buy an entire trolley full of rice, the checkout assistant would challenge that,” he says. “But that’s not directly coronavirus-related.”

The prime minister and others in government have warned the public against the need to stockpile, and the source says customers haven’t started real panic-buying yet.

“We’re seeing a little bit of home stock building. People are buying an extra couple of packs of pasta or an extra packet of toilet roll, which is very different behaviour to panic-buying,” he says. “People just have one eye on the future if they do then need to self-isolate.”

That view is supported by the source at the big-four grocer, who says basket sizes have increased, driven by “just-in-case purchases”.

In terms of online delivery increases, sources say they have not seen much of a spike – more customers are choosing to come into stores, for the timebeing at least.

A fourth industry source says there has been “a bit of an increase online”, but maintains that delivery slots are all still available.

This sentiment is supported by Iceland’s Walker, who says its online delivery slots “are available as normal”. 

Those who spoke to Retail Week wouldn’t be drawn on what might happen, however, should staff in warehouses or delivery drivers fall ill with the virus in terms of a wider outbreak. 

Uncertain future

The problem for most retailers is not what is happening now, but what might happen in the near future.

In a note yesterday, Shore Capital head of research Clive Black wrote that “current policy suggests a peak for the virus in mid-April” before adding “but, frankly, who knows?”

“We’ll probably see it tail off in a couple of weeks and then you’ll see the opposite – a slowdown in the sale of key lines, because everyone is packed to the rafters”

Industry source

Buying teams across the industry are having to walk a tightrope between maintaining availability at present, without leading to an oversupply of stock once consumer demand drops off.

“We’ll probably see it tail off in a couple of weeks and then you’ll probably see the opposite – a slowdown in the sale of key lines, because everyone is packed to the rafters with things like dishwasher tablets, pasta, rice and so on,” says one source.

The big-four source refused to be drawn on future plans, particularly if demand does not soften. “When something is happening that impacts normal behaviour, you start planning to work that through,” she said.

She did flag that the grocer was keen to ensure stock availability for everyone in the case of a wider outbreak, rather than just those who can afford to stock up now.

That leads to a wider issue of what the government is doing in the face of the growing outbreak.

Numerous sources who were on the Defra call yesterday described the conversation as “exploratory”, while some trade bodies have criticised what they see as the government’s piecemeal approach to the burgeoning crisis.

While Defra has said that supermarkets should work with local communities to help the vulnerable and elderly, sources point out it should not be down to retailers to decide who those people are.

For now, the government says it is leaning on scientific and medical advice in shaping its response to the coronavirus outbreak. For supermarkets, all they can do now, in the words of one person, is “keep calm and carry on”.