Raw turkeys are divided up ahead of slicing and some to be distributed ahead of Thanksgiving and amid the coronavirus disease outbreak in LaGrange, Indiana, Michigan, US,on November 20, 2020. Picture: REUTERS/EMILY ELCONIN
Raw turkeys are divided up ahead of slicing and some to be distributed ahead of Thanksgiving and amid the coronavirus disease outbreak in LaGrange, Indiana, Michigan, US,on November 20, 2020. Picture: REUTERS/EMILY ELCONIN

Christmas is coming, the geese are getting fat. Well, maybe not so much in 2020.

Covid-19 is poised to reshape Thanksgiving and Christmas dinners, with downsized celebrations the norm. This isn’t necessarily bad news for food retailers. In fact, with more people eating at home, the holidays could bring grocers some cheer.

According to GlobalData, Americans are expected to spend 5.2% more on holiday food and drink in 2020 compared with 2019. The increase in food and grocery sales in the final three months of 2020 could be even bigger in the UK at 14%, the data provider estimates.

But people probably won’t be spending on the usual items. For example, grocers are betting shoppers won’t need as many big centrepiece turkeys for holiday dinners. Consequently, they have upped their orders of turkey breasts, typically still attached to bone and known as crowns in Britain. Walmart will carry 20% to 30% more of them this year. Its British arm, Asda, said sales of frozen turkey crowns, which typically feed three to four people, are up 230% since they went on sale in mid-October, compared with 2019, outperforming frozen whole turkeys.

Meanwhile Kroger Co., the U.S.’s largest traditional supermarket chain, said that in addition to offering more small-size turkeys, it was preparing for heightened demand for ham, beef, pork roast and seafood. Alongside crowns, which Tesco Plc has bought 22% more of this year, Britain’s biggest grocer expects chickens and vegan alternatives to be popular. Its smaller rival Waitrose has also tripled stocks of its upmarket Venison Wellington, which serves four people, after a flood of early orders.

It turns out that large turkeys are not very profitable anyway, as supermarkets compete to offer the cheapest deals. Stores can actually charge more for packaged turkey crowns, bringing in higher margins along with more sales.

And there are other ways holiday food trends spurred by the pandemic could play into retailers’ hands.

Smaller gatherings potentially mean more groups purchasing their own Thanksgiving and Christmas dinners. Take turkeys: Rather than a family buying one large bird to feed collected relatives, four or five family groups might each buy a crown or a joint of meat. If each group still wants all the trimmings — sweet potatoes, green bean casserole, cranberry sauce — that could mean an overall higher volume of food sold.

Fewer people dining in restaurants or spending the holidays abroad will also translate into more eating at home. This may be one reason people seem to be buying key items early. Sales of Christmas puddings were up 81% in the UK in October compared with the year earlier, according to data provider Kantar.

The pandemic has also encouraged more preparation of food and drinks from scratch, whether it’s bread baking or DIY cocktail mixing. Data provider Nielsen expects this to continue over the holiday season.

Perhaps the biggest benefit to food retailers is the potential for shoppers to buy more expensive items. Many affluent consumers have amassed savings from not going on holiday, eating out or commuting. At a time when many indulgences feel risky or are simply unavailable, some shoppers are channelling their lust for luxury into their grocery carts, opting for filet mignon instead of cheaper cuts of meat or springing for an extra-fancy bottle of wine.  

Consumers have a greater propensity to trade up for the holidays, and they may be even more willing to loosen the purse strings this year. A report from market research company IRI found that shoppers are generally less price sensitive about food and some other household essentials right now. They’re not balking as packaged goods companies have raised prices and yanked promotions.

This doesn’t mean supermarkets can rest easy. As infections spike across the US and Europe and shoppers have to deal with more restrictions, their preferences could suddenly shift. This would hurt already stretched food supply chains, particularly in the US, where stock levels have not yet returned to normal.

Against this backdrop, retailers need to build in as much flexibility as possible. That means, for example, having the option to buy extra turkey crowns if there is a surge in demand. If retailers fail to get the balance right, they could end up with too many big birds. While frozen turkeys can be sold later, fresh ones will need to be discounted.

Grocers have already navigated many challenges amid the pandemic — a rise in people working from home, an explosion in e-commerce ordering and a flight to comfort foods, just to name a few. Smaller holiday dinners are another to add to the list. With sharp inventory management and marketing, at least this shift won’t leave the industry hungry for sales.

Bloomberg

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