Resilience and optimism: Post-covid trends from the APAL 2022 Forum
Consumer insightsLabour challenges, changing consumer preferences and volatility have defined the first half of 2022 as the market begins its long recovery after Covid-19. But by taking advantage of emerging trends, growers have an opportunity to turn these challenges into opportunities.
The APAL 2022 Forum kicked off with three bird’s-eye-view sessions from well-known demographer Bernard Salt, KPMG’s Emily Seeckts, and Kitchener Partners’ Tristan Kitchener. Between them, these trend-spotters told the audience that although recovery will require resilience and determination, there are plenty of reasons for optimism in the months ahead.
Below, we share some of the major trends identified by Bernard, Emily and Tristan.
The recovery process will be constrained by access to labour
According to Bernard, Australians should not underestimate the lasting impact of the 2020–21 border closures. “We are different on the other side of this event,” he says. “We had built a labour market predicated on the assumption of 250,000 people arriving on our shores every year and providing deep labour pools … but we kinked the hose of overseas workers for two years.”
With borders closed and overseas students returning home, Australia recorded a net loss of 88,800 people from 2020 to 2021 – the first negative net migration since 1946. Businesses across the board have been hit by ongoing staff shortages, with Emily reporting that 84 per cent of surveyed firms are “experiencing difficulty in finding suitable labour”.
Other demographic factors contributing to the labour shortage are a slow retreat from the interior to coastal cities, along with Australia’s “baby bust” – the period in which baby boomers are retiring faster than millennials are entering the workforce. This reality, says Bernard, started to bite from 2020 and would have caused a labour shortage even without the Covid crisis.
From a regional point of view, growers know that a substantial part of the labour market (60 per cent in Victoria and 50 per cent in New South Wales) is usually brought in from overseas – another reason labour pools were disrupted so drastically by Covid border closures. But Bernard shares some interesting points about migration from the cities to the regions. While it’s commonly accepted that young people leave the regions around the age of 18 to seek education, training and jobs in the city, people are coming back to the regions in their late thirties and early forties in search of better lifestyles. Retirees also return to regional areas, representing a previously untapped labour pool.
Volatility
Australia has seen another year of volatile growth in food sales (5.2 per cent year-on-year). Emily points to elevated freight rates and supply chain issues including delays, stockouts, increased prices due to transport costs and difficulty in sourcing products from alternative suppliers. Meanwhile, household savings remain high after Covid and interest rates are beginning to rise, although they are still low in comparison with other economies. According to KPMG, 63 per cent of CEOs predict inflation will be the top trend in 2022.
Resilience
It’s not all bad news. Bernard compared the post-Covid recovery to the celebration of life in Australia after World War I. “Australia emerges well from adversity. We’re upbeat and optimistic. We are going to rebuild a better version of ourselves on the other side of Covid.”
As evidence, Bernard points to spending patterns of Australians showing that “whatever you throw at them, Australians will pursue lifestyle and quality of life. How can you get your product into that narrative?”
Speaking of resilience, Emily notes that while the Covid story in the United States was one of major retail bankruptcies, this was not the case in Australia. In fact, the number of retailers entering external administration and controller appointments dropped by 57 per cent between FY19 and FY21. Besides government initiatives including JobKeeper, Emily nominates trends including a massive pivot to online sales, the sharp improvement in last-mile delivery services, a reduction in rents and a shrinking of store footprints.
Evolving consumer preferences
Emily highlighted the following points in her exploration of shopper trends:
- Retailers have seen a permanent shift towards online sales.
- Retail experience is now firmly a hybrid of physical and digital – shoppers want a personalised customer experience in a digital world.
- Shoppers are making fewer trips, with an 8–15 per cent increase in basket size.
- 50 per cent of consumers rank sustainability as a top-five value driver and 34 per cent are willing to pay more for sustainable products, although there is increasing polarisation between low- and high-income consumers towards price, health, quality and environment.
Tristan noted that the shift to online sales means there have never been so many opportunities for producers in terms of food service and retail offerings “from pure online to blended offline/online, supermarkets, delivery companies, meal kits and more”.
Other trends include consumers becoming increasingly value-savvy, sceptical and price-conscious, and “snackification”: traditional meal occasions fragmenting under time pressure.
Apples are no longer the dominant fresh snack offer
While the snackification trend sounds like good news for apples, Tristan highlighted the incredible performance of berry sales that have skyrocketed due to year-round availability through longer seasons, covered crops, geographic spread, improved genetics and better branding.
Other fruits have stepped up their game. Mandarins are now seedless and easier to peel, peaches and nectarines have improved eating quality, and vegetable growers have mastered the art of convenience-sized portions to capture higher values, such as Perino grape tomatoes, broccolini and Baby Qukes (cucumbers).
Tristan warns of a quality “doom-loop” where poor eating quality apples and pears will hand market share to other fresh snack competitors and risk losing shelf space. The concern is very real – in the race for shelf space, apples generate $100 per sq/m, and berries $480 per sq/m.
Finally, Tristan believes that undifferentiated product attributes will lead to further sales cannibalisation. A glance at Coles Online shows 22 apple SKUs (stock keeping units): “Is this range innovation, or range duplication?” he asks.
Opportunities
In summary, opportunities for growers in the year ahead include:
- Reclaiming the snacking space by leveraging convenience, premiumisation, portion sizes and branding.
- Lifting the quality bar across all varieties with consistent quality year round.
- Working together as an industry to share data and improve decision-making.
- Exploring new and emerging online alternatives to the major retailers.
- Better marketing of fruit for health-conscious consumers post-Covid.
- Boosting sustainability efforts, including reducing food miles and lowering carbon intensity.
Bernard Salt speaking at the Forum 2022.
