Before lockdown, foodmakers were vying to produce ever more niche and premium products, from plant-based fish to purple Filipino yam ice cream.
But as restrictions were imposed last month, UK shoppers filled their baskets with processed foods and decades-old brands such as Mr Kipling baking sets, Ryvita crackers, Marvel powdered milk and Hellmann’s mayonnaise, according to manufacturers and analysts.
The return to tradition has provided a boost to long-established — but unfashionable — food producers whose businesses had been struggling.
“What happens in this type of environment is that people tend to come back to comfort food, the food that reminds them of how they grew up,” said Rafael Oliveira, international zone president at Kraft Heinz.
Premier Foods, which makes Mr Kipling cakes and mixes, Smash instant mashed potato, Oxo cubes, Marvel powdered milk and Bisto gravy, this week reported a 10.5 per cent increase in sales in March as the UK lockdown began.
Along with a new deal on pension deficits, the sales jump marked a turnround for a company that has been hampered by debt and under pressure from activist investors. Premier said it was still seeing “higher than average patterns of demand”.
Similarly, Primark owner Associated British Foods, which makes Ryvita crackers and Kingsmill bread, revealed its food businesses had “had to produce more than ever before” during lockdown.
For Unilever, Hellmann’s mayonnaise and Knorr stock cubes were among its strongest food brands in the first quarter. Emily Thom, supply chain director for Northern Europe at US-based General Mills, said consumers had loaded up on products such as Green Giant sweetcorn, causing a “huge uplift” in sales, before turning to the company’s Betty Crocker cake mixes.
“When we entered lockdown . . . those businesses that had a lot of capacity, a lot of familiarity with shoppers and the capability to service supermarkets gained share,” said Clive Black, analyst at Shore Capital.
Since the UK’s restaurants and food-to-go venues closed down, billions of pounds in food spending has moved to shops. Additional “larder loading” has pushed up sales further, a surprise for manufacturers accustomed to declines or organic growth rates below 3 per cent.
Data from market researcher Kantar showed the rise was particularly sharp for sales of old-fashioned foodstuffs such as suet, instant mashed potato and canned meats, all of which more than doubled in the week to March 22 from a year earlier. This compared with a 24 per cent increase in food and consumer goods overall. Demand for baked beans, milk powder and rice pudding also rose sharply.
Bread, which had been declining as consumers switched to perceived healthier options, has also made a comeback, according to Andrew Searle, managing director at the consultancy AlixPartners.
“The three main bread players, Allied, Hovis and Warburtons, had excess capacity and they were all struggling as a result of that. Now when you go around supermarket shelves, there is very little bread left,” said Mr Searle. Allied and Hovis are owned by ABF and a Premier joint venture respectively, while Warburtons is privately owned.
Martin Deboo, analyst at Jefferies, said the shift was not just about consumer sentiment, although “the sales of flour and home baking products would seem to indicate a bit of a back-to-basics approach”.
Another reason was the convenience of store-cupboard staples such as Heinz baked beans.
Large manufacturers also have the advantage of higher capacity, enabling them to restock stores even as the virus strained supply chains. “The niche brand that you love buying — from the retailer’s point of view, it’s probably made by contract manufacturers and they can’t supply it,” said Mr Deboo.
Kraft Heinz, a company that had been suffering declining sales, has seen strong demand for its macaroni cheese, soups and sauces worldwide. “Our factories are working 24/7,” said Mr Oliveira. In the US, Mr Deboo said, “mac n’ cheese is flying off the shelves”, while previously “people would be saying ‘it’s off trend — people want an arugula salad’”.
Nestlé, the world's largest food company, on Friday reported a jump in sales of its frozen food brands, such as Stouffer’s lasagne and its macaroni and cheese, Hot Pockets turnovers and DiGiorno pizza, which are mainly sold in the US.
The question for manufacturers and investors is how much these trends will persist. Given the failures of some restaurant chains and an expected consumer spending squeeze, analysts said they anticipated households may not return to eating out at pre-pandemic levels.
This has contributed to a rise in food manufacturers’ share prices since coronavirus broke out, even as other sectors dropped. Nestlé, for example, is trading at about 23 times earnings, which is close to its all-time highest valuation, said Mr Deboo.
But the future of consumers’ food choices will probably depend on their finances and the deals manufacturers strike with supermarkets.
After the financial crisis, manufacturers “used promotions as the way to support value and volume”, said Mr Black, and the “supermarkets had been weaning themselves off promotional dependency for the past decade”.
“The leading brands are probably quite resilient but what they do in terms of price and promotion will be important. Supermarkets will undoubtedly look to private label [own brand] to challenge them on value,” he added.
More expensive, premium, brands will probably suffer, he warned: “Demand for organic food in the UK went down by 35 per cent in the financial crisis because people didn’t have the money.”
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