Financial Impacts of COVID-19
By Melissa Meisel, Associate Editor | 05.25.20
How will it impact the household and personal care industry? A Mintel expert weighs in on the pandemic and business.
Mintel research spanning the 2007-09 recession and the years beyond suggests there are four economic indicators that play an especially important role in predicting consumer spending patterns—unemployment, confidence, income and savings rates.
From an economic standpoint, recovery is contingent on COVID-19 containment. Prevailing expectations indicate this will take place in May or June 2020. Consumer confidence will lag by a couple of months leading to a sharp contraction in Q2 2020, spilling into Q3, and potentially into Q4.
Senior Household Care Analyst Rebecca Cullen of Mintel chatted with Happi about how these financial specifics will impact the household and personal care industry.
Happi: How has COVID-19 impacted the household and personal care industry?
RC: In immediate response to the COVID-19 outbreak, Mintel research shows that cleaning habits have already changed. Americans are adopting a triage mindset to decide what to clean and when in an effort to reduce the risk of bringing the virus into the home and compromising the health and safety of their safe haven. This elevated the status of household cleaning products, which now became a part of consumers’survival strategy.
Disinfectants, household cleaners and hand sanitizers have become high-demand items in retail outlets and online, driven by this closer attention to personal and household hygiene amid concerns about the coronavirus. In the short term, natural interests are taking a backseat as consumers prioritize disinfection and germ killing to protect their health and the health of the home; however, as concerns about the pandemic ease and consumers fall back into “normal”routines, value, safety and health will move back as top priorities. While sales may reflect a short-term uptick in paper products, as these products are typically used at a consistent pace; therefore, those who stocked up won't need to replace for a while. Medium to longer term, the category will balance itself out. Disinfectants and household cleaners, on the other hand, will have sustained demand and will be used more frequently, having a positive longer-term impact on the category.
Within the personal care industry, the initial impact of the COVID-19 outbreak saw consumers take a “protect and prepare”approach, focusing on primarily health and hygiene, and therefore having the biggest impact on preventative personal care categories such as hand sanitizer and soap. This was fueled by good personal hygiene being widely publicized as the strongest defense against the virus. In the short-term, as Americans remain quarantined in their homes and until the virus is under control, consumers will continue to be hyper-vigilant of their hygiene sustaining demand for hand sanitizer and soap.
While striving to stick to regular routines during lockdown, some elements of consumers’personal care routines may slide a bit, especially those that relate to certain aspects of personal care (or beauty) habits, such as using deodorant, shaving or washing/styling hair. As the majority of Americans shelter-in-place and limit their interactions outside of the home, hair washing and styling has become less of a priority, leading to even less frequent washing and longer purchase cycles than pre-COVID-19.
Already relaxed grooming habits among men and women have been altered further due to the coronavirus crisis in terms of shaving as well. Hashtags like #QuarantineBeard have been gaining momentum on social media as men lean into self-isolation by growing out facial hair. As restrictions are eased, we can expect to see a lot of personal care habits and usage behaviors moving back to pre-COVID levels, however, some habits may stick, which means brands will need to pivot to meet changing consumer needs. The facial hair trend, for example, started gaining momentum years ago and could regain popularity due to pandemic creating a strengthened market for products that help maintain facial hair.
Happi: In regards to consumers evaluating their lifestyles and reduce discretionary spending—how will this apply to household and personal care products?
RC: The economic turmoil caused by the COVID-19 outbreak will hugely affect many people's financial situation, and this will drive a return toward stricter budgeting, proving a boon for budget brands and services. Within the household care space store brands are already winning as 63% of house cleaners agree that store brands work as well as mainstream brands, so store brands are already well-positioned for the economic downturn.
But what we have seen from the past recession is that as consumer confidence has grown, perceptions of what a good deal means has also changed: they're still looking to get the best possible deal, but the perception of value certainly falls along a spectrum and isn’t solely driven by cost. Still, shoppers are price-driven and the onset of a recession will only reinforce existing cost-conscious behaviors. There will be continued opportunities to focus on quality and value over the short to medium-term, as was the case following the 2008 recession, which gave rise to the “affordable luxury”trend.
Personal care categories have largely remained resilient during economic hardships as most consumers continue to rely on hygiene staples such as shampoo and soap, regardless of swings in unemployment and consumer confidence. In fact, the personal care industry can even flourish as consumers look to treat themselves to smaller indulgences and swap pricey salon services for at-home products. The high unemployment rate, combined with shelter-in-place orders will see priorities shift as certain behaviors, such as hair styling, is seen as less important for many consumers, regardless of income. Non-hygiene essentials including nail care, styling products and treatments could be especially hard hit as consumers look to prioritize their spending.
Happi: Can you provide an outlook of what to expect for household and personal care brands to get back to business?
RC: In the longer term, when the economy is almost recovered, people will re-evaluate what is important. The crisis has shifted consumer attitudes, creating elevated awareness and altered beliefs about personal and environmental hygiene, already increasing demand for sanitizers and antibacterial cleaning products. Some of these new behaviors forced by the crisis will stick around as new habits after the pandemic recede. Health will weigh heavily on shoppers when it comes time to purchase, leading many to scrutinize product formulations and ingredients and how they directly impact and benefit health, both physically and mentally. In the case of personal care purchases (as with all purchases), consumers will be more insistent on ingredient and claim transparency. More consumers will expect brands to provide detailed information regarding ingredient sourcing and throughout the whole production process to ensure products are clean, safe and healthy.
Issues such as animal ingredients, waste reduction and ingredient regulation may have taken a backseat to health and hygiene during and following the COVID-19 pandemic, yet longer term these topics will once again be top-of-mind for consumers. More than ever, consumers will be aware of their impact on the world around them after witnessing first-hand the dramatic fall of pollution across the globe as a result of lockdown. A brand’s corporate social responsibility or a product’s ethical origins will once again act as a differentiator or even a deal breaker. Consumers will head toward products that have less harmful impact on the planet and make informed choices in this regard and scrutinize the credentials of companies.