Interview Synopsis

CPG industry – commodities outlook & coronavirus demand dynamics

  • Multi Asset
  • Consumer
  • North America

One of the immediate consumer reactions to the coronavirus outbreak was stockpiling food, with empty supermarket shelves a common sight for many people. To look into what this means for different consumer packaged goods (CPG) companies in the US, as well as impacts on commodity prices, we interviewed a former senior executive from Conagra Brands Inc.

COVID-19 and CPG companies: changing consumer appetites

CPG companies’ responses will vary according to their preparedness and, not only having a business continuity plan, but also putting it into practice. “Those companies that had a real plan, had rehearsed it, knew where they were fragile in the supply chain, I would say that they’re probably faring better today.”

When looking at the winners and losers, the specialist said to look out for their portfolio diversity and whether they’re vertically integrated. Another aspect was their geographic dispersion, as in rural areas many Americans are worried about working owing to the lack of healthcare resources.

The Interview covered demand in different categories and sales channels. For instance, people have focused on pantry and freezer goods, eschewing more indulgent products. This could lead to a lag in demand once the pandemic is over as people eat through their stockpiles. 

Foodservice products could also be affected. The specialist estimates that about 10-15% of revenue comes from this source for the bigger CPG firms. However, “I would say the arbitrage between the increased high-velocity, high-volume SKUs would likely mute or maybe even wipe out the negative from the foodservice portfolios from the companies that I’m familiar with.”

The conversation turned to supply-chain constraints by geography, with certain industries – like petrochemicals – regionally concentrated. Moreover, there are just two major paper mills in the US, and there could be consequences for CPG supply chains if one of those were to face disruption. “If you can’t get corrugate, you can’t ship an awful lot or make cartons for the frozen food example.”

The price of food commodities is also at risk. With many dairy and smaller farms struggling, “what you’re going to see on the other end of this is a different looking [agricultural] commodity look across the US and that’s going to cause quite a bit of price uptick.”  

To access all the human insights from Third Bridge Forum’s CPG Industry – Commodities Outlook & Coronavirus Demand Dynamics Interview, click here to view the full transcript.

The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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