COMPANIES IN A POST CORONA WORLD

Changes in consumer buying patterns

Fifty-four percent of consumers are no longer considering the purchase of big-ticket items
(homes, cars, trips, luxury goods) over the next three months. Instead, consumers are focusing on
two tiers of consumable products, which Britton has deemed the “Survival” tier and the “Sanity”
tier.

Where consumers are buying their products has also changed. Over the last two weeks,
consumers are beginning to fear crowding and lack of inventory, and said they are shopping less
at wholesale and big box retailers (at a decrease rate of 33 percent and 35 percent, respectively).
Meanwhile, despite concerns about deliverability of packages, online shopping has increased 31
percent in the past two weeks; visits to local grocery stores have increased 28 percent.

As consumers take protective actions against the virus, their health/financial concerns and
behavioral adjustments will continue to have an enormous social and economic impact. In
affected areas, we are already observing drastic changes in consumer behavior such as bulk-
buying, a surge in low contact commerce, and crowd avoidance/cocooning

. “Buying patterns have shifted dramatically as people stock up on supplies,” said Carl Perrson,
senior director of global cross-category consumer insights at PepsiCo, Inc., Purchase, NY. “In
addition to hand sanitizers and toilet paper, shoppers are passing over fresh items to fill their
carts with canned and frozen foods.

“It really is a reversal of everything we learned about shopper trends over the past decade or so. I
imagine there’ll be a great awareness of the notion of preparation and of keeping a supply.”

Sales of staples like dried beans rose 63% for the one-week period ended March 7 when
compared to the previous four weeks, according to the market research company Nielsen. Rice
sales spiked 58%, chickpeas/garbanzos 47%, powdered milk products 126%, water 42% and
canned meat 58%.

 Products that experienced a dip in sales included apples (-3%), papayas (-7%) and celery (-
19%).

Nielsen has broken consumer response to the coronavirus outbreak into six categories –
Proactive health-minded buying; reactive health management; pantry preparation; quarantines
living preparation; restricted living; and living a new normal. In an article published March 16,
the market researcher placed the United States squarely in category 5 — restricted living — and
Canada in category 4 — pantry preparation.
Within the restricted living category, there are mass cases of the coronavirus and communities
are ordered into lockdown. At this stage, consumers severely restrict shopping trips, online
fulfillment is limited, and price concerns rise as limited stock availability impacts pricing in
some cases.

HOW TO REACH CUTOMERS

MOST IMPORTANTLY – BE PRESENT AND INVEST IN CONSUMER RELATIONSHIPS:
It can be tempting for brands to go into cost containment mode in times of distress, quietly
weathering the storm. But we have a unique window where brands can earn trust by maintaining
presence and delivering relevant value in a fluid period of heightened anxiety

.BE A SOURCE OF TRUTH AND POSITIVE IMPACT: Brands can develop deeper consumer
relationships by being a trusted source of accurate information or consumer-centric counsel in
uncertain times. Here are some examples of brands that have taken the initiative to help stop the
virus from spreading or to avoid other negative impacts:

• In the UK, Lush is inviting people to come into their stores to wash their hands.

• In India, we have seen communication from Lifebuoy to practice good hygiene - even if it’s
with a competitive brand.

• Amazon is actively working to eliminate acts of profiteering/price gauging.

•Amul has been aadvertising milk both regular and haldi and explaining how it helps build
immunity.

In an era where many are increasingly open to brands rather than traditional institutions to
promote social progress and well-being, the current crisis could accelerate that pattern if brands
rise to the occasion.

SHOW EMPATHY / GIVE COMFORT: Louis Vuitton posted a heartfelt message to Chinese
customers on social media platforms like WeChat, and Weibo: “Every paused journey will
eventually restart. Louis Vuitton hopes you and your beloved ones stay safe and healthy.” This
tone-appropriate message fits a brand positioned as a purveyor of fine luggage.

HELP PEOPLE CONSTRUCTIVELY USE TIME AND BUILD NEW ROUTINES AT HOME:
This is inspiring territory, as brands can look to help people make good use of the time they
spend at home – and to drive internalization of new habits by helping them feel good about the
way that time is spent. With many adopting new in-home behaviors, building positive
associations/identities around those new routine behaviors will help to build motivation to re-
enact them.How Amul is doing really great by teaching people new recipes by going live on their
social media with renowned chefs.

GO VIRTUAL: We expect to see a further shift to virtual alternatives. In China, online car sales
went up in the first weeks of the crisis, despite overall car sales crashing. We also see many
professional meetings and exhibitions moving online; just as many museums have started to
create an online experience by creating virtual rooms where art is being shown. Alibaba is
organizing no-meeting concerts, where they live-stream new content.

RECOGNIZE AND AFFIRM NEW SOCIAL NORMS: When trying new behaviors, people can
often feel a bit self-conscious, as if they are the only people practicing them. This feeling of
marginalization can be a barrier to changing behaviors, so it can help to illustrate the prevalence
or social consensus of the behavior or belief. If people feel that others are doing this behavior
too, they are much more likely to maintain it.

LEARN FROM THE LAST ‘NEW NORMAL’: History provides evidence that brands can grow
in distressing times. There are some enduring examples from the Great Recession, where brands
like Netflix, Lego, Amazon, and Domino’s courageously expanded their horizons through
investment /innovation, customer treatment, alternative pricing models, and transparency in
communications. While many of their competitors either stopped communicating or held fast to
old business models, these brands pursued consumers in the right way and delivered value in a
time of contextual fluidity and behavioural change.

CORONA VIRUS AND MANAGING SUPPLY CHAIN

What to do today
In the current landscape, we see that a complete short-term response means tackling six sets of
issues that require quick action across the end-to-end supply chain . These actions should be
taken in parallel with steps to support the workforce and comply with the latest policy
requirements:

1. Create transparency on multitier supply chains, establishing a list of critical components,

determining the origin of supply, and identifying alternative sources.
2. Estimate available inventory along the value chain—including spare parts and after-sales
stock—for use as a bridge to keep production running and enable delivery to customers.
3. Assess realistic final-customer demand and respond to (or, where possible, contain)
shortage-buying behavior of customers.
4. Optimize production and distribution capacity to ensure employee safety, such as by
supplying personal protective equipment (PPE) and engaging with communication teams
to share infection-risk levels and work-from-home options. These steps will enable
leaders to understand current and projected capacity levels in both workforce and
materials.
5. Identify and secure logistics capacity, estimating capacity and accelerating, where
possible, and being flexible on transportation mode, when required.
6. Manage cash and net working capital by running stress tests to understand where supply-
chain issues will start to cause a financial impact.