Most European countries have experienced varying levels of lockdown or self-quarantine during the COVID-19 pandemic, which is affecting food and beverage consumption and trends. In regions where the outbreak was more severe and widespread, such as parts of Italy, restaurants were not even permitted to deliver food. In countries including Greece, France and Italy, the public had to apply for permits to carry out their grocery shopping.

Nevertheless, being an essential spend and with consumers limiting their shopping trips and time spent in-store, retailers are becoming places where consumers can satisfy food, beverage and general lifestyle needs, and often indulge themselves to compensate for the high level of stress. As a result, retail grocery stores are showing strong year-on-year growth across multiple food and beverage categories in Europe.

In order to cope with the peak in demand, many retailers hired additional staff to support operations in-store but also to increase their online order fulfilment capabilities. In May 2020, Waitrose opened a new customer fulfilment centre in Enfield to double its grocery delivery capacity. In Belgium, Albert Heijn launched a temporary home delivery service on Sundays, starting 3 May, to meet the growing demand for groceries delivered to the home.

Also in May 2020, Italy saw the creation of a new independent, 100% digital online supermarket called Macai, offering over 2,000 SKUs with guaranteed delivery within 24-48 hours in Milan and Turin. In turn, SPAR expanded its online offering in Albania and launched a home delivery service of three different grocery boxes, while introducing online grocery shopping in Slovenia.

Figure 1: Albert Heijn’s temporary home delivery service, May 2020
[graphic: image 1]
Source: Albert Heijn

Technology and robotics used to support operations

Another trend we have observed in grocery retailing across Europe as a result of the COVID-19 pandemic was a substantial increase in the use of technology.

In some cases, technology was used to improve the experience of shopping in-store, enabling better safety measures to protect staff and customers against contamination. In April 2020, French retail giant Carrefour started a trial in Belgium by installing a disinfection unit in front of the entrance to its supermarket on the popular Place Jourdan. The unit creates an airlock to access the store where customer can disinfect their hands and cover their face before entering.

German discounter chain Aldi Sud went in a different direction and applied the use of technology to launch a digital access control system for its stores. The system provides a real-time count of all the consumers in the store at a given time. Rolled out in half of the 1,930 outlets in April 2020, it allows the group to adhere to the established limit for clients in store. Since then, we have seen numerous other retailers come up with variations of such access control devices. In May 2020, Aldi introduced a traffic light system across all its stores in the UK, and Tesco launched a similar automated queueing system that uses “3D body imaging” to track the number of people in the store, in real-time.

Figure 2: Aldi’s traffic light queueing system in the UK, May 2020
[graphic: image 2]
Source: The Independent/Aldi

With the use of trolleys becoming mandatory in certain countries, in May Delhaize supermarkets started testing using robots to disinfect the top and bottom of the trolleys. In France, Auchan created a different type of device in the shape of an arch to disinfect its trolleys before each reuse in a three-second process.

Figure 3: Delhaize’s robots disinfect trolleys at stores, May 2020
[graphic: image 3]
Source: VRT/Delhaize

The use of robotics by grocery retailers in response to the COVID-19 pandemic has presented itself in other forms too. Amazon designed a robot that uses 10+ ultraviolet tube lights to kill the coronavirus and help sanitise its warehouses and Whole Foods stores. The sanitization process covers a variety of surfaces such as food, packaging and doors. In the UK, the Co-op rolled out robots for home deliveries to communities across Milton Keynes, as well as in other towns and villages due to increased demand for convenient delivery services during COVID-19 restrictions. Between the start of lockdown in March until June 2020, robot deliveries have reportedly doubled both at Co-op and across the UK.

The above initiatives tie in closely with Mintel Trend Who Needs Humans, which looks at how automated technology has meant machines increasingly replacing people – for better or worse.

Collaborations enable better service

One of the trends resulting from the ongoing COVID-19 pandemic is a heightened sense of collaboration and support across businesses. In fact, we have even seen partnerships created between retailers in different sectors in order to support both sides during the difficult times. In March 2020, for example, we have seen McDonald’s, Aldi Nord and Aldi Sud partnering in Germany to enable employees of the fast-food company to work temporarily at the discounters’ stores.

In line with this trend, we have seen a number of food retailers, large and small, creating partnerships with food delivery companies to introduce or expand home deliveries of food and essentials. In France, MonoPrix partnered with Uber Eats for home delivery of essential goods. The service was kicked off in April 2020 across 38 stores of the brand in 15 cities in France, covering a total of 80 essential items.

In the UK, Marks & Spencer extended its delivery service through a collaboration with Deliveroo to 142 stores across the country. Over 100 BP forecourts with M&S franchises began offering online deliveries through Deliveroo at the end of March 2020. Also in partnership with Deliveroo, Aldi UK started trialling grocery home delivery for the first time in May 2020. Aldi offered a rapid delivery service from a store in Nottingham, before extending the trial to another seven stores across the East Midlands in June.

In addition to the larger players in Europe, we have also seen smaller retailers establish collaborations and partnerships with the likes of Deliveroo and Uber Eats to start offering home deliveries. In the UK, a good example is the chain of McColl convenience stores, which started offering a delivery service through Deliveroo from 300 of its stores in April 2020.

Discounters pose threat to supermarkets as shoppers look to price

In a bid to win over consumers and maintain their market share, we expect to see discounters like Aldi, Lidl and Eurospin introduce sharper price deals in the coming months, making them competitive even against the supermarkets' private labels. This will make them particularly attractive in a scenario of more considered shopping and tighter budgets.

However, it isn’t just about price. Discounters have been investing heavily in advertising and experimenting with everything from store formats and enhancing shopping experience to the fresh food offer.

They have done so while still offering extremely competitive prices and so represent a growing challenge for traditional supermarkets. Supermarkets must think carefully about how to respond to the discounter threat that shows no sign of slowing.

How COVID-19 will reshape the industry

Supporting the local community will gain further relevance

The importance of supporting and giving back to the local community was already growing across grocery retailers in Europe, even prior to the ongoing COVID-19 pandemic. Mintel Trend Giving Back discusses how the time has come to share the wealth, and how people are creating their own ways to help those in need.

Coronavirus is intensifying this trend, revitalising the concept of community, making it even more important for retailers to give back and provide support to those in need during difficult times. In line with that, we have seen many of the leading European retailers donating substantial sums to charities and to support the fight against the virus.

In late April 2020, Grupo DIA launched 'DIAContribuye2020', a project aimed at mitigating the negative consequences of the COVID-19 crisis on the communities across the four markets in which it operates: Spain, Portugal, Argentina and Brazil. Eroski, in turn, donated eight tonnes of food to the existing food banks of Bizkaia, Gipuzkoa and Álava in Spain, in collaboration with the Spanish Federation of Food Banks.

In the UK, in April 2020 Sainsburys launched a volunteer shopping card that enables others to shop on behalf of the elderly, disabled and vulnerable, among other customers who could not shop for themselves. One month earlier, in March, The Co-op announced it would donate £1.5 million of food to FareShare, a charity that tackles hunger, and John Lewis Partnership donated £75,000 each for selected leading charities, including Age UK, FareShare and the Trussell Trust. Meanwhile, M&S made an immediate £100,000 investment in the Neighbourly Community Fund to support hundreds of local organisations, from food banks to youth clubs, as well as an additional £100,000 to the National Emergencies Trust Coronavirus Appeal.

Figure 4: Sainsbury’s volunteer shopping card, May 2020
[graphic: image 4]
Source: Sainsbury’s

Retailers are also supporting local communities by promoting smaller local suppliers. In Spain, Caprabo launched an initiative during the month of June 2020 with detailed information and discounts of up to 50% on more than 150 SKUs from small producers and agricultural cooperatives in Catalonia.

Mobile apps create space in home delivery for smaller players

Among the numerous developments in technology that we have seen since the beginning of the coronavirus outbreak, many retailers have launched new mobile apps to enable smaller grocery players, such as corner shops and convenience stores, to offer home delivery to its customers.

Based in the Netherlands, HERE Technologies launched a route planning tool to help local businesses in Amsterdam meet the increase in demand, easily implementing a home delivery service. There will be no cost for retailers during 2020. In a similar initiative, Facebook introduced a free tool to help small retailers set up an online store that can be accessed on both Facebook and Instagram. Sellers can customise the look and feel and select the products they would like to feature in the shop.

In Germany, the new ‘Localivery’ app, launched in May 2020 through an initiative supported by the Federal Government, allows people to order groceries nearby via messenger apps. The new platform allows users, without prior registration, to contact shops and restaurants nearby and order their groceries while supporting the local economy. In Spain, hypermarket chain Alcampo started enabling customers to buy household goods and appliances via WhatsApp. The service connects shoppers directly to the buyer, with delivery within 48 to 72 hours, and we think this type of service could be easily implemented by smaller players as well.

Discounters boosted by limited budgets

With the growing importance of discounting and lower prices as a result of tighter budgets and less impulsive spending due to the COVID-19 crisis, discounters are experiencing a further boost to their fast and continuous growth.

Discounters are the most powerful force in the grocery retailing sector of certain countries, such as in Germany. However, they still tend to only sell non-food products online. Traditionally, discounters were not prone to innovations and change in their rigid business model, where price is the paramount consideration.

However, we have seen Aldi and Lidl expand their home delivery to include groceries in a number of European countries. In the UK, Aldi started delivering food to consumers’ homes through a partnership with Deliveroo. And if the online grocery market continues to grow across Europe as we expect, the group’s move into this area could be swift and decisive.

In fact, based on the information available to date and what we have already seen across Europe since the start of the pandemic, we think there is a good chance that discounters will eventually offer online grocery services in the short to medium term.

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