Covid-19: Lessons for grocers from Covid-19

Last week I was stood in the checkout queue at a branch of Lidl in Sussex. The woman behind me was on the phone, in tears, complaining about people panic buying. She was pushing a large trolley absolutely rammed to the gills and liberally topped off with booze. I confess, I did roll my eyes.

But on reflection I really shouldn’t have judged. Coronavirus isn’t the only thing that’s infectious. So is panic. Perfectly rational people confronted with empty shelves may despair of others taking what they don’t need, but equally start to worry themselves about being left without what they do need.

Though it’s just too early yet to say how, one thing we can be pretty certain of is that the world after the pandemic will be different from the one before it.

One of the things I suspect will get a fundamental rethink is how we reconfigure our supply chains so that we don’t see a repeat of the scenes that have led us to question whether we’re still the nation of the Blitz spirit and the stiff upper lip.

I suspect we’ll see a finger of blame pointed at the trend for supermarkets (and most retailers) to keep less and less stock on hand as supply chains and replenishment have become more efficient. This is disingenuous. Excess inventory doesn’t just tie up working capital in stock that’s unnecessary, it also increases spoilage. Food waste is a genuine public concern and grocery retailers have made huge strides in cutting spoilage. The way you do that is forecasting at an ever more granular level what you will actually sell, and then buying in no more than that plus what it takes to maintain an attractive display. It also offers the public fresher produce that’s more nutritious and more likely to be used rather than moulder in the nation’s fridges.

That said it doesn’t seem to be fresh produce that’s been most under pressure during this crisis. People have been stocking up on dried and canned goods with a long shelf life, precisely because it’ll keep them fed even if their worst fears are realised. This, don’t forget, is a nation that, having watched Shaun of the Dead, knows what to expect.

The most obvious answer with panic buying is to squash it before it starts. Use the tools that epidemiology has given us. If there’s an outbreak, contain it and cure it. However, in an age when pictures go viral instantly that’s difficult. What it will need is hugely expanded safety stocks of the things that people grab when they’re afraid, not least toilet rolls. (If you want to see the response from the Philippines to panic buying of toilet rolls watch this! It’s a scream.) 

The big question will be who holds the stocks. There will almost certainly be politicians who call for the major supermarkets to take responsibility. Others may call for the state to stockpile rice, pasta, tinned veg, fish, meat and, yes, loo rolls in MoD bunkers in darkest Wiltshire.

I suggest the answer may lie somewhere in between. There’s little point doing the latter. Food will sit in government warehouses going out of date. It’ll be a waste, and the cost will reduce the chances of such a scheme lasting until it’s actually needed again. Moreover the supply chain isn’t set up for stock to get from those warehouses to where it’ll be needed. Better we encourage the major grocers to adjust their safety stocks to give them a chance to ramp up their supply chains in response to a crisis. This way those stocks will feed into regular sales and will be replenished from new supplies. The risk of spoilage, especially given the long shelf lives of the items, will be massively reduced.

The last few weeks have given us the sales data we need to make far more accurate forecasts of irrational demand than before. There will inevitably be an additional cost of maintaining higher safety stocks in the national interest, but it’ll be far lower than if the state tries to do it itself. What the government could and probably should do, however, is meet those additional costs.

We’ll need to start planning as soon as this is all over, because if there’s another thing we’ve learned from all this, it’s that governments are far too slow to learn the ropes once it has all kicked off.