Predicting Grocery's Future in COVID-19

Jun 24, 2020

From supply chain shortages and changing shopper behaviors to new safety precautions to protect shoppers and associates alike, the COVID-19 pandemic has altered the way IGA retailers and grocers across the world do business. To help prepare IGA retailers for our new normal while the pandemic continues, IGA News spoke with Oliver Wyman's Helen Leis, a partner in the Health and Life Sciences practice, about the COVID-19 pandemic. Leis offered IGA exclusive insights into Oliver Wyman's forecasts on the effect the pandemic is expected to have on the grocery industry and supply chain, how we expect the virus to spread in the summer, fall, and winter, and how retailers can apply the lessons we've learned so far to their future plans. 

Q: What can we expect this summer as states begin to open up?

Leis: In general, as people start moving around more and interacting with one another more, you’re going to see the numbers go up. Particularly when they find themselves in what we call the three Cs—enClosed spaces, close proximity, and crowds. That said, as people start moving around again, we’re not always seeing transmission rates increase. We think that’s because of learned behaviors. People are wearing masks and washing their hands regularly. People are trying to adhere to six foot social distancing in public. Cash registers now have plexiglass, and many stores have focused on removing physical touchpoints between individuals and cashiers (e.g., by moving to no-cash systems). That’s really important. 

The other big factor is whether most of the interaction is happening inside or outside. In the summer months in the Northern Hemisphere, you’re typically spending a lot more time outside, where infection is much less likely. But in Arizona, for example, the average temperature in May is between 92 and 98 degrees, so people are moving indoors again. They’re not outside having a socially-distanced cocktail across the patio; it’s so hot that they’re going back inside and that’s far riskier from a transmission standpoint. Most of the states that are currently seeing a lot of growth are located in the South and we think the temperature-driven movement inside is a contributing factor. States like Colorado, where people tend to spend a lot of time outdoors, are doing much better despite being open for multiple weeks. 

The last big factor I’ll mention is how much active infection was circulating around in the community when the state began to reopen. The forecasting tools that our team has built [Oliver Wyman’s Pandemic Navigator] are pretty sophisticated, and give us insight into where a state or region is along the path of the virus at any point in time. For many of the states where we’re seeing growth, they began opening right around their peak (just before it, at it, or just after it). Looking at the curves now, we can see that for some, what looked like the beginning of a decline was really a plateau, which subsequently turned into new growth. That’s going to create a more difficult situation as the state reopens. States in the Northeast were hit really hard, so they waited a lot longer to cool off before reopening, so they’re starting from a safer place. 

It’s a mix of: What was their position before they reopened relative to the peak? Did they leave enough time for the spread of the virus to really slow down significantly?

Q: What do you think the fall may look like in terms of virus spread?

Leis: I expect that come fall, we won’t see an increase right away. The theory behind that reasoning is if we let the virus spread at just below R-naught of 1 right now, the people infected in the summer can act as a brake in cases in the fall (assuming they gain protective immunity that lasts through fall).

If there are fewer susceptible individuals in the population, then your transmission rate is naturally lower and as a result, this means you maybe won’t have to shut everything down as severely to maintain R-naught below 1 and that is a good thing. If we keep a steady flow through the summer and even into the early autumn, so that the hospital systems aren’t overwhelmed, then you can go into the winter with a little R-naught “cushion” and we can hopefully get away with more mild suppression measures.

The worry I have for late October and through winter, especially in the Northeast where it gets pretty cold starting in November, is that people will be forced indoors again (similar to what we’re seeing in response to the heat in the South right now). And if we have gyms and bars and restaurants open, they’ll likely have to be at reduced capacity or have other preventative measures to keep the transmission down. Wearing a mask in a bar is tricky in these places. In New York, once you sit down at a patio, you don’t have to wear the mask as long as you’re seated. That seems fine, but I don’t know how that works at a restaurant indoors in the cold weather. Will they have to put plexiglass around the table? Or upgrade the air filtration system?

Then there is the issue of kids returning to school. There’s a decent amount of data that suggests kids aren’t the primary transmitters—they’re not the first to get it in a household and spread it—but they do get it and when they do, they tend to build high viral loads even while largely remaining asymptomatic. But we just don’t know enough right now. Can you safely put kids in a school together, and if a child gets COVID-19, to what extent will they infect their families when they come home from school? If a teacher is diagnosed, what does that mean for everyone who came in contact with him or her—do they need to quarantine for 14 days? There’s a lot of learning that we have to do, and our team is looking largely at what has been happening in Asia and Europe. We’ve seen countries that reopen schools then have cases associated with them (e.g., Israel and South Korea), so we're learning from that.

Q: What are some lessons we’re learning from hard-hit areas of the U.S., like New York City?

Leis: In terms of why COVID-19 hit New York City so badly, the city had a lot of factors working against it for a highly contagious respiratory disease to appear. The city has a high population density. Its residents rely heavily on mass transit, particularly the subways and buses, for transportation. When the virus first appeared in New York in late February, it was cold so people weren’t walking or biking as much. And it’s a major travel hub internationally with JFK, LaGuardia, and Newark airports, which helped to import cases to the city.

Q: How about herd immunity? How far away are we from that? 

Leis: The big question right now is whether protective immunity can be conferred by natural infection and how long that protection could last. We just don’t know yet and the most we have to compare to right now are other Coronaviruses, where we’ve seen immunity last as little as six months and as long as three years. 

Assuming immunity is conferred, driving towards herd immunity is a plausible strategy. This is a generalization of course, but we are finding that both individuals and countries are becoming more comfortable with letting COVID-19 spread in order to keep economies open. As a result, we are making progress towards herd immunity. That progress varies significantly by region—how hard was it hit? How effective were suppression measures? If you were really good at keeping infection out the first time, then the population has almost no protective immunity (e.g., South Korea), whereas other places are making significant progress (e.g., New York City and Sweden). 

A vaccine is not around the corner, as much as we all want to believe that we can have a vaccine quickly. The fastest vaccine I ever heard of took about four years to make. There are some estimates that say a vaccine for the novel Coronavirus could be available commercially as early as next year. That would be great, but it’s an ambitious estimate. Without the benefit of a vaccine in the short term, if you want to move towards herd immunity, then you have to let the virus spread in a way that health systems can treat the severe cases without becoming overwhelmed and manage the transmission rate closely so it doesn’t become exponential.

Q: If supply chain issues manifest, when do you expect that to happen and what might that generally look like?

Leis: Supply chain issues could be ongoing, depending on where you are sourcing products from and how the local authorities are addressing any outbreaks, and what the risk of further disruption is. As we discussed earlier, this is going to vary a lot by region. The Northeast and Midwest are looking pretty good right now, but the South and West are seeing a lot of growth. We are also seeing growth in rural areas. Come fall, the Northeast will be facing colder temperatures and more people indoors, while the South may actually get a bit of a reprieve given temperatures will be more mild.

In terms of the greater/global supply chain, it will depend on (potential) herd immunity in a location, as well as any modifications your suppliers have made to their own operations to protect their workforce. With those caveats, and our factories and fulfillment centers working differently (plexiglass at stations, masks, screenings upon entry), then you may not see as many outbreaks in these workplaces where people are physically close together.

Q: It seems like COVID-19 has accelerated some trends in shopper behavior. What do you see as the biggest opportunities for independent retailers? 

Ecommerce, for one. If you look at China's experience from January to May, digital grew between 100 and 900 percent across retail, financial services, healthcare, and education. In the U.S., we were already seeing a shift in retail to eCommerce before the virus, but the pandemic has significantly accelerated that shift. Stores that have eCommerce set up are benefitting greatly. 

Then, there's the trend toward local. Consumers may feel it's safer to shop closer to home in a smaller store rather than going to a bigger town to shop in a big-box or chain store. Reducing their travel and exposure to a greater number of people, feeling safer consuming local products because fewer people have touched them along the supply chain, all of these factors contribute to shoppers favoring local, which really benefits the independent retailer.

And of course, I think we are going to see a return to eating indoors and cooking at home again in the late fall and winter, which is great for your retailers. They'll be able to take the lessons they've learned from this spring in terms of supply and stocking for meal solutions, and continue to apply them in the fall and winter.

Q: From a long-term perspective, how will COVID affect the population of cities moving forward? 

Leis: I don’t have a clear answer yet, but initially there was a flight away from density—people were looking for more space, especially from large, urban metropolitan areas. But for instance, in New York City, many New Yorkers lived through September 11, the blackouts, the financial crisis, Hurricane Sandy—all of which people said would be the end of the city as we knew it, and New York came back. I still see significant benefits to a city. But there is a disruption period—maybe one, two, or three years—where people may be worried about exposure to a large population.

Q: What do IGA retailers need to be doing to keep shoppers and associates safe? 

Leis: Think of it like scaffolding: the masks and/or the 6-foot distance and/or the hand washing multiple times a day and/or disinfecting the space, all of those things work in concert to really reduce the probability that you get infected, which is essential for retail.

Screenings like temperature checks are also important for employees, but likely not for shoppers. You definitely don’t want a shopper with a fever coming into your place of business, but on the other hand, there are people who don’t have a fever who may be infected, so the temperature check won’t catch them, and may do more harm than good by giving your employees a false sense of security and alienating shoppers. 

Bottom line: masks are one of your most important lines of defense and we need to change how we think of them. People used to think they would wear masks to protect themselves—the wearer—from getting sick. But it’s very much also about protecting other people. If a person who is asymptomatic wears the mask in public, the risk of transmission is much lower than if he or she wasn’t wearing a mask. If I’m infected and I go out in public wearing a mask AND you’re wearing a mask, there’s an even lower risk of transmission.

Masks help. Social distancing helps. Hand washing helps.

You've seen what works early on from your IGA China retailers, and the IGA retailers in the U.S. have been following similar protocols, right? By observing what has been successful in preventing virus transmission in countries and continents that are ahead of us in terms of the spread, like Asia and Europe, we can use those lessons to help us stay protected here. 

For more information and predictions from Oliver Wyman about COVID-19, see the Oliver Wyman COVID-19 Pandemic Navigator, which forecasts the number of new and cumulative Coronavirus cases across nearly 40 countries, incorporating the effectiveness of containment and suppression measures. It also provides insights into how to manage after the peak, as well as the ability to study potential future containment scenarios until a vaccine or a scale treatment solution is in place. 

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