Quick Bites: Growing Online Dairy Sales

• Over the past several months, consumers have been in a near-constant state of shifting. Shifting what they eat, where they eat, and where they buy the things they eat. Lockdowns across the country forced an immediate consumption shift. What was once a near 50/50 split in dollars spent at restaurants versus grocery stores moved almost entirely to supermarkets in mid-March. Where were those grocery dollars spent? Brick and Mortar? Online?
  
• Data from Nielsen pegs grocery sales growth consistently around +20% year-over-year in April and May. And e-commerce was a big winner. Though off a smaller base, over the course of April and May, online grocery spending increased by an average 71% year-over-year. Meanwhile, brick and mortar increased by 19%.
  
• Gains in dairy sales followed a similar trend. Volume through brick and mortar stores jumped 25% from 2019 during April and May, while online dairy sales increased by an average 74%.
  
• Even more impressive: the surge in online alcohol sales – up nearly 350% year-over-year versus up 30% in-store. Are consumers doing more at-home wine and cheese pairings?
  
• This data clearly suggests that consumers are not balking at the idea of buying dairy products online in the COVID-19 world, but will they keep it up as life returns to “normal"?
  

Today's Special

• USDA has been a major force in the dairy markets in recent weeks as it seeks to support both producers and families in need. Since mid-April USDA has spent or awarded bids on more than $43 million dollars’ worth of food to bolster traditional food aid programs. Cheese represents the largest chunk of those dollars, with USDA planning to buy about 185 truckloads worth of cheese for third quarter delivery.
  

• But that’s just the money spent on traditional programs. USDA’s “Farmers to Families Food Box Program” put a new twist on aid programs. While volumes are not quite as clear, USDA awarded bids on $300 million worth of purchases over a six-week period running through June 30. The fledgling program has encountered some bumps, but food is making its way to American consumers in need. USDA reports more than 5 million boxes distributed so far.
  

• Large-scale government purchases are contributing to a suddenly robust demand picture that’s propelled dairy markets in recent weeks. Grocery store sales remain strong, restaurant sales are bouncing back and marketers are still shipping exports booked when cheese was at its lows. Now, with prices back to “highest since” levels, will USDA back off on dairy purchases? That’s where the uncertainty comes into play.
  

• Given record-high unemployment and continued economic pain across much of the U.S. and upcoming elections expect USDA to keep spending. In mid-May, USDA pledged to spend up to $120 million on dairy products during the third quarter using Section 32 funds. And there seems to be more money in the emergency aid pool. Timing and volume are unclear, though. The same can be said for possible future “Food Box” programs. Initial indications suggest that USDA will look into a second round of the program starting in July, but details are yet to come.
  

• Though timing, volume, and duration are still up in the air, don’t count USDA out when thinking about demand heading into the second half of the year.
  

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