Less Lysol, More Condoms: Companies Plan for a Post-Pandemic Buying Shift
March 05 2021 - 11:29AM
Dow Jones News
By Charley Grant
When your multinational corporation sells disinfectant products
and condoms under the same roof, it's important to get the
transition from stay-at-home to out-on-the-town right. To be
prepared, it can help to look far away from your biggest
markets.
Figuring out how much customers plan to spend on your product,
and when, is always job number one for management. But the task
becomes especially urgent, and thorny, when preparing for a return
to business as usual after a year of pandemic-hobbled economic
activity. Just ask Kris Licht, head of the health business and
chief customer officer at consumer-products giant Reckitt
Benckiser. "If we don't create good scenarios and good plans in
advance, we will not be able to meet demand, " he told me in an
interview this past week. That effort includes predicting when the
pandemic will run its course and predicting the extent to which the
experience of a yearlong lockdown will alter consumer behavior,
among other factors.
It isn't just Reckitt trying to sort through this issue, of
course. Lately, reopening has been the dominant theme when
corporations face Wall Street, since vaccines are rolling out and
some government leaders are lifting health restrictions. There were
nearly 500 mentions of the phrase "pent up demand" on public
corporate conference calls in February, according to financial-data
provider Sentieo. That monthly figure barely cracked triple digits
as the U.S. emerged from the global financial crisis roughly a
decade ago. If talking is as good as spending, maybe a sequel to
the Roaring 20s really is in store, as more than a few pundits have
lately predicted.
Any executive who is only beginning to answer these questions is
far behind: Mr. Licht says good plans and forecasts are needed six
months in advance, because decisions around global production,
staffing and other concerns require significant lead time. To make
the challenge even more significant, there is no modern historical
precedent for the U.S. and other major economies to help management
teams plan.
Reckitt owns brands that have thrived during the pandemic, like
Lysol. It also owns products that should do better in a world of
full mobility, like Clearasil acne medicine, Airborne cold
medicine, and Durex sexual well-being products. To gauge demand for
Durex, Mr. Licht watches the pace of restaurant and bar reopenings
in key markets, while cold medicine sales may hinge on kids
spreading germs as more schools reopen.
All told, a team of more than 200 employees at Reckittt studies
a host of metrics to produce demand forecasts, says Mr. Licht.
These include child birth projections, Covid-19 measures such as
rates of vaccination, as well as local-market gross domestic
product and retail consumption data.
While the U.S. is in its early stages of reopening, some
preliminary consumer trends aren't exactly surprising. A year of
limited travel options has would-be revelers rushing to book trips
to Las Vegas, for instance. Caesars Entertainment executives said
last month that casino bookings are up 20% from a month earlier.
"It's like a switch was flipped," Chief Executive Thomas Reeg told
Wall Street analysts last month. At least some Americans are
feeling lucky.
Things are more complicated for other businesses, even some that
have been thriving. For instance, retail giant Target declined to
provide a sales or profit forecast for its current fiscal year on
Tuesday as it reported quarterly results, due to "continued
uncertainty." "The reality is that none of us can accurately
predict the future as all of us are facing a much higher level of
uncertainty compared with a normal year," finance chief Michael
Fiddelke told Wall Street analysts.
He certainly has a point: The reopening's ultimate shape and
nature is still a mystery. But there are clues available in smaller
countries that are farther ahead in the fight against Covid-19.
Some of those suggest that all that optimism on corporate
conference calls might be justified: Israel, which leads the world
in vaccine distribution, has experienced a jolt of activity as
national lockdowns lifted in February. Online travel and restaurant
reservation portal Booking Holdings told investors last month that
domestic bookings in Israel were now well above 2019 levels.
Lysol sales grew 70% from a year earlier in 2020, a pace that
will be hard to maintain. At the same time, Reckitt has found that
Israeli consumers have retained an elevated awareness of hygiene
habits. That is similar to how shoppers in markets affected by past
outbreaks like SARS have reacted. That trend could bode well for
longer term sales of products like portable disinfectant wipes or
office cleaning products.
While a look at distant markets that have reopened is certainly
helpful, Mr. Licht cautioned that what happens in Tel Aviv is no
crystal ball for predicting how the reopen might look in Dallas or
New York. The modern consumer living in a pandemic environment
faces a balancing act of important factors, like safety,
willingness to spend money, employment prospects, and child care
availability. Those circumstances vary significantly across
markets.
And yet another layer of the onion still needs to be pulled
back: in some places and product categories Reckitt is the
entrenched market leader, and in some cases the plucky upstart.
"You need a good amount of art on top of all the analytics," he
says.
Write to Charley Grant at charles.grant@wsj.com
(END) Dow Jones Newswires
March 05, 2021 11:14 ET (16:14 GMT)
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