Covid-19 & Income Inequality: the Existential Crisis for the Consumer Industries

In 2017, I was honoured to present at the Consumer Goods Forum on the impact of Income Inequality on the Consumer Goods industry.

Covid-19 is going to accelerate these trends.

In our report, we linked the rise of inequality to the entry of discounters and increasing private label share. The takeaway was that if trends continued - the bifurcation of the market between the haves / have-nots would continue and this would have a dramatic effect on the consumer industry of the future. This would lead to growth in the 'premium' end of the market and at the value end - with a flattening of demand for middle mainstream brands. Potentially, reducing market room for mainstream brands to 1 or 2 in each category - a real hollowing out of the current market. We also discussed how definitions of Premium and Value vary significantly by consumer.

How does Covid-19 effect this?

Covid-19 is clearly a humanitarian crisis. We are entering a recession with income inequality levels higher than they were at the peak of the Great Depression.

Historically, inequality has dropped following mass pandemic events; this is due to the high levels of deaths leading to a massive reduction in the labour market - shifting the labour-capital balance. With Covid-19, our health systems and mitigating actions have mercifully reduced the deaths.

Inequality is pretty certain to increase rapidly; driving the outcomes we'd described before - stronger and sooner. (Unless governments take further redistributive actions - very unlikely across the 'Western' world).

I believe our recommendations to retailers and manufacturers still hold true -