The Grocery Headquarters annual State of the Industry Almanac delves into the performance of dozens of supermarket categories.
Good times? Bad times?
That is what just about every retailer is asking themselves these days. Faced with rising energy prices, years of high unemployment and a general uncertainty on which direction the economy is headed, consumers have taken a very cautious view of spending. Simply put, many shoppers do not want to let go of their precious money.
That said, the supermarket seems to be in perfect position to take advantage of these concerns. As we often say in this space, people have to eat and the food store has done a spectacular job over the years of creating an environment that is cost- and time-efficient for consumers.
Now, that theory is really being put to the test. As gasoline prices climb to the $5 a gallon mark in some areas of the country and other commodity costs increase, shoppers are looking for every way possible to cut costs and keep their budgets balanced.
So where does that leave the grocery store industry? According to the 2012 State of the Industry Almanac, our annual look at sales of key categories and products at the supermarket, the industry is hanging in just fine. With consumers spending less money eating meals out of the house, they appear to be that much more willing to splurge on products at the supermarket.
For example, dollar sales of cookies, wine, salty snacks and even bottled water all grew during the 52-week period ended Jan. 22. Wine sales rose by a dramatic 5.1% in dollars and an impressive 4.5% in units. Cookies were up by 2.4% in dollar sales, while salty snacks showed a 2.1% jump in dollar sales and bottled water grew by 2.8% in dollars and 3.5% in unit sales.
“We see a lot more people coming in for the little things for home entertaining,” says an official with a Northern California-based grocery store chain. “It makes so much sense to us because it saves the consumer a lot of money and they can still feel good about themselves. Our job is to make sure that these products are available on the store shelves.”
Of course, the rise of prices in many key categories is playing havoc with the overall industry. Normally, supermarket chains like a bit of inflation to help pump up dollar sales. But some retailers say that with so many commodity prices rising, it is causing some consumers to purchase fewer products overall.
The milk segment, for instance, is one of those segments that showed dollar growth but a unit decline. Unit sales of milk dropped by nearly 4% during the tracked period, though higher prices gave the category a 6.2% increase in dollar sales. The ice cream/sherbet segment experienced the same situation. Unit sales dropped by 4.6%, but dollar sales showed a 4.6% increase.
“There is definitely inflation in many segments at the supermarket and that is causing many shoppers to purchase fewer items in some key areas like milk,” says the California supermarket executive. “On the other hand, we see some shoppers simply switching away from some non-essential products. It is playing havoc with our merchandising strategies.”
Healthy items again seemed to outperform the category in general. Yogurt sales rose by 7.7% in dollars and snack bars/granola bars rose by 5.5% in dollars and 4.7% in units. Sports drinks also continued to show impressive growth, increasing by 4.1% in dollars and 8.9% in units.
Interestingly, frankfurters, not considered to be much of a growth area in recent years, showed a 3.4% jump in dollars, though units were down by 1.6%.
Once again, we welcome your feedback on these charts. Examine them and determine how they can help you build your store so that you give consumers the right product, in the right location and at the price that will encourage sales but still offer you a healthy profit.
We hope our annual almanac helps you makes those decisions.