A numbers game

The Grocery Headquarters annual State of the Industry Almanac takes a comprehensive look at dozens of supermarket categories.    

The supermarket industry is in a battle for its collective life. A lackluster economy and higher costs are impacting industry sales and profits. Competition is increasing from virtually every angle.

The result has been a downturn in sales in some major categories at the food store. As our annual State of the Industry report, developed with the SymphonyIRI Group and sponsored in part by Kraft Foods, shows, many kealmintro4-13 2 charty segments posted drops in dollar and unit sales at supermarkets during the 12-month period ended Jan. 27.

High profile categories such as carbonated beverages, milk, bread and rolls and cereal showed drops in volume during the tracked period as consumers either moved on to replacement products or found other locations to purchase these items. “We don’t just compete with other supermarket chains and Walmart and Target these days,” says a senior executive with a West Coast chain. “Now, we have to worry about drug store chains, convenience store chains, dollar store chains, independent specialty operations and, more recently, Amazon.com and other e-commerce outlets. It is natural that they would take some business from us just by offering a sampling of products.”

The $11.5 billion carbonated beverage segment is a great example of losing sales to other retailers and a change in consumer shopping behavior. Down by about 2.1% in dollars and 2.7% in units during the tracked period, the carbonated beverage segment is quickly changing as more consumers seek healthier alternatives to these products. Of course, the big players in the field are moving into other products, especially bottled water, flavored teas and energy drinks.

In fact, bottled water produced a solid 5.1% increase in dollar sales and 4% increase in unit sales during the tracked period, testament to the change in consumer purchasing patterns. Wine, another growth area, showed a 4.2% increase in dollar sales and a 2.2% increase in unit sales. Yogurt, coffee—thanks to new delivery systems—and beer/ale/alcoholic cider also showed strong returns during the year.

Many industry observers say changing consumer behavior is responsible for this change in sales. With more shoppers looking for healthy alternatives, grocery retailers will have to respond accordingly, mostly by changing their merchandise mix to include new items that consumers want to at least experiment with, if not simply purchase on a regular basis.
Take the snack nuts/seeds/corn nuts category for instance. This segment that once was the domain of convenience stores has now become a huge business in grocery stores. So huge that it accounted for more than $1.7 billion in sales at the supermarket, a 10.2% increase from the previous year. It is growing for two reasons. One is that consumers want to purchase the products at the same place that they buy their other grocery needs. The second is that suppliers are adding new packaging that fits into a supermarket planogram.

“We see a lot of suppliers changing packaging and promoting their products differently because they see an opportunity in the supermarket,” says the West Coast retailer. “I expect that to continue because consumers are thinking differently.”

As we always say in this spot, we encourage you to review our annual almanac and let us know your thoughts. We welcome your feedback.


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