Essentials like meat and dairy are strong, but service departments are challenged.
While meat and dairy have emerged as sales leaders, the limited service/assortment and/or shutting down of bakery and deli counters across many stores have had severely negative impact on sales in areas like deli-prepared food, made-to-order cakes and other fresh food items.
Despite a difficult past four months, deli remained atop all fresh subcategories in terms of dollar sales, with $37.6 billion for the 52 weeks ending May 30, 2020. Other top performers include fresh vegetables ($32.4 billion), fruit ($31.2 billion) and beef ($28.7 billion).
Sales in challenged fresh departments like deli and bakery had started to inch up this summer, but the spread of the pandemic in the southern and western regions of the United States could once again impact consumers’ confidence level in going out to the grocery store.
Taken as a whole, the overall meat category (including beef, poultry and pork) was the biggest winner in fresh, with $75.9 billion in sales, up 10.5% over the same period a year ago.
Meanwhile, fresh staples meat and dairy continue reporting strong sales, though nowhere near the peak the categories experienced during the panic buying and hoarding this spring. Out-of-stocks and higher prices also continue to be a challenge for these high-demand categories.
Fresh produce, on the other hand, has had more of a winding road through the pandemic. During the initial outbreak of the coronavirus, many shoppers turned to center store substitutes for fruit and vegetables for their long-lasting quality as well as avoiding produce that may have been touched by others.
Also, the explosion of online grocery impacted typical in-store purchases such as bakery, deli and produce; essential groceries like milk and meat were not as sensitive to that trend.
Produce is once again back on the rise this summer as consumers become more comfortable with masked and social-distanced shopping trips.
While the in-store bakery took a big hit during the early stages of the coronavirus, there were some signs of recovery in early summer with holidays such as Memorial Day and Father’s Day boosting sales as well as graduations and other summer celebrations — albeit on a smaller scale.
According to Nielsen Total Food View data, fresh bakery managed to eke out a 1.3% sales gain year over year for the week ending May 30, 2020.
That’s positive news, considering the precipitous dips the category suffered during March and April when many in-store bakeries were closing or limiting service.
However, as of mid-summer as the coronavirus continues its spread in the southern and western United States, the outlook for bakery remains hazy. Still, as retailers learn to adapt and consumers return to in-store grocery shopping, there is room for optimism.
After many weeks of overall down result and positive gains only for bread and croissants, cake sales growth came roaring back Father’s Day week, according to data from IDDBA and IRI. Sales remained above last year’s level the final week of June.
Aside from Father’s Day, June is historically a critical sales month for cakes with graduation celebrations, many of which were canceled as in-person events.
In-store bakeries pivoted to smaller cakes and desserts, recognizing consumers’ desire to celebrate major milestones just within smaller groups, a trend that is expected to continue throughout the year, said IDDBA.
To measure the impact that the pandemic has had on sales in the dairy case, just go back a few months to March 1, when according to IRI data, the category was continuing its long-running trend of flat to underwhelming dollar sales increases year over year: milk (+3%), natural cheese (+4%), yogurt (0%).
Just one month later, spurred on by coronavirus panic buying and shopper hoarding, the year-to-year sales comparisons tell a much different story.
For the month of March, total daily sales were up 35.0% over March 2019, with huge increases in sales for natural cheese (+45.7%) and milk (+29.6%), with butter up a whopping 69.2% and even the long struggling yogurt category up an impressive 15.0%.
Similar sales figures continued for most of the category through April and May before coming to a more consistent and sustainable level in June. Dairy sales gains have been in the mid-teens so far this summer.
Some shoppers continue to experience limited supply in some dairy categories. IRI’s measure reflecting assortment variety shows some declines across subcategories during the week of June 28 versus the same week last year.
Overall, the number of dairy items per store selling was off by 2.6%, up from -1.7% the week prior. This reflects 33 fewer items compared with the same week in 2019.
Compared to areas like frozen foods that are off by more than 100 items, the dairy department is doing well as far as assortment and in-stock position go. In the coming months, category management decisions on line extensions, pack size varieties, the number of brands carried and other SKU-level decisions will likely take on a big role.
Dairy doesn’t have the same limitations as perishables like meat and produce and consistently sells as both a frequently shopped item and a stock-up item.
Even as coronavirus-spurred panic buying ebbed in April, meat continued to be a huge category in grocery stores through late spring and summer as consumers got an early start on grilling season while restaurants around the country remained closed or offered limited dining options.
According to Nielsen Total Food View, overall meat sales were up 10.5% year over year for the week ending May 30, 2020. Beef was the big winner, up 11.7% over that time period, while poultry sales were up 9.3% and pork 9.4%.
Retail meat sales during the week leading up to Father’s Day were “astounding,” according to Anne-Marie Roerink, president of 210 Analytics LLC. Despite supply improvements, Roerink said prices remained highly elevated and that was the big unknown relative to the success of Father’s Day 2020.
The second unknown, she said, was consumer engagement with foodservice, as restaurants in most parts of the country reopened for outdoor dining with social distancing measures in place. That situation is still in flux as the coronavirus continues to spread in the southern and western regions of the United States, and many restaurants face the prospect of re-closing or limiting dining options.
Even with those two factors, Father’s Day meat sales were much higher than the year prior, with a 31.9% sales gain for the week of June 21. This, Roerink said, marked the 15th week of double-digit gains since the onset of the pandemic.
Volume demand also saw a robust rebound, jumping 13.5% ahead of the same week last year, data showed. Roerink said this was the highest volume gain since the second week of May. Despite this increase, the gap between dollar gains and volume growth set a new record, at 18.4 percentage points.
Higher prices and increased out-of-stocks in the meat category have helped boost the seafood category, as shrimp, crab and lobster sales jumped 12.5% year over year for the week ended May 30, according to Nielsen Total Food View. All fin fish was up 9.5% during the same time period, while value-added prepared seafood sales increased by 6.5%.
While the high price of seafood is often considered a barrier for consumers, the increase in home cooking has led some shoppers to try new things. Indeed, supermarket operators that shrewdly promote lobster and crab while offering the best selections are in position to boost interest and revenues.
For instance, with many restaurants now closed or offering limited dining, supermarkets can offer items that are popular at foodservice locations that shoppers can prepare at home, said Dave Sanz, meat and seafood merchandiser for Seattle-based PCC Community Markets.
To keep prices down, it also is more efficient and attractive for supermarkets to source selections closest to their areas, noted Sanz. “The East Coast should offer more blue crab and stone crab since those species are native to the area, while there is a wider selection of Dungeness crab and wild Alaska king crab on the West Coast,” he said.
Yet, consumer unfamiliarity with how to prepare whole crabs and the perception that it is a seasonal food remain merchandising challenges, said Megan Rider, domestic marketing director for the Juneau-based Alaska Seafood Marketing Institute (ASMI).
Supermarkets, meanwhile, can increase visibility by showcasing products in different areas of the store, such as whole crab in the seafood department and crab cakes and ready-to-eat crab salads and spreads in the deli/fresh prepared foods area, Rider noted.
After an initial dip in produce sales during the coronavirus outbreak, the category has rebounded as customers have returned to grocery stores and are more comfortable buying fresh produce for all those meals and snacks they’re preparing at home.
For the 52 weeks ending May 30, 2020, sales of fresh fruit are up 6.2% and vegetables are up 3.5%, according to Nielsen Total Food View. Convenience is a factor — as is the perceived added safety of prepackaged products — with packaged salads up 9.6% and value-add vegetables up 9.7%. A big winner in the category is potatoes, with sales up 12.6%, likely due to their heartiness and longer-lasting freshness during a time when shoppers are looking to stock up.
On the fruit side, berries (up 8.9%) and citrus (up 7.4%) are performing strongly, according to the Nielsen data.
In the early days of the pandemic, produce sales dropped due to consumer fears about items being touched by others and the desire to buy more long-lasting food.
But with stay-at-home orders being lifted in much of the country and people more accustomed to wearing masks and following safe social-distance shopping rules, consumers began buying produce at normal levels.
However, as the coronavirus continues to spike in the southern and western regions of the United States, retailers will be carefully watching the category for another potential sales dip.
U.S. organic fresh produce sales jumped 22% in March and 8% overall for the first quarter “in retail conditions unlike any ever experienced in the modern era of grocery retailing,” according to the “2020 Q1 Organic Produce Performance Report,” released by the Organic Produce Network and Category Partners.
Data show organic fruit and vegetables outperformed conventional produce in March as well as in the first quarter, the Organic Produce Network noted.
As the coronavirus began to take hold in mid-March, retail grocery experienced a huge surge in stock-up shopping across the entire store. But despite a bump at the outset of the pandemic, as lockdowns nationwide began to take effect, in-store deli quickly began to struggle.
The most dramatic drops were in the prepared food category, which dropped by as much as 47% in April; as of the week ending July 5, prepared food dollar sales versus a year ago had improved to -19%.
Overall deli was down 7.7% for the week of July 5, up from a low of -26% in mid-April.
In moving from salad and hot bars to prepackaged offerings, the number of deli-prepared items saw a steep reduction during the pandemic. At its lowest point, according to IDDBA, the average number of items per store selling stood at 77 from its normal assortment of about 100 items.
Deli-prepared food sales continued to recover from March and April when sales were down more than 40% versus last year’s levels. During the holiday week ending July 5, sales for deli-prepared items were down 19%, but sales of refrigerated meals continue to improve, now up 12.7% versus the same week last year.
