Deconstructing The Market Basket
Research by Debra Chanil / Analysis by Meg Major
Higher commodity prices and an ever-so-slight uptick in consumer spending pushed supermarket sales up roughly $15.2 billion to $459.2 billion in 2011, from 2010's total of $444.0 billion. The consumer supermarket spending increase for 2011 netted a gain of 3.4 percent — the largest seen since 2008's similar 3.2 percent increase, which is also noteworthy viewed against the identical 1.6 percent gain tabbed during both 2009 and 2010.
Total supermarket sales of grocery categories (including alcoholic beverages, food and nonfood) rang up $164.5 billion. The 1.5 percent comparable increase in this year's consumer expenditures report follows after a single year of a 0.2 percent decline in 2010. When analyzing the three sectors, alcoholic beverages increased by 2.6 percent (compared with 3.1 percent in 2010), while food climbed 2.3 percent after flat sales in 2010. Meanwhile, nonfood sales fell by 2.1 percent in 2011, marking the second consecutive year of declines in that sector.
Overall, the grocery segment represents 35.8 percent of supermarket sales, which mirrors a similar pattern of comp declines, from 36.5 percent in 2010 and 37.1 percent in 2009.
The all-important perishable food sector represented more than half, or 52.6 percent, of total supermarket dollars in 2011, up from 51.9 percent in 2010. Total perishables sales captured $241.7 billion in 2011, up a healthy 4.9 percent, which marks a sizable jump when compared with the modest 2.5 percent gain in 2010.
General merchandise (tracked and untracked combined) generated $25.1 billion in sales, or 5.5 percent of total supermarket sales, down from 5.5 percent in 2010. Increases continue to be driven by the untracked side, which gained an even 5 percent, compared with a decline of 4.1 percent on the untracked side. However, sales gains on the untracked side continue to diminish each year.
Health and beauty care represents 3.1 percent of supermarket sales, identical with last year's 3.1 percent net. Overall HBC sales for 2011 tabbed $14.2 billion, a 2.4 percent increase — the largest such sector gain in several years.
Pharmacy, which represents 3 percent of supermarket sales, posted sales of $13.6 billion in 2011, up a steady 2.8 percent.
Now it's time to take a closer look inside PG's annual Consumer Expenditures Study (CES), which offers detailed tables of 2012 supermarket sales of various product categories, as well as annual percent changes from recent years. Our analysis of this year's CES data unfolds on the following pages, with companion insights that expound further on some the most noteworthy categories across the store.
METHODOLOGY
Progressive Grocer's 65th annual Consumer Expenditures Study (CES) is based on data collected by The Nielsen Co. for UPC-coded products, as well as sales estimates made by PG's research department for nontracked categories, including perishables and general merchandise.
Data for total retail sales and share of market for supermarkets and mass supercenters is drawn from Nielsen's Homescan Consumer Facts 2011 Report. The Nielsen Homescan Panel is made up of 125,000 households nationally dispersed and projectable to the total U.S. population. These households record UPC-coded purchases across all outlets.
This year's report spotlights sales trends by the number of children in each household. Please note that percentages in these charts won't add up to the total because households with multiple children in various age brackets will be represented more than once.
Sales for U.S. supermarkets for 2011, shown in millions of dollars, are based on data from Nielsen's Strategic Planner database of UPC-scanned items, as well as on PG estimates for categories for which Nielsen doesn't collect scan data.
Please note that some totals may not justify, due to rounding or suppression of sales detail. Categories with sales of less than $10 million are subject to omission.
Top brand data for the Category Spotlights is provided by SymphonyIRI Group, a Chicago-based market research firm. This data includes total U.S. supermarkets, drug stores and mass market retailers, excluding Walmart.
Other data for fresh food, cutting-edge consumer shopping patterns and Hispanic/ethnic food preferences included in this year's CES hail from Nielsen Perishables Group; The Hartman Group's Shopping Topography: Mapping the New Pathways to Purchase report, and Mintel's July 2012Shopping for Groceries: Impact of Race/Hispanic Origin. We're grateful to all of our research partners for rounding out our study with their reliable statistics and intuitive projections.
An expanded version of PG's 65th annual Consumer Expenditure Study, which includes more in-depth supermarket category sales results, is available for sale on PG's website, www.progressivegrocer.com.
CATEGORY SPOTLIGHT
BEER
Total beer sales in U.S. food, drug, liquor and convenience channels surpassed $27.4 billion for the year ending Jan. 7, according to Nielsen — just 0.6 percent over last year's sales. Among the subcategories, light beer sales fell 1.2 percent, while sales of regular beer rose 2.7 percent.
In fact, most of beer's subcategories went flat or sagged over the past year, Nielsen data shows. A few notable exceptions: Sales of craft beers jumped more than 17 percent to more than $2.15 billion, capping three years of steady growth. Among imports, Belgian beers did best, experiencing a 25.5 percent increase in sales, followed by Asian imports (up 8.3 percent) and Australian imports (4.1 percent).
The country's major brewers are tapping craft beer's strength, despite its being the smallest beer subcategory. The healthy momentum flowing for craft beer sales is being driven by consumers' thirst for rich, unique flavors and beverages that aren't mass-produced, according to Mintel's December 2011 executive summary on the beer category. As such, larger brewers have been getting in on the game.
Beer sales in supermarkets totaled $8.8 billion in 2011, with the category growing 0.2 percent, Nielsen reports. Some chains, such as Wegmans, Jungle Jim's and Giant Eagle, are giving the category a gourmet twist by emphasizing food pairings and beer education.
CATEGORY SPOTLIGHT
CANDY
Candy manufacturers continue to make inroads into the better-for-you domain while still delivering on the indulgence that shoppers want, as opportunities for snacking keep expanding.
Chocolate candy box/bag/bar greater than 3.5 ounces represents 43.1 percent of the total chocolate candy category at U.S. retail food outlets, while the chocolate candy category posted a 4.8 percent increase in dollar sales in the latest 52 weeks.
Chocolate is showing particular resilience in convenience stores and natural food stores, according to a recent report by Rockville, Md.-based Packaged Facts. In natural food stores, organic chocolates posted nearly 20 percent growth in 2011, according to SPINSscan data cited in the report, while conventional supermarkets remain the main channel for chocolate sales, followed by c-stores.
CATEGORY SPOTLIGHT
COFFEE
Coffee and tea continue to make their mark in the premium/specialty segment, with standout products offering health and wellness, eco-friendliness — and a little adventure. Looking at the latest 52-week period, single-cup coffee still represents a small segment of the total retail coffee sales pie (13 percent, according to IRI). But triple-digit growth of 121 percent during this time frame indicates that the single-cup segment has long legs as a primary growth driver of the coffee category at grocery, as well as with the tea and hot cocoa categories.
Recent data from the 2012National Coffee Drinking Trends report from the New York-based National Coffee Association (NCA) finds that daily coffee consumption jumped seven percentage points, moving well ahead of soft drinks, attributable in part to the rising coffee consumption patterns of Hispanics and African-Americans.
Beyond that, NCA reports that total coffee consumption rose two points, from 76 percent to 78 percent, for past-year consumption, which paces soft drink penetration by more than 10 percentage points. NCA noted that the consumption increase spans all age groups, but especially among consumers between the ages of 18 and 39. Gourmet coffee consumption also surged, moving from 37 percent of all cups of coffee consumed in the United States in 2011 to 46 percent in 2012.
Capitalizing on this burgeoning popularity, manufacturers are taking the opportunity to introduce coffee and tea product lines that resonate with several consumer needs — not just satisfying their sense of taste and desire for indulgence and convenience, but also their interests in maintaining better health, creating a cleaner environment and even fulfilling a thirst for adventure.
As depicted in the adjacent chart, all segments of the coffee category posted dollar sales gains in the latest 52 weeks, including ground coffee, which has 62 percent of category sales and posted sales growth of almost 11 percent.
CATEGORY SPOTLIGHT
BATTERIES
Despite dips in dollar and unit sales in supermarkets, drug stores and mass merchandisers (excluding Walmart), there's still plenty of life in the $1.5 billion battery category, according to Infoscan Reviews from SymphonyIRI Group.
In the $1.1 billion alkaline segment, which makes up 85.9 percent of total battery sales in U.S. retail food outlets, Duracell Coppertop is tops, with Energizer Max at No. 2. Perhaps most interestingly, private label brands take the third spot, which hammers home retailers' vested interests in spotlighting house-brand batteries in displays and store promotions.
Other brands represented among the most profitable in this segment, some of which are also premium-positioned variations on traditional batteries, include Ray O Vac, Duracell Ultra, Panasonic Plus, Eveready Gold, Energizer, Ray O Vac Maximum and Kodak. The inclusion of environmentally sustainable battery brands is also trending strong, portending another area for retailers to spotlight as a way to draw in green-minded consumers.
All told, alkaline battery sales powered up 4.2 percent in the past 52 weeks.
CATEGORY SPOTLIGHT
READY-TO-EAT CEREAL
The top one and two most consumed morning meal food choices — across age and gender — are cold cereal and fruit, respectively, but the choices after these two items vary by age group and gender, according to the latest NPD's National Eating Trends, which continually tracks all aspects of U.S. consumers' eating behaviors.
In terms of ready-to-eat (RTE) cereal products, innovation continues to evolve in line with changing consumer needs. According to a February 2012 report from Mintel, the category generated an estimated $10.2 billion in sales in 2011, which was essentially unchanged from 2010 sales data. However, the comparative trend represents a noticeable improvement from 2009-10, when the market posted a 4.7 percent decline. Accordingly, accounting for inflation, the category was down 1.8 percent in 2011 but still improved over 2010, which saw a drop of 6.3 percent, notes Mintel.
Why the dip in the cereal segment? Rising commodity prices for ingredients like wheat and corn are among the chief culprits, according to Mintel, which also sees a bright spot on the horizon. In what it calls "a best-case scenario," Mintel predicts the breakfast cereal category will grow from $10.2 billion in 2011 to $11.2 billion in 2016, good for 10 percent cumulative growth. And while less optimistic models exist, the researcher believes factors such as rising food prices and cereal's high household penetration make the best-case scenario the most likely development.
CATEGORY SPOTLIGHT
DRIED FRUIT
The $3.2 billion nut and dried fruit market is primed to benefit from a number of U.S. lifestyle trends, including a continuum of nutrient-positioned products ranging from whole foods to fortified and functional foods, including those that are rich in antioxidants — like dried fruits.
By now, many consumers know that purple, blue, red and orange fruits are richest in antioxidants, and in dried form, cause the nutrients in their earlier fresh state — i.e., proteins, carbohydrates and dietary fiber — to concentrate. Moreover, dried fruits contain 60 percent to 70 percent of natural sugars that can be easily digested and absorbed into the bloodstream.
Dried fruits are also rich in vitamins A, B1, B2, B3, and E6, as well as pantothenic acid, and also furnish the body with high levels of iron, calcium, copper, manganese, phosphorous, magnesium and potassium, all of which clearly provide a wealth of compelling reasons for retailers to play them up, particularly among adult consumers over age 45.
The Food and Drug Administration's (FDA) qualified health claims for almonds, pistachios, peanuts, hazelnuts, walnuts and pecans as reducing coronary heart disease — in addition to its regularly suggested five or more servings of fruits daily in all forms — may boost sales even further.
At 32 percent, raisins have the largest dollar share of the dried fruit category.
CATEGORY SPOTLIGHT
TEA
Sales of tea in its traditional and ready-to-drink (RTD) forms are on the rise in all channels, according to the latest category research from Mintel, with growth fueled by canned and bottled tea as well as refrigerated RTD tea. Flavor was the top reason cited for consumers' "affini-tea" for the beverage. Further, consumers' expanding knowledge of the tea segment has increased as more people drink tea more frequently, leading to more discerning consumers.
Accordingly, the premium tea segment continues to grow as a direct result of more educated consumers looking for higher-quality teas.
CATEGORY SPOTLIGHT
WINE
The U.S. wine market is growing, according to the latest category research from Nielsen, which found table wines priced at $20 and up per 750-milliliter bottle gaining 11.1 percent by volume and 12.3 percent by value in the 52-week period ended Oct. 15, 2011. Less expensive wines haven't fared well overall, as those priced under $9 per 750-milliliter bottle combined for declines of 1.7 percent by volume and 1 percent by value in the 52-week period.
Total table wine consumption held a consistent level of growth from 2008 through 2010, with table wine consumption since increasing by 4.7 percent in 2011 — a rate not seen since 2000.
And though American wine drinkers consume much less wine than many other countries on a per capita basis, the United States, ranked as the fourth-largest producer of wine overall, is now ahead of France and Italy in the volume of table wine consumed, according to the Wine Market Council's latest annual consumer tracking study on the U.S. wine market.
The trend in demand for table wine in the United States has allowed the U.S. wine industry to weather the recent economic storm, according to the Wine Market Council, with gains being driven by many factors over the past few years, particularly the adoption of wine in early adulthood by the large millennial generation, the availability of quality wine at all price levels, and the acceptance of moderate wine consumption as compatible with a healthy lifestyle.
CATEGORY SPOTLIGHT
Juice
As more consumers seek to incorporate fruit juices into their meals amid rising awareness of healthier dietary decisions, shelf-stable juices are an increasingly important component in one of the most competitive segments in the beverage industry.
A look at the latest category research affirms the same. The fruit juice and juice drink market grew by 1 percent in 2011, which is an improvement from the 1.7 percent decline posted in 2009 and no gain in 2010, according to market researchers at Mintel. The market has continued growth potential, especially in reduced-calorie and functional products that are nutrient-rich and high in antioxidants. Further, new juices and blends featuring sweetener alternatives, reduced sugar and vitamin fortification are also gaining in popularity.
Accordingly, leading juice manufacturers are turning to tart, bold ingredients, including cranberry, pomegranate, cherry, blueberry, mango, strawberry, kiwi, goji, tangerine and acai, to develop new flavors and blends that tap consumers' desires for unique, bolder tastes and specific ingredients.
Continued growth of coconut waters and smoothies also continues with new flavors and blends being added, such as pineapple, mango, blueberry and coffee.
Debra Chanil, PG's market research director, can be reached at [email protected].
