GROCERY: Dairy: Golden eggs

When many grocers think of eggs, they're likely to think of a solid but static staple in the dairy case. But that perception would be wrong, according to a recent study of the egg business conducted by the American Egg Board (AEB), based in Park Ridge, Ill., and Libertyville, Ill.-based Wisner Marketing Group.

The researchers found just the opposite: Egg consumption is actually climbing, with a little help from evolving demographics and positive publicity about eggs' nutritional benefits. Moreover, shell eggs generated a whopping $1,052.28 in annual true profit per square foot -- outperforming every other category in the dairy case, including fellow staple milk.

However, the study, Room for Improvement: Making the Space for Eggs, also found that eggs case space is woefully under-allocated compared to other dairy categories, with an average shelf inventory of just 1.6 days. The inescapable conclusion: Retailers aren't taking advantage of the potential profits to be derived from eggs.

"Too often, many retailers approach traditional products with a dated set of assumptions, instead of fully understanding the real facts behind the category," noted Wisner Marketing Group president Jim Wisner, citing such reasons as "extraordinarily busy" grocers' continual "scrambling to find space in the dairy case," their need to focus primarily on emerging categories instead of commodities they think they know, and what he termed "lingering [false] perceptions" of eggs as unhealthy.

Even Wisner, despite his years of experience with eggs, confessed himself to be "surprised at how efficient the category was from a promotion standpoint," as revealed in the study.

Another key finding was that specialty eggs, which include organic, natural, cage-free, and nutrient-enhanced varieties, currently make up 21.4 percent of egg category sales dollars, and that many retailers are failing to offer their customers a full range of choices, thereby missing sales.

Through their research, AEB and Wisner Marketing Group set out not only to paint an accurate picture of the egg category, but also to come up with concrete recommendations for grocers looking to boost both egg sales and overall dairy case margins.

The case for more space

They did their homework, collecting and studying sales data, gross margins, and space allocation information of five retail chains for a 12-week period during the first calendar quarter of 2006. The field work included measuring stock levels, item counts, and space allocations across all major dairy case categories at Bashas', Bi-Lo, Food City (K-VA-T Food Stores), Giant Eagle, HEB, and Schnucks, in 43 test stores; interviews with 35 dairy, grocery, and store managers; and an in-store survey of 250 shoppers.

At the stores that Wisner Marketing Group surveyed, shell eggs accounted for 4.6 percent of total dairy case space, but they generated 5.6 percent of sales dollars and 8.6 percent of dairy case gross profit. Nearly half (48 percent) of the managers interviewed for the study said that they would give more dairy space to eggs.

What's more, customers are also carefully considering stores' egg sections: Over two-thirds of the shoppers who were surveyed in-store said that the egg case affected their impression of the entire store, with 38.2 percent considering the appearance of the egg section even more important than that of milk.

Additionally, the insufficient space allotted to eggs in the test stores was leading to more out-of-stocks (managers reported having to restock an average of four times daily) and higher handling costs.

But why would more space for eggs increase sales across the whole department? The study bears out earlier findings that egg sales are highly space-elastic, meaning that more space for eggs equals more sales.

For retailers wondering which products they should cut back on to make room for more eggs, the study suggests assortment optimization in the juice and yogurt sections, as both categories, which generate among the lowest profit per square foot in the dairy case, have seen explosions in product lines and extensions that, the eggs folks say, are more likely to overwhelm shoppers rather than entice them to buy the new items.

Based on the results of the study, AEB recommends a minimum allocation of eight feet, with one shelf dedicated to liquid eggs/substitutes and tie-in products, enabling retailers to maintain appearance and shelf appearance, as well as reduce back-room stock.

Larger stores, locations in areas with high concentrations of ethnic shoppers (Hispanics and Asians are particularly enthusiastic egg consumers), and stores with roll-in cases will need additional space.

The board further recommends that retailers carry a wide range of regular, specialty, liquid eggs/substitutes, and such other optional additions as grade AA eggs, private label premium eggs, small eggs, and Pasteurized eggs, to meet customer demands.

The AEB believes that in addition to higher profits and sales for eggs, retailers who adopt its recommendations should see improved stock conditions, more opportunities to grow sales, and a better shopping experience for customers.
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