Grocery Industry Forecasts Sales Growth Amid Rising Costs, Supply Chain Challenges

As the year draws to a close and grocery manufacturers and retailers look ahead to the first quarter of 2022, they’re predicting continued dollar sales growth as they grapple with rising costs and supply chain challenges, adjust in-store space allocation, and focus on investments in digital commerce, according to “Advantage Sales Outlook October 2021,” based on two new surveys by Advantage Sales, a division of Advantage Solutions.

Among the report’s findings are the following:

• Six in 10 manufacturers and seven in 10 retailers said that they anticipated higher dollar sales in the fourth quarter of 2021 compared with a year ago. Manufacturers and retailers agreed that price increases will be the top driver of dollar sales growth.
• Beyond price increases, more manufacturers than retailers said that improved supply will spur growth. Retailers pointed to higher levels of in-home consumption and increased consumer spending.
• To mitigate rising costs, nine in 10 manufacturers said that they’re planning or they’ve implemented at least one price increase since the pandemic began. One half have implemented one increase. One-fourth are planning or have implemented a second. Almost one-sixth are planning or have implemented three or more. Most price hikes have been reflected in the list price.
• Manufacturers expressed more optimism than retailers about supply levels: While one-third of manufacturers said that they expected supply levels to top 90% in the last quarter of 2021, none of the surveyed retailers did.
• More than half of retailers said that they’re expanding their fresh category offering, and four in 10 said that they planned to trim space dedicated to tobacco and general merchandise.
• According to manufacturers, retailers that are winning online are leveraging new shopper fulfillment options, focusing on online shopper experience and services, and have a retail media network. Almost all retailers surveyed said that they’ve increased their digital investments this year compared with 2019.
• Seven in 10 manufacturers said that they plan to reduce traditional trade spending in the next six months. Among their top reasons were supply constraints, diverting funds to digital investments and cost increases.

“Advantage Sales Outlook October 2021” is based on responses from 79 consumer packaged goods manufacturers and 36 grocery retailers to online surveys conducted Sept. 13-Sept. 23 by SMARTeam, Advantage Sales’ consumer packaged goods research and insights team.

Based in Irvine, Calif., Advantage has offices throughout North America and strategic investments in select markets throughout Africa, Asia, Australia and Europe, through which it services the global needs of multinational, regional and local manufacturers.