Inside The Marketbasket

Supermarket sales reached $444 billion in 2010, which represents a near $7 billion gain from 2009's $437 billion total, according to results of Progressive Grocer's 64th annual Consumer Expenditures Study (CES). The flat 1.6 percent comparative growth tabbed in this year's report indicates a modest glimmer of positive news for food retailers versus the identical comp sum tabbed in last year's study, which marked the first time in five years that supermarkets failed to exceed the sum of the previous year.

Total supermarket sales of grocery categories, including alcoholic beverages, food and nonfoods, were $162.1 billion — a decline of 0.2 percent from 2009, the first such decrease after several years of increases of about 2 percent. A closer examination of the three aforementioned categories, all of which were amassed by Nielsen data (see additional details about the report's data in the Methodology explanation on page 52) shows alcoholic beverages, increasing by 3.1 percent; food, status quo; and nonfoods, declining by 2.3 percent in 2011 following increases for all three segments tallied in 2010. The grocery segment represents 36.5 percent of supermarket sales, down from 37.1 percent in 2009.

The all-important perishables categories collectively represent 51.9 percent of supermarket sales, up slightly from last year's 51.4 percent sum, while general merchandise (tracked and untracked combined) generates 5.5 percent of total supermarket sales, up from 5.3 percent in 2009. The slight increase in general merchandise share was driven by the untracked segment, which increased by 5.5 percent in 2011 to reach $17.9 billion in supermarket sales. Even so, increases for this segment have slowly eroded over the past several years. On the UPC-tracked side, sales declined for the third year in a row, dropping 2.4 percent to $6.6 billion.

Sales of health and beauty care, meanwhile, represent 3.1 percent of the supermarket pie — virtually identical to last year's 3.2 percent share — good for $13.8 billion and on par with a 0.1 percent decline versus last year. Pharmacy, which represents 3.0 percent of supermarket sales versus 3.1 percent last year, posted sales of $13.3 billion, up a respectable 3 percent.

CES Fresh Food Insights:

Data for supermarkets' meat, seafood, deli, produce and bakery categories were furnished by The Perishables Group, a Chicago-based consultancy offering a full spectrum of products and services geared toward fresh food market and category understanding, including research, analytics, marketing communications, category development, promotional best practices and shopper insights. More detailed information is available by visiting www.perishablesgroup.com.

Deli: The deli department increased its importance to total store sales through innovations in variety and convenience. While deli meats and cheeses also grew sales, deli prepared foods now generate more than 52 percent of total department revenue, with an impressive 83 percent of households buying some form of prepared deli foods in the past 52-week period.

Prepared food offerings meet a variety of meal occasion needs, with growth occurring in snacking items and dips such as hummus and related items like pita chips, dinner entrees and center-of-the-plate proteins like rotisserie chicken, and grab-and-go lunch solutions like sandwiches, wraps and paninis.

CES Fresh Food Insights:

■ Meat

Accounting for more than one-third of total supermarket perishables' category sales, the average grocery shopper spent $330 on meat department purchases in supermarkets during the past year. Fresh meat products (all species) far and away represent the largest dollar contributors for the average supermarket, with two-thirds of all meat department sales. However, fresh meat products still posted a slight dollar decline in the past year as consumers cut down on purchases due to steadily rising fresh meat prices.

The segment that made the biggest meat department strides was value-added fresh meat products, which thrived as consumers displayed their affection for oven-and grill-ready convenience-oriented items and restaurant-quality cuts and flavors. Indeed, while these types of products often carry higher price points than traditional meat products, prepared, value-added products like kabobs, marinated steaks and chicken breasts, and stuffed pork chops helped drive up value-added fresh meat sales.

Recent cheese sales numbers and per capita consumption suggest that consumers are seeking out hard bargains for cheese and are not highly motivated by what they are finding on store shelves, according to Chicago-based market researcher Mintel.

The overall dairy department has seen dollar growth of 4.6 percent but a 1.3 percent drop in units for the year ending June 11, due to inflationary pressures, according to Schaumburg, III.-based Nielsen.

Natural cheese sales have waned, Mintel reports, at a time when they should be growing as more people are cooking at home in a down economy, as well as paying greater attention to the “natural” buzzword. Kraft, as the largest brand manufacturer, has lost market share and seen sales decline as it has struggled with the identity of its natural cheese line. The Northfield, III.-based food giant owns the second and third of the top 10 natural chunk cheese brands, though both have dropped in sales over the past year.

Private label brands brought in an overwhelming share of natural chunk cheese sales, at more than $900 million. Meanwhile, second-ranked Tillamook dipped just a tenth of a percent, while others in the top 10, such as Vermont's Cabot, Babybel and Belgioioso, have posted double-digit sales growth for the same period.

Mainstream supermarkets are the most often shopped at for cheese, and this destination is on the rise, Mintel reports. Older respondents are more frequent supermarket shoppers, as are higher-income householders.

Consumers enjoy a taste of happiness in their lives, and chocolate never fails to fit the bill as the ultimate affordable luxury. Indeed, with its broad demographic appeal, the majority of consumers appreciate the unique role chocolate plays in their lives. From an eating-occasion standpoint, the average American consumes chocolate confectionery about 107 times per year, according to the National Confectioners Association (NCA), which finds chocolate confectionery sales well positioned to continue solid growth through 2011 in light of new product launches that are expected to remain strong in tandem with continued consumer interest in the potential health benefits of dark chocolate.

Older Americans have a higher preference for dark chocolate, while research from multiple sources indicates consumers over 45 are consuming more dark chocolate these days because of its perceived healthier attributes. Brand extensions by the major chocolate companies, such as aerated chocolates offering a light and airy texture, and bite-sized versions of the forerunner original varieties, are also making fast inroads with sweet-seeking shoppers.

In terms of seasonal chocolate trends, Easter and Christmas holiday sales are gaining in importance as Valentine's Day and Halloween dip, according to recent Nielsen research.

Candy continues to represent an affordable indulgence for consumers in a slow economy, as demonstrated by solid sales growth over the past two years. Non-chocolate chewy items are particularly hot, according the National Confectioners Association (NCA), among them gummy candy varieties that are driven by seasonal Halloween sales, and 23 percent more likely to be consumed in the fall than licorice or other chewy candies. Licorice consumption increases in the warmer, summer months based on its portability, notes NCA, which finds other non-chocolate chewy items continuing to gain momentum as well.

Among this year's top non-chocolate candy trends, new flavors and value-oriented pack-sizes are satisfying the increasingly complex palates of consumers, whose interest is also surging for dual-layered and multi-flavor profiles in one bite. Further, new combinations, including unique blends of fruits, and the addition of ingredients like mint, are also coming on strong.

The incidence and frequency of coffee use in the United States have remained steady in recent years despite the economic downturn, which Mintel contends has contributed to relatively stable, moderate market growth. In fact, the coffee category has performed well compared with others, as Americans sought ways save money in the face of recessionary pressures.

Eight of the top 10 ground coffee brands experienced sales growth over the past year, with powerhouses like Folgers, Starbucks and Dunkin Donuts seeing increases in the double digits.

In fact, coffee was the sixth fastest-growing category for the year ending June 11, with dollar sales rising more than 6 percent for the period, according to Schaumburg, III.-based Nielsen.

This performance comes as the retail price of coffee has risen more than 20 percent since summer 2010, according to the Bureau of Labor Statistics, a situation widely blamed on financial speculators taking advantage of global supply problems to drive up prices by stoking volatility in futures contract trading.

Coffee's household penetration is healthy, at more than 60 percent, with volume sales strongest in the East. Mintel suggests that CPG firms seeking growth may want to consider developing new coffee products or stepping up efforts to promote existing brands, to capitalize on this consistently good performance at the retail level.

Conventional wisdom says alcohol is recession-proof, and that certainly seems to be the case with wine. Despite an economy struggling to regain its footing, sales of wine are robust. In fact, Schaumburg, III.-based Nielsen indicates wine was the eighth fastest-growing category of the year ending June 11, with a 5.7 percent increase in sales over the year-ago period.

Total table wine sales for the year ending July 23 approached $9.6 billion, up 4.6 percent. Standouts included wines from New Zealand (sales up nearly 26 percent) and Argentina (20 percent). Varietals gaining ground were led by pinot noir (up nearly 11 percent) and gamay (more than 16 percent). It helps that wine remains an affordable luxury, with the average 750-milliliter bottle price for this reporting period retailing for $6.26.

The top-selling brands are by and large domestic, led by California's Barefoot, posting a 24 percent increase in sales for the year ending July 10, according to SymphonyIRI Group's Infoscan Reviews. Single-digit gains were reported by other Golden State brands such as Sutter Home (No. 2), Wood-bridge (5) and Kendall Jackson (6), with 10th-ranked Gallo showing 14 percent higher sales over the year-ago period.