Egg substitutes soared in popularity during the pandemic as consumers rediscovered home baking and set about adapting ingredients to their dietary needs.
A period of reckoning has arrived for the food retailing industry. After the onset of the pandemic more than a year ago caused a massive spike in sales, there was a steady deceleration in the rate of growth throughout 2020. The new year began the same way, but now, as retailers are in the midst of lapping the great pantry-loading period of 2020, sales comparisons have become extremely challenging and the growth outlook for the remainder of the year remains murky.
To review, total perimeter department sales increased 11.2% to $161.3 billion, during the 52 weeks ended Feb. 21, 2021. The two biggest constituents of the perimeter, produce and meat, grew 12.9% to $70.9 billion and 21.9% to $48.3 billion, respectively.
The overall deli department’s once-in-a-lifetime growth numbers were held back somewhat by challenges in the deli prepared area, where sales declined 16.6% to $13.8 billion. However, the full-year figure doesn’t tell the true story of a section that appears poised for a rebound in the second half of 2021. The deli prepared area saw sales declines of 30% or more during the early months of the pandemic, but then retailers figured out how to modify their operations and resume sales. Declines persisted as fewer people ventured inside stores, with the low double-digit declines becoming the norm in late 2020 and the start of 2021.
The big winner of all of the perimeter departments during the pandemic was seafood, with sales advancing 30.5% to $6.2 billion. However, the trajectory of sales in seafood appears to have been driven somewhat by supply chain disruptions early on in the pandemic that caused in-stock challenges in other protein categories. For example, meat sales surged 41.3%, 32.9% and 42.8% during March, April and May, respectively, before falling back to Earth somewhat to grow in more of the 15%-to-20% range.
By comparison, shoppers showed little interest in seafood during the early days of the pandemic, with sales rather muted in March and April. Then the category caught fire in May, June and July, growing more than 40% each month, with sales maintaining a near, or above, 30% monthly rate of growth through the 52-week period ending Feb. 21.
Optimism Prevails Among Some
Despite what’s expected to be a challenging year for sales growth, CEOs and consumer and retail companies are very optimistic. Global financial consultancy KPMG recently surveyed 60 CEOs at global consumer and retail companies with revenues in excess of $1 billion, and 90% said that they’re confident or very confident in their company’s growth prospects over the next three years. Another 92% said that they’re confident or very confident in the sector’s growth prospects over the next three years.
These business leaders also indicated that the pandemic has served as a catalyst to accelerate ongoing transformation efforts while sparking new types of change. This phenomenon was widespread throughout the industry, with 68% of those surveyed by KPMG indicating that the pandemic has accelerated the creation of new digital business models and revenue streams. Another 55% said that the pandemic has accelerated the creation of a seamless digital customer experience. Another thing that the pandemic did was to heighten the vulnerability of supply chains to cope with a demand surge of epic proportions. While the spike in demand was an anomaly, the supply chain was identified by 43% of CEOs as the top risk to their organization’s growth over the next three years.
“The challenges in the supply chain are numerous from demand predictability, production capacity constraints, port delays, carton and driver shortages, as well as higher input and transportation costs,” says Matt Kramer, KPMG’s national sector leader for consumer and retail. “Ensuring products are efficiently delivered through the supply chain to customers with greater transparency will be both a challenge and significant focus in 2021.”
Regarding transparency, retailers continue to take unusual actions to manage shopper expectations regarding product availability in key categories that aren’t yet back to normal. Among the most notable of these are household cleaning and paper products. For example, in March, Lakeland, Fla.-based Publix Super Markets was still displaying shelf edge signs in the household cleaning section alerting shoppers that “[i]tems in this section have limited availability due to supplier production issues.” Issaquah, Wash.-based Costco took things a step further by posting a member notice near its Kirkland Signature brand paper towels to let shoppers know that it had reduced the size of the roll. “Due to industry-wide demand for paper towels, we have reduced the number of sheets per roll from 160 to 140 in order to provide better supply to our members,” the warehouse club retailer informed customers.