Progressive Grocer - June/July 2009 - (Page Intro)

Progressive Grocer’s Exclusive Research & Analysis The 76th Annual Report of the Grocery Industry 76th Annual Report of the Grocery Industry Bakery Operations Review 2008 Fresh food 61st Annual Consumer Expenditures Study 61st Annual Consumer Expenditures Study Deli Operations Review 2008 Fresh food Opportunity Knocking Grocers have settled in to face the economic storm, armed with value propositions and focused on helping shoppers navigate uncertain economic shifts. By Michelle Moran, With Research by Debra Chanil expectations In-store bakery execs expect sales growth in 2008—but with costs up and profits down, they’re also trying to offset margin pressure by raising retails or reducing sizes and product portions. By Debra Chanil and Meg Major RISING Bakery Operations Review 2008 Watching the rise Grocery industry sales gains continue, riding a wave of higher food prices, for better or worse. ast year, the glass was half-full and we were tossing about the “R” word. The recession was top of mind for virtually every grocer, supplier and even consumer in the supermarket supply chain. Now, with anxiety continuing to be fed by the imploding housing market, unstable stock market and banking failure — analysts have moved up the alphabet, whispering the “D” word. As economic pundits continue to debate the state of the economy, the grocery industry’s response to Progressive Grocer’s 76th Annual Report of the Grocery Industry certainly reflects the emotional drain of uncertain economics. Data from PG’s study reveals that supermarket operators are as pessimistic as the pundits. OptiRetail Climate mism has waned from a year ago when 46 percent Compared with a year ago, are you more or less optimistic about the of executives PG surveyed said they’re more optiretailing climate for supermarkets? mistic about the retailing climate for supermarkets. Total Chain Ind Whlslr Only 27.6 percent responded positively More Optimistic Less Optimistic No Change 27.6% 46.0 26.4 37.5% 35.4 27.1 22.9% 51.8 25.3 32.6% 37.0 30.4 L ith raw ingredient and distribution costs rising sharply and profits falling flat, the in-store bakery segment admirably managed to stay afloat in one of the most turbulent operating climates on record, as revealed in the latest installment of PROGRESSIVE GROCER’S annual Bakery Operations Review. Bakery sales change, 2006-2007 Among the highlights of the latest study of the state of the in-store bakery business, two-thirds, or 70 percent, of retailers polled say their in-store bakery sales increased in 2007, vs. the 62.5 percent who reported increases the previous year, while 9 percent say they experienced sales decreases, and another 21.2 percent report that their bakery sales remained the same. Looking ahead, slightly more respondents—72 percent—foresee in-store bakery sales increasing in 2008. Three percent are forecasting decreases, while 25 percent are forecasting flat sales. This year’s study is based on direct input from a diverse sample of supermarket bakery executives from across the country, who were asked to assign statistical estimates for their average bakery department performance during 2007 and project performance for 2008. With an estimated 25,400 in-store bakeries• Progressive Grocer • June 2008 W nationally, the industry rang up approximately $10 billion at retail in 2007, nearly a half-billion more than last year. About 70 percent of supermarkets have in-store bakeries, which represents a net increase of 300 service bakeries from the year before, due in large part to a net increase in store count of over 1,948 units nationally. On a weekly average, the typical supermarket bakery tabbed $7,579 in sales vs. $7,573 last year, which breaks out to an average $394,094 in annual sales per store, which is less than 1 percent higher than last year’s $393,776 tally. And though the T Methodology otal supermarket sales growth increased by 2.7 percent in 2007, topping the 2.4 percent gain in growth posted in 2006—continuing the trend of slightly higher percentage increases in each of the past five years, according to the results of PROGRESSIVE GROCER’s 61st Annual Consumer Expenditures Study. Total supermarket sales were $403.3 billion, up swelling feed costs, which in $10.7 billion from the $392.6 billion recorded in 2006. turn were prompted by the So why are so many in the industry watching massive diversion of corn into these trends with trepidation? The answer is because ethanol production. The trend it would be presumptive to credit these gains just to pushes both deeper and more fundamentally, with a flood of innovation, sharp merchandising, and crop prices up about the same percentage. aggressive competitive practices. The reality no After all, according to our latest CES analysis of doubt is this growth in dollar sales should be attrib- Nielsen Homescan data, while egg dollar sales were up uted at least in part to the relentless momentum of in healthy double digits in 2007, unit sales were down rising wholesale prices, ingredient costs, and energy vs. 2006. It was the same for milk, pasta, cheese, juice, costs that have affected the entire supply chain. and other bellwethers. In an example of a scenario At the other end of the spectrum, More ONLINE repeated throughout the store, the among the categories with the least Consumer Price Index reports that growth in 2007, the biggest underFor the complete CES, egg prices skyrocketed 30 percent achievers were the nonbasics: photo go to Progressivegrocer.com vs. last year, pushed skyward by supplies, fragrances, men’s toiletries. The 5.5 percent increase in bakery sales for 2007 was driven in part by price increases dictated by higher costs for baking ingredients. Overall, more than two-thirds of respondents saw a sales increase for the year. Increased 69.7% Total grocery—38.4 percent of all supermarket sales— grew by 2.4 percent, up from 1.8 percent growth in the previous year. Food and alcohol beverage segment sales were both up by larger percentages, while nonfood sales were flat. Sales for perishables— 49.7 percent of total supermarket sales—increased by 2.1 percent, slightly less than the 2.4 percent increase posted in 2006. Within this segment, eggs and milk had the largest sales increases, driven by price increases, as unit sales for both showed a decline. This is a pattern made apparent by the performance of many other important categories as well. General merchandise segments combined for 5.2 percent of total sales. Tracked categories had flat sales, while the nontracked side of the business continued its run of double-digit increases. Health and beauty care, 3.5 percent of total sales, increased by 1.8 percent. Pharmacy, at 3.2 percent of total sales, posted an increase of 1.8 percent. I Profits are getting shaved back, but other, more positive forces in the market have grocery deli execs anticipating higher sales in 2008. vey say profits are down (23 percent vs. 9.3 percent). Profits are unchanged for 29 percent of respondents. Angling aggressively to retain traffic by offering more variety in both products and price ranges, a commendable 71 percent of respondents say their deli sales increased in 2007, one percentage point lower than in last year’s survey. Just 3 percent report decreased deli sales, and a full quarter indicate sales holding steady, good for a net 4 percent gain overall. For the year ahead, nearly 80 percent of the study’s respondents foresee higher same-store deli department sales, with only 3 percent of respondents anticipating deli sales will fall. Nineteen percent expect deli sales to remain the same as in 2007 THIN By Debra Chanil and Meg Major Slicing it Deli Operations Review 2008 upermarket deli executives are finding themselves sandwiched between new obstacles and new opportunities in the market, both emanating from the impact of the economy. It’s the “push-me” of consumers’ increasing demand for convenience and desire for at-home eating choices, against the “pull-you” of the harshest rate of inflation in two decades, thanks to higher prices for food and energy. Stuck in the middle is the in-store deli, but accordDeli sales change, 2006-2007 ing to insights revealed in PRODeli sales changes have been remarkably similar for the past two years, with almost three-quarters of GRESSIVE GROCER’S latest annual those polled reporting an increase in deli sales in both 2006 and 2007. Overall, retailers posted an increase Deli Operations Review, most gro- of 4.4 percent in 2007, compared with 4.2 percent in 2006. cers expect ultimately to come out ahead as the year plays out. The annual study is a report on the state of the deli based upon direct input from retail deli executives working at a wide variety of operators with stores all over the United States. We asked the deli experts in the retail trenches to share estimates for their average deli department operations during 2007, and to project their expected performance in 2008. Aggressive angling S Increased 71.0% Stayed the same Decreased 21.2% Net change +5.5% SOURCE: PROGRESSIVE GROCER MARKET RESEARCH, 2008 9.1% SOURCE: Progressive Grocer MARKET RESEARCH, 2009 The 61th Annual Consumer Expenditures Study is based on data collected by The Nielsen Company for UPC-coded products, as well as sales estimates made by PROGRESSIVE GROCER’S research department for nontracked categories in perishables and general merchandise. Data in the summary table for total retail sales and share of market for supermarkets and mass supercenters is drawn from Nielsen Homescan, the industry’s only multioutlet panel that captures all consumer packaged goods purchase information, as well as non-UPC coded random-weight perishable products, based on consumer purchase information from over 126,000 households globally. For more information on the Homescan Panel, visit http://nielsen.com. Sales in the detailed tables are for U.S. supermarkets in the calendar year 2007, shown in millions of dollars. These a http://www.progressivegrocer.com/progressivegrocer/research-analysis/index.jsp

Table of Contents for the Digital Edition of Progressive Grocer - June/July 2009

Progressive Grocer - June/July 2009
Table of Contents
Nielsen’s Shelf Stoppers/ Spotlight: Cheese/Shredded Cheese
Market Snapshot: Sacramento-Stockton-Modesto, Calif.
Independents Report: The Advantages of Older Associates
Lempert Report: Food Experts Tackle the Economy
Industry Achievement: The Top 100 Women in Grocery
Multicultural Marketing: 2050 is Today
Retailer of the Year: Celebrating Kroger
2009 Deli/Bakery Operations Review: Shrink-Wrapped
Fresh Developments: Consumer Shifts Create New Complexities for Fresh Food Trading Partners
Produce: Brimming With Possibilities
Meat: Fired Up!
Store of the Month: Giant Eagle’s Express-Ohhh!
Cheese: Cooked Cheese and Other Spiritual Revelations
Beverage Alcohol: A Cup of Cheer
Frozen Foods: Frozen Vegetable Sales are Steaming
Real Estate: Bigger is not Always Better
Technology: At Your Service
Equipment Innovations
What’s Next: Editors’ Picks for Innovative Products

Progressive Grocer - June/July 2009