Mark Hamstra | Nov 06, 2020
Link to article at www.supermarketnews.com
While stock-up shopping has slowed, cooking and baking at home and another COVID wave are still driving grocery sales
Food retailers are preparing for ongoing elevated demand for shelf-stable food items amid a persistent stock-up mentality as the coronavirus pandemic continues — albeit at a diminished level from that seen in March and April.
“It remains in the back of their mind, to make sure they have enough on hand,” said Rachel Shemirani, senior VP at Barons Market, based in Poway, Calif.
Customers have continued shopping less frequently and making larger purchases, and they are still shopping to ensure their pantries are packed with shelf-stable items, she said.
With the year-end holidays approaching and along with those the prime season for at-home baking, demand is expected to remain strong in center store, said Joe McQuesten, senior VP of merchandising at SpartanNash.
“We anticipate continued sales increases based on current purchasing patterns and industry trends,” said Joe McQuesten, senior VP of merchandising at SpartanNash.
Items at the Grand Rapids, Mich.-based retailer and wholesaler that have seen the strongest gains include canned meat, soup, pasta, pasta sauce, boxed dinners, side dishes and peanut butter, he said.
The surge in home baking during the pandemic also provided a windfall for many retailers, as homebound families made cookies, muffins, pies and even tried their hand at making bread from scratch.
Year-to-date dollar sales of baking mixes and other baking needs across food retailing were up 31.3% and 37.4%, respectively, through Sept. 6, according to data from IRI, a Chicago-based market research firm (@iriworldwide).
“We noticed a higher uptick in baking sales during the summer holidays, and we look forward to the upcoming holiday seasons, anticipating this strong interest in baking supply will continue,” said McQuesten. “Baking is a fun activity that can be done alone or with friends and family. Not to mention, the outcome is the creation of a tasty dessert for all to enjoy.”
Shemirani said trying to anticipate consumers’ baking needs during the upcoming holiday season remains a challenge.
“Right now, people are not really having big holiday gatherings,” she said. “Will it be a family of four together, or will it be a big holiday gathering? We are taking it day by day.”
Compounding the challenges retailers face are ongoing shortages of some items, including flour and yeast. Shemirani said one of Barons’ flour suppliers recently informed the chain that it would not have any flour available until the end of the year.
Increasing inventories
During the early days of the pandemic, Barons was able to compensate for product shortages in some categories by buying from restaurant suppliers, which were faced with massive surpluses amid the widespread restaurant closures. The supply chains for most items have since been replenished, and Barons has also stocked its warehouse with about four months’ worth of inventory on many shelf-stable items, rather than the usual one- to two-month’s supply.
Barons has also merchandised some items in larger packaging during the pandemic, including pasta, rice and beans, which it purchased from restaurant suppliers.
“When you have those items in stock , even if it’s not exactly what your customers are looking for, it helps inspire confidence,” said Shemirani. “That has been a big takeaway.”
According to IRI, year-to-date dollar sales of shelf-stable vegetables have risen 29.4%, to $2.69 billion across food retail, with gains in the 20%-40% range across all of the largest subcategories. Shelf-stable soup has seen similar results, notching sales gains of 28%, to $4.55 billion. Pasta (up 30.4%), spaghetti/Italian sauces (up 26.1%) and other sauces (up 27.6%) have all enjoyed similar success.
“COVID has brought a great deal of change into our homes and communities,” said McQuesten of SpartanNash. “Families turned to their local stores for help in preparing the vast majority of their food at home, and in the process discovered time and cost savings, plus the comfort of cooking.”
Staples such as rice, beans and pasta have continued to performing strongly in supermarkets since the beginning of the pandemic.
Retailers can prolong the success of shelf-stable categories by supporting them with promotional activity around home meal solutions, McQuesten suggested.
“It is important to create fun and engaging displays with meal starters and provide customers with the opportunity to build complete meal solutions as a part of their shopping experience,” he said.
Mike Pierson, senior VP of sales, meals and beverages at Campbell ’s Soup Co., said nearly 70% of households are cooking more meals at home during the pandemic.
“Families of all sizes, demographics and ages are spending more time around the table,” he said. “They’re exploring and sharing new recipes on social media, and learning new ways to cook with mainstream products, like Campbell’s Condensed Soups. At the end of the day, during crisis, people will turn to brands they trust and rely on. Therefore, maintaining this brand loyalty, particularly across all the new households that center store categories have gained, will help sustain the overall momentum.”
Retailers need to leverage all aspects of the path to purchase, both physical and digital, to provide solutions to make the shopping experience more rewarding and engaging, Pierson said. Additionally, they should seek to leverage their shelving space to serve the growing omnichannel opportunities.
“With the emergence of e-commerce, click-and-collect and other ways of accessing products, the shelf has to evolve to become more multidimensional.,” he said, citing the increase of pickers for click-and-collect and delivery orders.
“Pay attention to who’s actually navigating the store and aisle,” he said. “The [customer] profile doesn’t look like it used to, nor should the shelf.”
Conditions bring pricing, costs into sharp focus
Some food retailers have come under fire for reducing their promotional activity during the pandemic, but sharp pricing may take on increased importance amid a weakened economy and other circumstances, according to industry experts.
“Pricing and value will continue to play a very important role in consumer behavior, particularly given all the uncertainty with macro-economic conditions,” said Mike Pierson, senior VP of sales, meals and beverages at Campbell’s Soup Co. “Concerns with the effects of climate change, a lingering pandemic, all while navigating an election year, will likely lead to a conservative household budget.
“At the same time, headwinds continue to swirl in regard to increased costs across the value chain for many manufacturers and retailers,” he said. “Now more than ever, retailers and suppliers will need to work harder to find efficiencies to keep prices as attractive as possible, supporting American families through these challenging times.”
Grand Rapids, Mich.-based SpartanNash continued its ad and promotional activity throughout the pandemic, which attracted new customers to its stores, said Joe McQuesten, senior VP of merchandising at the retailer/wholesaler. The company also enhanced its private label portfolio to create a “savings atmosphere,” he added.
“Going forward, we will continue to create innovative displays and product offerings that appeal to evolving shopping trends, and we are also committed to building stronger loyalty with our newer customers,” he said. “We have many initiatives planned to engage all departments within our stores to improve the overall customer shopping experience.”