Growth in food and beverage industry sales (dollar sales through multi-outlets, including the convenience channel) has slowed from 5 percent in 2011 to 4.1 percent in 2012 year to date, according to a new SymphonyIRI Group study. Slower or negative growth pervasive in the food and beverage market will continue for the remainder of 2012, the report added.
“Our comprehensive review of food and beverage trends for 2012 points to limited growth, with weak growth prospects for the remainder of the year,” said Dr. Krishnakumar S. Davey, managing director, Symphony Consulting. “Shoppers are still making conservative and deliberate purchase decisions and are reluctant to open their wallets. With this in mind, manufacturer and retail decision makers must uncover select, high-growth categories, and target products and offers to very specific shopper groups.”
Smaller food and beverage manufacturers (defined as companies with revenues under $1 billion) have demonstrated “outsized” growth in 2012. For smaller firms, value sales growth in 2012 year-to-date has increased an average of 7.9 percent versus one year ago compared with 3 percent for medium-sized businesses (revenues $1-5 billion) and 1.3 percent for large enterprises (revenues over $5 billion). Volume sales among small manufacturers have also outpaced competitors: 3.6 percent growth for small manufacturers versus 0.5 percent and 3.3 percent declines for medium and large manufacturers, respectively.
Small manufacturers have discovered and successfully penetrated specific market niches, such as Greek yogurt within the yogurt category and single-cup coffee within the coffee category. Among staple products, such as milk, fresh bread, and rolls, growth continues to be slow as shoppers react to continuously increasing prices by cutting back. Value sales of staples versus one year ago grew just 1.6 percent as compared to 4.8 percent for non-staples. Estimated volume sales have declined 2.5 percent in staple products versus growth of 0.2 percent for non-staples.
Contributing to weaker staples sales is the potential shift to new-age healthy snacks. Shoppers are increasingly avoiding traditional big meals and replacing them with more frequent, smaller meals comprised of portion-controlled healthy products. Many healthy and relatively portable products, such as snack/granola bars, energy drinks, and spreads (for example, hummus), have seen volume gains in 2012.
However, not all non-staples are alike. While the category has grown on average, several areas of non-staples have fared poorly. Ready-to-eat meals, such as frozen dinners, frozen pizza, and soup, saw value sales increases of just 0.3 percent in 2012 versus one year ago as compared to a non-staples category average of 4.8 percent. Shelf-stable cooking ingredients (such as shelf-stable seafood and canned/bottled fruit) and breakfast foods (such as frozen breakfast food and pancake mixes) have exhibited similar weak performance.
Shoppers continue to define value based largely on price, highlighting, for example, that 78 percent of shoppers state they will continue to seek deals in the future, and 56 percent are choosing stores based on lower prices offered. Shoppers are opting to make more trips and purchase fewer items per trip to spread out the impact on their wallets, avoiding pantry-stocking trips that hit their wallets at once. In multi-outlets, shopping trips per buyer have grown 0.8 percent versus one year ago, while units per trip have declined 2.1 percent over the same period.
In addition, shoppers are increasing the number of stores at which they make purchases to lock in lower prices. Grocery and drug channels suffered from reduced trips per buyer (0.2 percent and 0.6 percent declines, respectively) while mass merchandisers excluding Walmart enjoyed 4.4 percent growth and dollar stores trips per buyer grew 7.2 percent. Rising prices because of this year’s drought and ongoing wariness to spend among shoppers increase the market challenge.
Food manufacturers must focus on investing in key areas of growth, developing a strong portfolio of potentially popular products, such as new-age snacks, and health and wellness-focused items. These must be offered at attractive price points to achieve sustained short- and long-term growth. Targeting fast-growing shopper segments, such as GenY and older Baby Boomers is also a critical strategy for success.
