Home News The great grocery boom is slowing down

The great grocery boom is slowing down

1
0

But the height of the boom is over for America’s biggest grocers. Food and beverage sales at US retail stores grew 11.5% in August compared with last year, according to Nielsen. That compares with 31.2% year-over-year growth in March.

Sales online have also moderated. Delivery and curbside pickup sales totaled $5.7 billion in August, down from $6.6 billion in May and $7.2 billion in June, consulting firm Brick Meets Click said in a report Thursday.

That’s because shoppers have settled into a routine, retail analysts say. Some restaurants have reopened, leading consumers to shift their spending. Stimulus checks have ended and an extra $600 in weekly unemployment benefits have expired. This has strained people who were already struggling before the pandemic, as well as those who have been laid off from their jobs during it.

“People aren’t hoarding. They’re not stocking up on products like they were,” said Katie Thomas, head of the Global Consumer Institute at Kearney, a strategy and management consulting firm.

Top grocery chains are reporting slowdowns, too.

Kroger said Friday that sales at stores open for at least one year, excluding fuel, increased 14.6% during the quarter ended August 15 versus a year ago. That compares with 19% sales growth the prior quarter.

Kroger said that sales dipped from mid-July to mid-August in part because of the end of federal stimulus and a reduction in food stamp benefits. Kroger also attributed the drop-off to customers adapting to the pandemic and resuming some of their normal spending patterns, such as eating out for dinner.

“Customers are now adapting to some level of a new normal,” Kroger chief financial officer Gary Millerchip said on a call with analysts Friday. Kroger forecast that sales will grow at 13.0% for the remainder of the year.

During its latest quarter ended August 1, Walmart, this country’s largest grocer, said food sales increased “high single digits” from the same stretch last year. That was also a drop from its previous quarter, when grocery sales increased “low double digits.”

And Costco said food sales grew in the “mid teens” in August from last year, compared with the “low-20’s” in July.

“The food categories moderated for the first time in recent months further pointing to the end of the grocery boom,” Oppenheimer analyst Rupesh Parikh said of Costco in a note to clients.

Industrywide, sales growth of most grocery categories has slowed, with prepared meals, meat and cookies posting the biggest drops from earlier in the pandemic, market research firm IRI said in a report last month. For the week ending August 9, frozen dinners and soups lost 9 percentage points of growth, while cookies and refrigerated drinks lost 7 points compared with the week ending July 26.

Why discounts could make a comeback

The trend has implications for companies selling the products as well as the people buying them.

Kroger (KR), Walmart (WMT) and Costco’s (COST) stocks have gained 14%, 16% and 17% respectively this year. But they all have declined so far this month. And Kroger’s stock fell 1% Friday despite beating analysts’ expectations on sales and profit during its most recent quarter. It dropped another 4% Monday.

Grocers are “going to have a higher sales environment” than they did before the pandemic, “but it’s not going to be what it was in April when people were locked at home,” said Scot Ciccarelli, analyst at RBC Capital Markets.

Retail analysts say that the slowdown may mean that companies ramp up promotions and discounts to push up sales.

Promotions have largely been absent from grocery stores in the spring because competition from restaurants had faded and customer demand was intense, according to analysts.

Kroger CEO Rodney McMullen said Friday that promotions would be “an important component” of its strategy as the “pandemic continues and government stimulus benefits have expired.” Procter and Gamble financial chief Jon Moeller said during a conference last week that promotions on its big brands were starting to come back.

Smaller product sizes that cost less may be in higher demand if the economy deteriorates further, predicted Scott McKenzie, analyst at Nielsen.

“Consumers who would normally be able to save money by buying larger, more economical pack sizes may be forced to actually buy smaller pack sizes,” he said.

LEAVE A REPLY

Please enter your comment!
Please enter your name here