The COVID-19 pandemic fundamentally changed the way consumers are spending their food dollars. Very quickly, spending moved from a majority of dollars going to foodservice to a majority of dollars being spent in food retailing. Due to out-of-stocks, experimentation and economic pressure, consumers have been ping-ponging between fresh, frozen and center store, and between brands, sizes, familiar and new items. A renewed emphasis on home cooking and healthful immunity collided with less time for impulse inspiration in-store and the most heightened economic concerns in over a decade. While the extreme spikes of the early weeks have given away to a steady week-to-week performance, the sales gains for dollars and volume remain well above 2019 levels for most departments.
210 Analytics analyzed the IRI weekly sales findings, made possible by the International Dairy Deli Bakery Association (IDDBA), to help understand how dairy, deli and bakery sales are developing throughout the pandemic. The net effect of the positive and negative trends resulted in a total store sales increase of 9.9% vs. a year ago during the week ending Aug. 16—virtually unchanged from the week prior. Food sales were stronger than nonfood sales, with a gain of 12.8% for center-store edibles (including frozen) and 10.2% for the fresh perimeter. Dollar sales for non-UPC deli prepared and fresh bakery remained down.
Dollar Sales Growth vs. Comparable Week in 2019
Source: IRI, total U.S., multioutlet, one-week percent growth vs. a year ago
“While still highly elevated, the data shows a gradual softening of the more extreme lockdown trends in the grocery market,” said Jeremy Johnson, VP of education for IDDBA. “We seem to be settling into a steady pattern as consumers continue to prepare many more meals at home. That includes the very different back-to-school landscape that will significantly impact trend lines for many categories, including bakery and dairy. We will continue to monitor how the trends develop to help the industry best understand what the remainder of the year may look like.”
Dairy: A Sales Powerhouse
“Dairy sales were virtually the same as the week prior, but because of going up against a lower 2019 baseline, year-over-year gains improved to 13.4%,” said Abrielle Backhaus, research coordinator for IDDBA. “Dairy has been a pandemic powerhouse ever since the second week of March, with 23 weeks of consecutive double-digit increases. Importantly, the three biggest categories in dollar sales, cheese, milk and yogurt, improved their week-over-week and year-over-year dollar performances. These staples underscore that America continues to consume many more meals at home, from breakfast, lunch and dinner to snacks and beverages.”
Natural cheese generated weekly sales of $300 million. Milk, yogurt and egg sales also totaled more than $100 million for the week; however, gains for milk and yogurt remained in the single digits. The highest percentage gain this week was recorded by whipped toppings, at 22.3%, albeit off a small base. “Seven categories still had double-digit year-over-year growth the week of Aug. 16,” said Backhaus.
Growth percentages differ whether looking at dollars, units or volume. “With the exception of whipped toppings, dollar gains trended ahead of volume gains for the week ending Aug. 16 vs. a year ago,” said Jonna Parker, team lead of fresh for IRI. “This tends to point to inflation, with some significant gaps for natural cheese, milk and eggs. But at the same time, we are seeing some interesting developments when comparing unit and volume gains. Although back-to-school season is gearing up, unit sales for yogurt remained down, while volume gains for yogurt improved to 2.7% this week. That tells me consumers continued to buy larger container sizes. The same is true for cheese, where volume gains also trend well ahead of unit sales. We will have to keep a close eye on how dairy snacking and single-serve items are faring as many students of all ages remain home in virtual learning environments.”
SKUs have been reduced some for dairy, but nothing like areas such as frozen foods or fresh meat. Overall, the number of dairy items per store selling was down by 2.4% during the week of Aug. 16 vs. the same week in 2019. However, there are a few areas that continue to see a much narrower assortment, margarine in particular at -12.8%.
Deli: Continued Mixed Results
For several weeks, the recovery of deli-prepared sales stalled between -10% and -8% vs. year-ago levels. In its second-best performance since the onset of the pandemic, the total deli department sales (including cheese, meat and deli prepared) was down just -7.0% from 2019 levels. “Deli cheese and meat had an equally strong performance and deli-prepared foods’ regained its recovery momentum,” said Angela Bozo, education director for IDDBA. “While pre-packaged and employee-served solutions are not quite able to recover all the ground lost during the pandemic, significant headway has been made as self-serve olive, salad, cold and hot food bars remain closed down across most operators. For deli-prepared, success is very closely tied to food traffic. As the new COVID-19 cases appear to be flattening out across the country, we may see trips start to increase once more, which would greatly benefit retail foodservice sales.
Sales for random-weight, non-UPC deli meat increased 11% vs. the same week a year ago. Pre-packaged lunch meat from the refrigerated area grew 6.7%—its highest gain in four weeks. Price inflation drove higher dollar than volume gains for both; however, packaged lunchmeat saw a decrease in volume, at -1.5%.
In dollar sales, non-UPC random weight is the bigger category at $134 million in weekly sales vs. $125 million for packaged lunchmeat. However, in volume, UPC lunchmeat is much bigger at 24 million per week vs. 16 million in non-UPC sliced to order.
Dollar gains of random-weight deli cheese increased both week over week and year over year the week of Aug. 16 vs. a year ago. Both random-weight and packaged cheese had a strong week, up 11.4% and 16.6% vs. a year ago, respectively. Fixed-weight cheese sales reached $389 million for the week of Aug. 16.
At 8.7%, volume gains for fixed-weight cheese fell into the high single digits for the first time since the onset of the pandemic.
“Assortment in deli-prepared items seems to be holding about 12% down from prior year levels,” said Eric Richard, industry relations coordinator for IDDBA. “Retailers are mostly relying on pre-packaged sales to replace cold and hot food bar revenue. And while grab-and-go has long been a consumer favorite, pre-packaged does not quite have the same opportunity to bring back the full assortment for operators or the same mix and match flexibility for consumers. We do hear from shoppers that portion size variety is an important solution to make sure pre-packaged items meet the needs of families of all sizes, as well as allow dishes to serve as sides or mains regardless of the size of the household.
These are the areas where assortment narrowed most during the week of Aug. 9 vs. a year ago—many of them lunch, special occasion or in-store consumption items:
- Combo meals: -35.9%
- Trays: -24%
- Salads: -21.3%
- Prepared/cooked meat: -21.2%
- Soups: -12.4%
- Sandwiches: -10.4%
After a few very strong weeks, sales gains for refrigerated, fixed-weight meals dropped back to 9.8%. This is still far above any of the areas within deli prepared as consumers are looking to mix and match scratch items with some convenience-focused items. Recovery of random-weight deli-prepared items continued on its road to recovery, now around -19% below last year’s levels.
A closer look at refrigerated, fixed-weight meals shows strength across all offerings, with the exception of lunch items, that includes pre-packaged meat/cheese/cracker kits. Pasta and side dishes have the highest year-over-year growth, at 26.2% and 18.8%, respectively.
The three areas within baked goods saw sales gains trending closer together once more as packaged items are seeing the slow week-to-week erosion and fresh, non-UPC bakery remained about -6% below year-ago levels.
Packaged Baked Goods Aisle
Total packaged baked goods increased 9% for weekly sales of $479 million, which was down from $482 million the week prior. Because the 2019 baseline for the week ending Aug. 16 being lower, the year-over-year increases came out to be a bit higher. Most areas within bakery remained stable compared with the gains generated the week prior, with the exception of English muffins that saw a big decline from 18.4% the week prior to 7.3%.
Cookies and Crackers
Aisle cookies and crackers in UPC/fixed-weight packages saw some recovery from their lowest gain since the onset of the pandemic last week. “America continues to bake, with baking aisle ingredients still up 21.9% over last year’s levels,” said Parker. “Additionally, cookies and cracker sales are also impacted by the lack of gatherings, evening and sports activities, in-office and in-school celebrations. Strengthening growth trends, however, show the need for on-hand indulgences and crackers snacks are still important to consumers.” Total weekly sales were $305 million.
While still not caught up with 2019 sales levels, the in-store bakery did have five items posting positive growth the week of Aug. 16 vs. 2019. Cakes, cookies, breakfast items, bread and croissants all had slight or moderate gains over the same week a year ago. That pushed total random-weight baked goods sales to just 5.9% below its year-ago levels. Doughnuts and rolls, often merchandised as a bulk item in the fresh bakery, continued to be down in double digits with both impulse as well as wariness of consumers’ being able to touch bulk product limited sales.
As restaurants remain under limited capacity restrictions in most states, it is likely that food retail patterns will start to stabilize around the current levels. While the number of new virus cases appears to be stabilizing, if not decreasing, consumer concern over the virus and economic pressure remain high. While unemployment and other financial pressure often favors food retailing vs. foodservice spending, it is likely consumers will start to emphasize other money-saving measures, including promotions, private brands, cheaper kinds or cheaper cuts of deli meats and cheese, as well as saving by buying less. Once consumer concern over in-store trips diminishes, it is likely we will see more cross-store comparison of promotions again as well.
Back-to-school season is in full swing, though it looks very differently from prior years in most states. This will continue to impact year-over-year trend lines, particularly for dairy, deli and bakery items affected by breakfast and lunch occasions with many more children at home participating in virtual education.
Between the continued social distancing mandates, highly elevated consumer concern about the virus, economic pressure and the impact of virtual schooling, retail sales are likely to hold well above 2019 levels for the foreseeable future.
Anne-Marie Roerink is principal of 210 Analytics, which specializes in research for the food retailing industry and authors studies in meat, produce, bakery, deli, frozen, confectionery, snacks and retail operations. She can be reached at firstname.lastname@example.org.
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