Father’s Day typically provides a boost to the perimeter departments, and the 2020 holiday did just that. The three big unknowns going into the week of June 21 were the impact of Father’s Day falling on a different week than in 2019, the reopening of restaurants after weeks of cooking at home and the highly elevated price of meat during a key grilling holiday that drives the rest of the grocery purchase.
Thus far, the reopening of restaurants has led to an increase in transactions and spending, but foodservice engagement remains down versus prior year levels. Grocery dollar gains have seen some week-to-week erosion, but sales have remained far ahead of 2019 levels. The pandemic has greatly affected sales in the dairy, bakery and deli departments. Dairy quickly emerged as a sales powerhouse with strong dollar and volume gains throughout the pandemic. The bakery performance has been mixed, with increased sales for UPC/packaged items, but the in-store bakery (non-UPC) struggled. The deli department performance has also been mixed, with gains for deli meat and cheese and continued losses for deli prepared. This is, in large part, due to the closure or limited offerings of self-service areas as well as increased home cooking. 210 Analytics analyzed the IRI weekly sales findings, made possible by the International Dairy Deli Bakery Association (IDDBA).
Father’s Day week shows very strong results for departments across the store. Sales gains went up against a regular week in 2019, with last year’s Father’s Day falling a week earlier in the season. Total store sales, including the fresh perimeter, improved to their highest point since mid-May, at 16.1%. But both center-store edibles and the fresh departments outpaced total store sales, at 19.1% each. Meat had a very strong week, as did dairy and baked goods (aisle and fresh, non-UPC). The deli department came a very long way from being down 27% in mid-April to just dow 6% the third week of June.
Dollar Sales Growth vs. Comparable Week in 2019
Source: IRI, total U.S., multioutlet, one-week percent growth vs. year ago
“We had high hopes for Father’s Day week, and the numbers did not disappoint,” said Jeremy Johnson, VP of education for IDDBA. “We had several very important firsts this week. The recovery in fresh baked goods continued. Father’s Day celebrations prompted positive gains for the in-store bakery over last year’s levels for the first time since mid-March. Second, strong performance by deli meat and cheese and continued recovery by deli prepared prompted a single-digit loss for the total deli department for the first time since the onset of coronavirus in the U.S. Now the question becomes how we can maintain this momentum in a non-holiday week. As consumers are out of ideas for the many at-home meal occasions, meal solutions and ideation are a big part of the answer.”
Continued Sales Boom for Dairy
From the onset of coronavirus in the U.S. in early March through Father’s Day week, dairy sales have been extremely strong. March had the highest dairy sales gains, at more than 35% over 2019. Sales remained in the double digits ever since. Dollar sales for the week of June 21 increased 18.6%.
“Every area within dairy improved sales versus year ago as well as versus the week prior,” said Abrielle Backhaus, research coordinator with IDDBA. “Consumers’ ongoing focus on baking and, of course, the many more at-home meal occasions continued to drive double-digit gains for all but two areas.”
Natural cheese is the largest dairy category, with sales of $298 million, followed by milk and yogurt. The latter two had single-digit gains, however, given their size, they were still among the top growth areas in absolute dollars.
While only two areas had single-digit dollar gains, five have single-digit volume gains, signaling continued supply and demand issues in some areas. The much higher dollar sales increases versus volume gains are indicative of inflation for areas such as eggs, processed cheese and margarine. In other areas, volume is tracking ahead of dollars, signaling deflation, including butter and whipped toppings, though the differences are much smaller.
At the same time, dairy sales have been affected for weeks by a narrower assortment in many areas. On the Retail Feedback Group’s Constant Customer Feedback (CCF) program, shoppers wrote in about dairy supply at their grocery store of choice. One wrote in, “The nondairy creamer has been out of stock for weeks. I have been looking for this all over.” Another said, “I have not been able to find my favorite margarine. It seems that section is still mostly empty whereas the rest of the dairy looked filled in.”
IRI’s measure reflecting assortment variety indeed shows some declines across subcategories during the week of June 21 versus the same week last year. “Overall, the number of dairy items per store selling was off by 1.7% or 22 items compared with the same week in 2019,” said Jonna Parker, team lead of fresh for IRI. “Compared to areas like frozen foods and meat, the dairy department is doing extremely well as far as assortment and in-stock position go. However, we do see some harder hit areas, including margarine and cream cheese. During the pandemic, many manufacturers put all their focus on core SKUs and I would not be surprised if some products will not come back with quite the number of line extensions we have seen in the past.”
Some examples of areas where assortment is much narrower are:
- Margarine/spreads: -18%
- Cream cheese: -14%
- Processed cheese: -5.8%
- Whipped toppings: -4.8%
Continued Mixed Results for Deli
“While most departments have been experiencing some erosion in their sales gains, we have quite the opposite happening in the deli department,” said Angela Bozo, education director for IDDBA. “In short, we have three sales lines trending up in a very important part of the store in terms of differentiation. Deli cheese has been a very consistent top performer, and deli meat has overcome its May dip into the single digits and is back in double-digit growth territory as well. While still in the negative, deli prepared is also on a positive growth path. In mid-April, deli prepared food sales were 47% below 2019 levels. Father’s Day week, losses were curbed to just 18.7% below normal levels.”
Deli prepared collapsed as quarantines began, retailers closed self-serve areas and shoppers minimized trips to the store. Retailers around the country are experimenting with packaged versus bulk items and/or reopening some of the cases with employee assistance. By and large, however, salad bars, olive bars and hot/cold food buffets remained closed.
The third week of June continued the acceleration in sales gains for random weight, non-UPC deli meat from the week prior, at 11.8%. While price inflation is driving higher dollar than volume gains, both increased over the week prior as many retailers have opened meat and cheese counters back up, much to the joy of some shoppers.
A shopper on CCF wrote, “I love having the deli open again for fresh meat and cheese slicing!” Another said, “Overall, we are quite pleased with this store and we are happy the deli is back open. We did find that we were able to order lunch meat sliced as we desired, in the quantity we desired, at a competitor during the virus lockdown. As such, we often visited there for lunch meat.”
Others, however, love grab-and-go, even if they suggest some improvements. “The prepackaged deli meats and cheese kiosk is great. It would be even better if the meat were sold in a variety of package sizes. It seems all the turkey packages are all well over a pound and I just do not need that much deli meat. The line at the deli is usually pretty long, so a better size variety of prepackaged deli items would be helpful in saving time.”
Patterns relative to grab-and-go versus slice-to-order counter sales remained the same as seen in prior weeks. While service counter sales made up 68% of deli meat sales this week, sales were off 4.2% as not all retailers have reopened the service counter. Sales for random-weight deli meat that has been previously sliced for grab-and-go, but still sold non-UPC, was up 52%.
“Grab-and-go did well pre-pandemic and has provided an important solution for the deli while service counters were closed,” adds Bozo. “Even though many retailers have reopened counters, having grab-and-go can be a real win for consumers looking to save time.”
During the week of June 21, random-weight deli meat once more outgrew UPC/prepackaged lunch meat. Dollars increased 11.4% for the latter, which was up from the week prior. But where random-weight deli meat grew volume by 7.3%, prepackaged UPC lunch meat increased a mere 2.2%.
Random-weight deli cheese dollar gains during the week ending June 21 jumped back up to mid-April levels, with a gain of 16.8% in dollars and 11.2% in volume. Just like deli meat, the numbers continue to show that having grab-and-go availability in random-weight cheese is a win, but variety in the amount, types and thickness of the slices is key. Whereas service counter sales were down 1.5%, sliced cheese packaged for grab-and-go, but still non-UPC, was up 48.9%. Grab-and-go reflects about 32% of total random-weight deli cheese and includes the sliced form.
Packaged (UPC) cheese saw much higher gains than deli cheese yet again, at 23.5% for total weekly sales of $359 million. Compared with $55 million in weekly sales for non-UPC cheese, packaged cheese sales are about seven times larger and yet, growth is higher. “Cheese, whether bulk or packaged, processed or natural, has been a top seller throughout the pandemic,” said Bozo. “As a versatile, protein-rich and kid-friendly snack or meal ingredient, cheese has benefited greatly from the many more at-home meal occasions.”
Along with a slow but steady recovery of sales, retailers are adding deli prepared items back on the menu. At its lowest point, the average number of items per store selling stood at 77. For the week of June 21, the items are up to 85, but it also means assortment is still down about 15% from pre-pandemic.
“With restaurant competition heating back up, decisions relative to assortment and pricing are crucial right now,” said Eric Richard, industry relations coordinator for IDDBA. “It is important to answer the demand for convenient, ready-to-eat meals with relevant assortment and attractive value propositions. Frozen food entrees have seen an extremely strong couple of months and restaurant transactions are growing each week. At the same time, the new normal provides us with the opportunity to re-evaluate line extensions and focus on high velocity, highly profitable items that helps us differentiate from the competition.”
These are the areas where assortment narrowed most during the week of June 21 versus year ago:
- Trays: -23.1%
- Salads: -26.6%
- Combo meals: -32.5%
- Sandwiches: -19.2%
- Desserts: -11.4%
- Soups: -16.4%
Deli-prepared food sales were down 18.7%—an improvement since April and gaining back a little each week. At the same time, sales continued to be off for all offerings and meal occasions, whether breakfast items, combo meals, trays or deli pizza.
“Father’s Day week brought us the first positive-growth fresh deli prepared category in dips and sauces,” said Richard. “Others, like sides, appetizers and sandwiches, are also well on their way back to normal. Importantly, fixed-weight refrigerated meals trended in the double digits this week, up 15.7%. That is also quite the turnaround from losing ground during April. This shows that consumers are resuming their mix and match tendencies with scratch and convenience items.”
All Baked Good Areas Are Back in the Plus
Until Father’s Day week, baked goods had seen mixed success amid the pandemic. All packaged items, whether cookies, crackers or baked goods typically found in the bread aisle have been tracking well ahead of prior year levels throughout the pandemic. However, in-store bakery, with a much greater reliance on holidays and celebrations, has experienced deep sales declines with slow recovery since the middle of April. The Father’s Day boost prompted fresh bakery (non-UPC) sales to meet and exceed prior year levels for the first time since March 15.
Packaged Baked Goods Aisle
Packaged baked goods sales have been strong throughout the pandemic, though sales gains have eroded each month from a high of 28.8% in March. Father’s Day provided a nice boost to the packaged baked goods aisle across items. All but bakery snacks bounced back into the double-digit sales gains versus the same week year ago, with the highest gains for bagels and English muffins, though these are also the smallest in terms of dollar sales. Fresh bread and rolls, though nearly $300 million in size, gained more than 15%.
Cookies and Crackers
Aisle cookies and crackers in UPC/fixed-weight packages had significant gains over the same week a year ago, with dollar sales up 14.6% versus a year ago. Cookie sales have been strong despite America’s baking craze. Sales for the baking ingredients aisle were up 34.8% over the week of June 21, with high gains for other ingredients, such as eggs, butter and milk also, as seen earlier. Crackers also had a double-digit performance during Father’s Day week.
Father’s Day week brought quite the change to the sales results of the in-store, fresh bakery. After many weeks of overall down results and only positive gains for bread and croissants, cakes’ sales growth came roaring back. After cake sales being down by as much as 30% during the month of April, cake sales improved 17.5% over the same week a year ago. It is important to note that Father’s Day fell a week earlier in 2019, which likely prompted much of this growth. At the same time, retailers are starting to adjust for the smaller, at-home celebrations as evidenced by unit sales. While dollar sales for cakes were up 17.5%, unit sales were up 44.4%. This points to the sales of more but smaller cakes. “June is historically a critical sales month for cakes with graduation celebrations,” Parker said. “Many in-store bakeries pivoted to a smaller size but more units available, recognizing Americans’ desire to celebrate major milestones just within smaller groups. This will be a trend we expect to see throughout the year.”
Doughnuts, often merchandised as a bulk item in the fresh bakery, continued to be down in double digits. Much like deli, some retailers have taken to selling prepackaged doughnuts instead, which is appreciated by some. A shopper on CCF wrote, “The bakery department has really done a great job providing items that are prepackaged since restrictions have been in place given COVID-19.”
As COVID-19 related shopping patterns started to develop in mid-March, retailers dialed back on assortment in the in-store bakery. The average number of items per store selling declined by as much as 21 items at the end of March. While still down 7% from normal levels, the average number of items for the week of June 21 averaged 99.
Some of the hardest-hit areas included the following:
- Doughnuts: -35.2%
- Trays: -27.1%
- Rolls: -14.0%
- Desserts: -11.4%
The food landscape continues to be in flux. Supply and demand in foodservice and food retailing has yet to find a new balance as consumer engagement continues to evolve. The past few weeks have seen spikes in COVID-19 cases and hospitalizations in some regions that had previously relaxed restrictions. The new outbreaks are likely to impact business activities, restaurant engagement and shopper behaviors in those regions. These outbreaks are also likely to prompt the continuation of social distancing measures and behaviors in hard-hit states. In IRI’s ongoing consumer sentiment tracking survey, the share of consumers more concerned about COVID-19 than the week prior is up from 15% to 22%. The Trump administration announced last week that it is preparing for a second wave of COVID-19 that could hit the country in the fall. Between the continued impact of COVID-19 and significant economic pressure, it is likely that demand for meat in retail will continue to track well above 2019 levels for the foreseeable future.
As consumers are getting fatigued with tried-and-true recipes, a major opportunity lies in providing easy meal solutions featuring deli favorites as well as tips on how to serve up something different, such as breakfast for dinner, which is a big win for dairy, deli and bakery.
The next report will cover the last week of June, followed by the week of July 4. Depending on the level of preparation, consumers may have started on their July 4 shopping. Independence Day is traditionally strong meat holiday and much like Memorial Day, about half of shoppers are expecting to celebrate the Fourth differently, with less travel and smaller celebrations.
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.