The roller coaster ride for retail sales continues as the virus remains in firm control of how and where consumers spend their food dollars. Come early fall, many of the pandemic shopping patterns had started to normalize. Sales were on a slow march back to normal, comfort levels with in-store shopping were much higher and shoppers started to spend a little more time in the aisles.
During October, COVID-19 cases started to rise once more. Restaurant transactions had recovered to within 10 percentage points of their 2019 volume, but it is likely that winter temperatures and renewed spikes in case counts will hamper a further restaurant comeback.
October retail dollars continued to pace well ahead of 2019 levels, gaining by 8.6% for total edibles (all store food and beverages including alcohol, grocery and fresh foods). 210 Analytics analyzed the IRI 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. These findings use the new IRI Integrated Fresh syndicated product hierarchy that places perishables products in the departments where they are commonly found across majority of retailers within the country.
“According to IRI’s latest survey wave of primary shoppers in October, many shoppers are still working from home, have kids home in virtual schooling or are dealing with furloughs and unemployment, or a mix of all,” said Jonna Parker, team lead of fresh for IRI. “While certainly some of the food dollars have moved back to foodservice, we continue to see a high share of meals being prepared and consumed at the home. And sales patterns continue to evolve with a move to a little more convenience on the one hand, but money-saving measures on the other.”
Throughout October, food spending at retail remained highly elevated across most departments. However, sales gains have been on a slow decline ever since the onset of the pandemic. Sales gains in center store (9.4%) outpaced those in fresh, though the meat department had another strong month. The deli department came in only slightly below last year’s levels, an improvement, whereas the bakery and dairy department had their slowest month since March.
“As deli, dairy and bakery are all slowly trending back to normal, building strategies on how we can keep the dollar at retail will be crucially important with several big grocery holidays coming up,” said Jeremy Johnson, VP of education for IDDBA. “Restaurants have developed very strong takeout and delivery platforms and we are seeing many holiday meal solutions being offered. Retail can also draw upon the many pandemic lessons including a look back at pandemic-affected holidays to see where demand for the winter holidays may sit, what worked and what didn’t.”
“October marked the first month in which the dairy department registered single-digit vs. double-digit dollar gains,” said Abrielle Backhaus, research coordinator for IDDBA. “However, all areas within dairy saw positive gains in October vs. a year ago. Milk and natural cheese were the two dominant players, generating around $1 billion in the five-week period, each. While natural cheese gained 13.7% over last year’s levels during the month of October, milk dropped to the mid-single digits, at 5.7%. The highest percentage gains in October were recorded by cream cheese and whipped toppings, though both are smaller sellers.”
Growth percentages differ whether looking at dollars, units or volume. For total dairy, dollars trended ahead of units, which is the case for all areas except for natural cheese and cream cheese. “Yogurt is one of the best examples of how much pandemic shopping has changed long-standing trends,” said Backhaus. “Single-serve cups had been very popular for years, but in today’s markets, units are down whereas dollars and volume are up. This points to increased yogurt consumption but the purchasing of larger containers than pre-pandemic.”
Mixed Results in Deli
“Sales for total deli, comprised of deli cheese, meat, prepared foods and entertaining, dipped just below last year’s levels during October,” said Angela Bozo, education director for IDDBA. “More than anything, results remained mixed for the different areas. Deli meat and cheese sales were strong, but deli-prepared and entertaining solutions pulled down the overall results.”
Whereas many departments and categories have seen month-over-month declines, deli meat sales are very steady in dollars and volume. Taking a closer look at deli meat shows that grab and go (random-weight, but sliced for self-service) has been the main driver of the deli meat success in the pandemic months, with additional success in pre-sliced options. While not the biggest area, gains in grab-and-go have consistently been up 50% or more vs. 2019 levels. In volume, packaged lunch in the meat department is much bigger at 88 million pounds vs. 64 million in deli for the October weeks. However, dollar and volume gains were lower.
Deli Cheese Gains
Random-weight deli cheese dollar sales increased 14.4% year over year the month of October—its lowest increase since the onset of the pandemic. Dollar gains easily exceeded volume gains, which points to continued inflation.
Taking a deeper look into grab-and-go, pre-sliced and service deli cheese shows a similar picture as seen earlier for deli meat. Grab-and-go and pre-sliced sales have both been very successful in growing sales. With some retailers still having the service deli shut down, sales are trailing 2019.
Deli-Prepared Performance Up and Down
Assortment in deli-prepared items decreased a little further vs. their July through September levels, at 164 average items per store throughout October. Additionally, the average number of items per store is still down vs. the pre-pandemic measurement of March 1 as well as a year ago.
During October, the results for deli-prepared food sales were very mixed. A few areas, such as holiday meal solutions and side dishes increased vs. a year ago. Others, including soups, combination meals and prepared meats continue to be down significantly versus year ago levels.
“Holiday meal solutions can be a great win for retailers,” said Eric Richard, industry relations coordinator for IDDBA. “We saw it at Easter and a number of the summer holidays as well. Thinking about the fact that most Americans have been cooking way more meals in recent months than they did before, there will likely to be increased demand to outsource the preparation of the Thanksgiving meal.”
Bakery Trending Back to Normal
Baked goods items found in the “aisle” or center-store area adjacent but not included in the perimeter bakery area are seeing continued strength in bread and rolls. Sales of dessert type items or sweet snacks is tapering off a little each month and breakfast items are also slowly trending back to normal.
“Impressively, all areas within the center store bakery recorded gains in the year-over-year comparison,” said Parker. “Bagels have seen stellar sales results all pandemic long and it looks like the popularity of croissants is only heating up. Areas that are trending down somewhat include pastries, Danishes and coffee cakes, pies, doughnuts and snack cakes.”
The perimeter bakery is significantly smaller than the bakery aisle and results were mixed. As seen throughout the pandemic, the more functional items of breads and rolls are mostly trending above year-ago levels. But desserts, sweet snacks and breakfast items continued to be below 2019 sales trends. These results are affected by the closing down of bulk, self-serve sections as well as the very different nature of celebrations and gatherings amid the pandemic.
Unlike the center store bakery, the perimeter bakery performance by area is much more mixed. Only four areas reported increases: breads, croissants, English muffins and tortillas/wraps and flatbreads.
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.