'Flat' is the new 'up' in food

By Warren Thayer

OCTOBER 16, 2014

4
inShare

5

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.

"Flat is the new up," Todd Hale says when asked about the state of the food industry. The half-in-jest comment is easy to understand if you've been following retail's disappointing numbers lately.

The former SVP of consumer and shopper insights with Nielsen and now principal at his namesake consultancy notes that dollars across channels rose 1 percent during the past year, with units flat. Inflation has driven most dollar gains, although that pressure is waning with notable exceptions such as in meat and some dairy categories.

"Over the past five plus years, the only dollar growth we experienced came in 2011 (4 percent) and 2012 (3 percent) when inflationary pressures had retailers accepting manufacturer price increases as well as passing on increases on their products too," Mr. Hale said.

Most store growth (about 1,855 units) since 2005 has come from low- and high-end niche retailers such as Aldi, Save-A-Lot, Trader Joe's, Fresh Market, Whole Foods and Sprouts, he points out. While natural, organic and specialty retailers accounted for nearly half the growth, deep discounters are in the lead, spurring mainstream supermarkets to add their own no-frills value formats.

Much of what we're seeing today is tied to the lingering effects of the recession and the continued, growing income disparity between the haves and the have-nots, Mr. Hale said. Commodity prices and demographic variations on channel shopping and buying habits have also played a part.

Citing Nielsen numbers, he notes that, "The club channel caters to the more affluent shoppers, getting 60 percent of its sales from households with incomes of $75,000 and more. For the grocery channel, that number drops to 43 percent, and for mass merchandisers, it's 36 percent. The 'haves' are spending and shopping, while those with lower incomes are struggling, with stagnant wages. I'm not surprised we're growing this slowly; it is what it is."

Mr. Hale expects slight improvement in the year ahead. Consumer confidence is up somewhat, and while people are still paying off debt and trying to save, they're planning to spend in discretionary categories such as electronics, vacations and apparel. This could also affect food sales, especially if wages rise by three percent or so during the next year.

"But it all comes down to spending power — where people shop and what's important to them," he said.