Since the start of the pandemic, retailers pulled back on promotion as demand for at-home food grew. But as the economy reopens, what are you doing to extend growth?
In my last three FRBuyer articles I discussed the amazing growth frozen and refrigerated foods have delivered during the COVID- 19 pandemic. Through the 52-week period ending July 25, 2020, Nielsen reports total measured retail channel dollar sales in the frozen food department grew 13.8% and dairy department sales were up 9.1% (both topping total store growth of 7.5%). The frozen food department was the second-fastest-growing department, edged out only by the seafood department, which grew by 14.3%.
With extreme demand for food and other essentials during the first couple of months of the pandemic, retailers struggled to keep shelves stocked. This led to greater reliance on big-selling items and less reliance on niche items. It also led to reduced promotion support. Nielsen shows a sizable decline in promotion support with 26.5% of frozen department unit sales on promotion (down 4.0 percentage points from the year-ago period) and 28.3% of dairy department unit sales on promotion (down 2.1 percentage points from year ago).
Recessionary pressures will cause more consumers to look for deals and lower prices, so I expect retailers and manufacturers to increase promotion support as demand slows. As elevated at-home time will likely remain the norm for some time, here are suggestions for how to continue to win.
FOCUS ON BASICS
During the Great Recession and the COVID-19 pandemic, consumers turned to basic foods to feed their households. Now that we are faced with the coronavirus recession and historic job losses, you should expect demand for basic foods to continue. Like many households, my own family made attempts during the past few months to watch our spending. Here are some examples of those efforts that your own shoppers may be adopting as well:
–We rediscovered the simple goodness and convenience of grilled cheese sandwiches. An easy and hearty sandwich to make, and you can juice it up with multiple cheese types (I like mixing sliced American and Swiss cheese – dairy department non-specialty cheese are up 12.8% to $11.8 billion); two slices of bread coated with ample slices of butter (up 17.3% to $3.7 billion); consider a couple slices of bacon, avocados or tomatoes for special occasions, and don’t forget the soup.
–Breakfast for dinner is always an option. As at our house, my guess is that many households prepare traditional breakfast meals for dinner. From scrambled or fried eggs (chicken eggs are up 8.5% to $6.1 billion) and toast to omelets/frittatas and quiche to pancakes, and frozen waffles (up 8.4% to $1 billion) and/or French toast. These are accompanied with bacon, frozen breakfast sausage (up 16.9% to $687 million), home fries, hash brown potatoes (dairy prepared potatoes up 13.0% to $670 million), frozen fruit (up 23.7% to $1.4 billion), refrigerated bagels (up 13.4% to $117 million), refrigerated English muffins (up 12.3% to $71 million), butter and jams/jellies. Retailers are good at promoting summer cookouts, but what about breakfast promotion? Breakfast is popular all day, year-round!
–Pizza delivery and carryout is hot and so are frozen multi-serve pizza sales (up 17.5% to $4.7 billion). Frozen pizza crusts (up 37.9% to $40 million) or shelf-stable can be used to make some creative meals or snacks and provide sales opportunities across the store. My wife and I have been buying bakery department flat-bread pizza crusts and topping them with barbecue sauce, precooked refrigerated pulled pork or chicken, crumbled bacon pieces, refrigerated kale salad mixes, toasted pine nuts, and two or more varieties of shredded or shaved Italian cheeses (dairy specialty cheese is up 14.5% to $2.8 billion). Pop them in the oven and enjoy.
–Recipes, recipes, recipes: I received the idea for our pizza concoction from a retailer’s monthly magazine and we have served them to family members and neighbors who expressed interest in making their own. I urged them to be creative and experiment with their own concoctions.
RESTAURANTS DOWN 27%
The National Restaurant Association projected 2020 restaurant and bar sales will fall $240 billion, or a 27% decline, from initial expectations. Most publicly traded restaurant chains have reported significant declines in same-store-sales performance during the first half of the year, but not all chains are struggling. In the second quarter, Popeyes and Papa John’s posted eye-popping gains of 29% and 28%, respectively, with decent gains from other QSRs (quick-serve-restaurants) like Domino’s (+16%), KFC (+7%), and Pizza Hut (+5%). On the other hand, more QSR chains posted declines, including Wendy’s (-4%), McDonald’s (-9%), Chipotle (-10%), Burger King (-10%), Dunkin’ (-19%), and Starbucks (-41%). Declines from casual dinein chains have been more dramatic with Olive Garden down 39.2%, followed by Applebee’s (-49.4%), Denny’s (-56.0%), and IHOP (-59.1%). The restaurant industry has already reported sizable numbers of bankruptcies and store closings and expect more into next year which translates into opportunities for food retailers.
Speaking of restaurant meals, who does not love French fries with hamburgers and other sandwiches? We found some frozen offerings (prepared potatoes up 18.5% to $2.2 billion) this year just as good as those from some of our favorite casual restaurants. I have noticed some TV ads promoting frozen French fries, but in the age of digital promotions, why aren’t retailers doing more joint promotions across products served with French fries to drive store sales across multiple departments?
In the immortal words of Spock: EAT WELL AND (allow your frozen and dairy departments to) PROSPER!
Retail insights thought leader Todd Hale (firstname.lastname@example.org) is the former senior VP of consumer and shopper insights at Nielsen. He is principal of Cincinnati-based Todd Hale LLC.