Here’s an overview from IRI of what’s happening, why, and what you need to do about it.
High inflation. Low service levels. New consumer trends. Logistics logjams. Changes in price elasticity.
This year is throwing us more challenges than we’ve seen in decades. “How America Eats: What’s Cooking Now with Consumers,” a new report from Chicago-based market research firm IRI, addresses these issues and suggests where new opportunities lie.
Sally Lyons Wyatt, IRI’s exec vp and practice leader, outlined the research in a recent webinar. We’ve summarized her key points here, with a focus on frozen and refrigerated foods wherever possible.
GET READY FOR MORE ELASTICITY AND MORE NEED TO PROMOTE
Overall, price elasticities are reverting back to previous norms as inflation picks up. For some time now, elasticity has been low with products in low supply. But as categories recover, and inflation picks up, you’ll need to protect sales and volume with deeper and more frequent promotion, Wyatt said. That’ll vary by category, of course, but she noted that if you don’t have much promotion planned for the rest of the year, now might be the time to look at your plans again.
IRI looked at dollar-weighted averages across the 50 top CPG categories the past couple of years, and calculated the dollar volume lost from a 10% price increase. Pre-covid (in the 52 weeks ended Feb. 23, 2020), a 10% price increase resulted in a volume loss of 15.2%. The first year of covid (ended Feb. 21, 2021), the loss was 13.1% with the same price increase.
Now let’s look at the price elasticity changes from that 10% increase in the 52 weeks, 26 weeks and 13 weeks, respectively, for the period ended Feb. 13, 2022. The 52-week elasticity came in at 11.4%; 26 weeks, 11.9%; and 13 weeks, 12.7%. You’d be hard pressed to find a trend clearer than that.
LOW IN-STOCKS HURT SALES
Some of these changes were impacted by product availability as well as product assortment. Lower sales numbers do not entirely represent lower demand. In-stock positions have fallen from the ideal metric of 95%, Wyatt said, and this impacts both dollars and units. Through June 30 of this year, for example, IRI data shows these average service levels for the following categories: frozen/refrigerated processed poultry, 88%; refrigerated side dishes, 90%; frozen dinners/entrees, 91%; and refrigerated tea/coffee, 91%. But in each case, those are improvements versus the first three months of the year.
INFLATION’S COSTS TO FROZEN/REFRIGERATED
Through May 15 of this year, inflation-driven price increases pushed brick and mortar store dollar growth ahead by 5.6% while online sales jumped by 17.2%. B&M store frozen sales climbed by 6.3% with online sales ahead by 3.2%. By comparison, B&M store refrigerated food sales rose by 8.3% while online sales dropped by 3.7%.
Units, of course, suffered. For the B&M store, units were off by 3.3%, although online unit sales climbed by 11.5%. B&M store frozen units fell by 4.2%, with online units dropping by 2.7%. B&M store refrigerated units were down by 2.8%, and online units fell by 3.3%.
Only two of the top 10 categories across departments — energy drinks and non-chocolate candy — scored gains in both dollars and units. Frozen dinners/entrees — one of the top 10 categories — posted a 6.9% dollar gain but losses of 7.2% in both units and volume.
CASH IN ON THE MEAL KIT COMPANY SLUMP
A few years ago, meal kit companies seemed poised to grab serious share from supermarkets. The pandemic even helped them awhile, but the party seems over. After a 12% dollar gain in 2019, a 53% gain in 2020 and a 58% gain in 2021, they’re up a mere 4% this year, Wyatt reported. The time is ripe, she said, to package convenient meal ideas for consumers, and run with them. One key is to make sure consumers know that supermarkets can offer the convenience and excitement promised by the meal kit companies.
THE NEW EDGE OVER QSRs
On-premise dining occasions at quick-service restaurants are down 3.0% this year, according to IRI’s new OmniConsumer Recipe Panel. Dollars per trip have jumped by 12.2%, driven by steeper price hikes. By comparison, retail trips for food and beverages are up by 1.2%, and dollars per trip are ahead by 4.2%. Low-income shoppers have cut back on QSR trips by 5.3% and increased supermarket meal purchases by 0.5%. The data suggests an opportunity to promote the relative economy of supermarket shopping.
By the way, frozen appetizers and snacks have gained 1.1 points of household penetration this year versus the year-ago period. Wyatt says they’re popular because they’re inexpensive sustenance (near $1 per package), they’re promoted with fewer/deeper deals and make an impact on social media.
SHOPPERS ARE BUYING IN BULK, SPLITTING GOODS WITH FRIENDS
Had you heard that some consumers are shopping for groceries in bulk, and then splitting up everything with friends, like mini-co-ops? IRI had heard that, and couldn’t believe it any more than we could. But they researched it and found it to be true. In fact, about 5% of shoppers are doing just that, according to the company’s research. It’s higher in some segments than in others. Here’s how IRI sorts it out:
—11%, Large households with 5+ members
—9%, Gen Z, younger millennials
—9%, Households with kids aged 6-12
Wyatt said this is new, and has legs for both branded and private label bulk offerings.
CLUB STORES AND ONLINE ARE THE BIG UNIT GAINERS
Everyone is hurting when it comes to unit sales, right? Nope. So far this year, club unit sales are up by 3.9%, and online units are up by 6.0%. Other unit gainers are military commissaries (up by 0.4%) and mass merchandisers (up 0.1%). The unit gainers are the ones taking away real share.
GEN Z SKEWS HIGH ON THESE FROZEN & REFRIGERATED FOODS
Generation Z shoppers skew high on convenient meals (refrigerated lunches, frozen appetizers and handhelds), energy (RTD coffee, energy drinks) and ethnic foods (Asian, hot sauces). Here are a few categories that score especially high with them, in rank order:
Refrigerated muffins, frozen corn on the cob, refrigerated snack cakes/doughnuts, frozen drinks, frozen appetizers/snack rolls, frozen processed poultry substitute, frozen handheld entrees (non-breakfast), yogurt drinks, refrigerated juices, frozen processed poultry, refrigerated lunches and oat milk.
GAS PRICES ARE AFFECTING SHOPPING PATTERNS
An IRI survey of primary grocery shoppers in early May turned up some factors affecting retail sales:
—27% say they stock up more on a given trip vs.
making frequent smaller trips for groceries.
—26% do more one-stop-shopping to save driving to multiple stores.
—11% order more often online to avoid driving.
Higher-income segments were less likely to report these changes. n