Wednesday, August 31, 2022

Grocery Stores Sales Maintain Momentum on Default as Restaurants Crumble


While conveniences stores and restaurants are doing their best to retain and recruit consumers, grocery stores have the benefit of all those consumers that have been working at home. According to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® who stated, “the comfort of the home office and empowered more and more consumers to explore cooking a meal at home and saving money every month from not buying gas and driving to work, buying coffee and breakfast on the way to work or by not going out to lunch.”.

In a new report from IRI and the NPD Group found that once again, “Food-at-home sales are surpassing those at restaurants. The pandemic, of course, sent most cubicle-dwellers to their home offices. The fact that many of those people are still working from home most of the time is apparently very good news for grocery stores.”  Thus, winning by default.

The report found, “Food-at-home sales are outpacing restaurant sales, a trend that is expected to continue to grow. …Food-at-home sales have grown 8.7% compared to a year ago, while food-away-from-home sales are up 6% compared to 2021, the groups said in their first-ever assessment of the nearly $1.5 trillion total food market.

Part of the reason for that growth is the way Americans are working today. Some 20 million U.S. workers have hybrid or flexible work schedules that allow them to do their jobs, at least some of the time, from home. That is keeping 62.5% of food dollars based on at-home sales, while 37.5% of food dollars are spent on restaurants and other foodservice, the report found.

In case you did not know, Albertsons CEO Vivek Sankaran told analysts last month that his company has noted the shift from people working at home, with the grocer’s prepared meals, sandwiches and grab-and-go salads performing well.

“Consumers are still eating a lot at home, right?” Sankaran said. “Our ready meals are doing so well, we just launched a sandwich program. And the sandwich program, which is homemade sandwiches, they’re doing so well. And our convenient salads in our stores are doing so well.”

David Portalatin, SVP and industry advisor for food and foodservice for NPD, stated, “Consumers are seeking out less-expensive food options from grocery stores rather than dining out at restaurants, … “Even with the impact of elevated grocery prices, dining out is still much more expensive than eating at home,”

This is a key point from the study,”Grocery prices have soared more than 13% over a year ago, while restaurant prices are up 7.6% over 2021. But a typical restaurant meal costs 3.4 times more than one from the grocery store.”

When shoppers hit the grocery store, they are increasingly hunting for low prices, the report said.

“Consumers are bargain hunting, preferring more mainstream and value brands over premium brands, choosing private-label foods in select categories and occasionally buying premium products as affordable luxuries,” the report noted.

There can be no doubt that as inflation hit every part of consumers daily life restaurants will face continued pressure keep prices low or risk capitulating year over year customer counts. Restaurant Year-over-year (YoY) same-store sales and traffic experienced the fifth consecutive month of negative growth. July’s sales growth was +0.6% — a slowdown of 1.3 percentage points compared to last month. Putting it into a longer historical perspective, this is the weakest growth posted by the industry since February 2021 — the last month in which the industry lapped over a pre-pandemic month.

Guest count growth rates face a similar and, frankly, more concerning circumstance. Same-store traffic experienced negative YoY growth for the five-month period ending in July 2022. Looking at traffic numbers from the first week of August, Black Box Intelligence expects the negative traffic growth trendline will continue its streak through the end of the month. Traffic growth was -5.1% in July — a decline of 0.4 percentage points compared to June’s growth rate. Like same-store sales, this was the softest traffic growth posted by the industry since February of last year.

The news for the restaurant sector gets even worse as new research says delinquencies across all small businesses are at an 18-month high because of deteriorating business conditions and landlords raising their fees.

“About 46% of restaurants lacked the funds to pay their August rents, an 8-point jump in delinquencies from two months earlier, according to the latest survey of small businesses by Alignable Research Center.

The research shows that rent became significantly more difficult for all types of small businesses to cover this month. The delinquency rate across all industries was 40%, the highest Alignable has clocked in 18 months. For July, the rate was 28%.

Restaurants had the highest delinquency among the service industries that were included in Alignable’s study. The report was based on a poll conducted between Aug. 13 and Aug. 23 of 7,331 randomly sampled small businesses.

Foodservice Solutions® specializes in outsourced business development. We can help you identify, quantify and qualify additional food retail segment opportunities or a new menu product segment and brand and menu integration strategy.  Foodservice Solutions® of Tacoma WA is the global leader in the Grocerant niche visit us on our social media sites by clicking one of the following links: Facebook,  LinkedIn, or Twitter

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