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Supermarkets, Where Did Your Customers Go?

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Sales at supermarkets, warehouse clubs and supercenters are not even keeping up with the inflation rate. Supermarket News’ recent discussion with food industry analysts talked about the so-called “shrinking pie” of food sales indicating that consumers are buying less food. But is that truly the case, or is it just that consumers are changing where they buy their food?

Sales at the nation’s clubs and supercenters have fallen from year ago levels for two consecutive months, and supermarket sales through the first eight months of 2012 barely kept pace with the 3.2% retail food inflation rate.

The Food Institute looks at just-released government sales data and the “shrinking pie” trend at http://www.foodinstitute.com/economic.cfm. This and the substitutability of food products as consumers look to deal with higher food process are also addressed in an interview I had with Brick Meets Click at http://www.brickmeetsclick.com/food-prices--substitutability--and-shoppers.

Supermarket Sales Are Flat

Food & beverage store sales rose a meager 1.2% in September versus a year ago to nearly $52 billion —lower than the inflation rate for retail food, according to The Food Institute analysis of Census Bureau data. That has been the trend for five out of the past nine months, meaning that less physical volume is moving through all food & beverage stores. There, sales through the first three quarters were up just 3.6%. For supermarkets alone, which account for roughly 85% of all food and beverage stores, sales are up even less, at 3.2% through Sept. 1 — exactly the same as the inflation rate, indicating no change in overall physical volume. (Note: Supermarket data lags one month behind totals.)

…Apparently Not Clubs & Supercenters

The latest sales data for August marked the second consecutive month sales at the nation’s supercenters and warehouse clubs fell from year ago levels, and the fourth monthly decline thus far this year. Through the first eight months of 2012, sales were up just 1.4%, below the overall all item inflation rate (the Consumer Price Index) of 2.1% during the same period.

Not long ago, these outlets were posting consistent double digit sales gains over the prior year. The Food Institute estimates that in prior years about 52.5% of sales at these retailers have come from food sales. Today, sales total about $134 billion through Sept. 1. Perhaps the increased focus on food at supercenters such as Wal-Mart and Target, has meant consumer’s shopping carts have been filled more with lower priced food products than higher priced hard- and soft-line items, reducing overall dollar sales at supercenters. Could it be that even more food than thought is going through these outlets? CITI Research estimates that Wal-Mart holds a 20.4% share of the grocery market, Target 3.4%, Costco 4.6% and Sam’s Club 4.0% — about $265 billion annually, combined.

Food sales at the traditional discount formats operated by Wal-Mart and Target are certainly on the rise as well, and that is where some of the business has gone. Unfortunately, there is little hard information on this front aside from scouring the SEC filings of these companies for some indication — something we at The Food Institute will continue to do.

Other alternative retailers, such as drug stores and dollar stores, are selling more food but comparatively small amounts. Drug store food sales are estimated by the Food Institute at about $1.5 billion a month, and dollar store food sales at the leading players, Dollar General and Family Dollar, are estimated by CITI at about $600 million a month, although growing rapidly along with the number of dollar stores.

What do you think is happening to food sales? Who is doing the business, or is there just less business to be done?

Questions? You can reach me at brian.todd@foodinstitute.com.

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Sean McBride

Sean McBride, founder of DSM Strategic Communications, LLC, is former EVP of communications and member services at the Grocery Manufacturers Association.
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