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Fresh Food Prices Keep Climbing

It's been another challenging year for perishables departments. In the face of rising wholesale prices in many categories, retailers are left to choose between sacrificing margins or volume as shoppers pinch pennies in this difficult economy. Fresh eggs were one of this year's most dramatic examples. With producers facing soaring input costs due primarily to the rising prices of feed and fuel, large

It's been another challenging year for perishables departments. In the face of rising wholesale prices in many categories, retailers are left to choose between sacrificing margins or volume as shoppers pinch pennies in this difficult economy.

Fresh eggs were one of this year's most dramatic examples. With producers facing soaring input costs due primarily to the rising prices of feed and fuel, large grade A eggs were retailing for an average of $2.20 per dozen in U.S. cities this March. These record prices helped lift dollar sales of eggs almost 30%, even as consumption declined. The story was similar, albeit less pronounced, with milk, cheese, cream, yogurt and refrigerated juices.

However, fuel prices appear to be easing in the near term, which will benefit both shoppers and suppliers. Also, dairies ramped up production in response to rising prices, and surplus milk is already easing those categories off recent highs.

Finally, the categories in this year's report that have demonstrated both positive dollar sales and unit sales growth — side dishes, refrigerated pastas and refrigerated marinades and sauces — indicate that shoppers are still looking for convenient meal solutions at the supermarket.


Milk

Unit sales of fluid milk have been steadily declining for several years, and the category's recent retail price spike appears to have accelerated that trend. Dollar sales of milk increased 13.9% in the supermarket channel during the 52 weeks ending June 15, raising total sales to $12.2 billion, despite a 4% decline in unit sales. As in years past, declining consumption is hitting whole milk the hardest, as health-conscious shoppers switch to low-fat and skim varieties for themselves and their children. Prices have moderated since their recent peak in late 2007, and that trend should continue in the near term, with fuel prices currently easing, and milk production up.


YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Super-
markets

$10.905B

-1.0

$10.552B

-3.2

$11.665B

10.6

Drug

$422.7M

26.0

$402.1M

-4.9

$497.8M

23.8

F/D/MX

$11.502B

-0.1

$11.146B

-3.1

$12.402B

11.3

52 WEEKS
ENDING
JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

LARGEST SALES

Milk

$12.2B

13.9

Drug

$535.6M

LARGEST SALES

Natural Cheese

27.4

F/D/MX

$13.0B

14.6

SUBCATEGORIES

SUPERMARKET
SALES 52
WEEKS ENDING
JUNE 15, 2008

RFG Flavored Milk/
Eggnog/
Buttermilk

$724.0M

1.4

RFG Kefir/
Milk Substitutes/
Soy Milk

$498.2M

8.8

RFG Milkshakes/
Non-Dairy Drinks

$56.2M

-12.9

RFG Skim/
Lowfat Milk

$7.8B

16.9

RFG Whole Milk

$3.2B

11.4

Natural Cheese
Unit sales of natural cheese declined 2.1% in the 52 weeks ending June 15, but higher prices — led both by rising commodity costs and stronger pricing on value-added products — boosted category sales 11.7%, to $7.1 billion. Natural chunks unit sales held relatively steady, posting 9.2% in dollar sales gains. But, the real growth came from the shredded, sliced and string cheese segments, which all posted double-digit dollar sales growth. These convenient, value-added products once again siphoned shoppers away from the processed cheese category, which saw a 6.4% decline in unit sales during this period.


SUBCATEGORIES

SUPERMARKET SALES
52 WEEKS ENDING
JUNE 15, 2008

Natural All Other Forms

$11.3M

44.0

Natural Chunks

$2.4B

9.2

Natural Crumbled

$206.0M

5.6

Natural Cube

$73.9M

5.6

Natural Shredded Cheese

$2.4B

14.5

Natural Slices

$864.7M

16.1

Natural String Cheese

$558.6M

13.1

RFG Grated Cheese

$94.6M

10.0

Ricotta Cheese

$183.4M

6.2

SS Grated Cheese

$231.6M

3.9

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$7.1B

11.7

Drug

$9.6M

6.4

F/D/MX

$7.2B

12.0

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$6.142B

2.2

$6.238B

1.6

$6.658B

6.7

Drug

$7.5M

35.3

$8.4M

12.5

$9.7M

14.4

F/D/MX

$6.206B

2.4

$6.321B

1.8

$6.770B

7.1


Luncheon Meats

Sales of packaged lunch meats remained flat during the 52 weeks ending June 15, with dollar sales increasing less than 1% and unit sales declining 2.6%, resulting in $3.4 billion in supermarket sales. Category doldrums have lingered during the past few years, even as sliced lunch meat sales have risen modestly at many in-store, full-service delis. The category may have reached a point of maturity, but several new products, such as all-natural nitrate- and nitrite-free cold cuts, as well as thin-sliced turkey products in resealable packages, may help reinvigorate this section of the cooler.


52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$3.4B

0.6

Drug

$8.8M

21.0

F/D/MX

$3.5B

0.9

SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG Non-Sliced Lunch Meat

$206.2M

0.0

RFG Sliced Lunch Meat

$3.2B

0.6

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$3.360B

0.7

$3.370B

0.3

$3.386B

0.5

Drug

$6.1M

-0.3

$6.7M

10.1

$8.3M

24.5

F/D/MX

$3.400B

0.9

$3.417B

0.5

$3.448B

0.9


Yogurt

After years of surprisingly steady growth for a mature, $3.6 billion category, unit sales of yogurt were flat in the latest 52 weeks ending June 15, declining about half of a percent. Still, commodity price inflation was not entirely responsible for yogurt's 9.2% increase in dollar sales. The advent of probiotics and other product innovations have reinvigorated the category's healthy image and improved its pricing power, demonstrating yogurt's ability to maintain volume even as prices are raised. By contrast, yogurt-based drinks continued slumping, with unit sales down and dollar sales flat at $412 million.


SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG Yogurt

$3.1B

9.2

RFG Yogurt Drinks

$411.9M

0.1

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$3.6B

8.0

Drug

$8.2M

26.6

F/D/MX

$3.6B

8.6

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$3.068B

7.1

$3.266B

6.4

$3.402B

4.2

Drug

$5.8M

9.2

$6.4M

10.0

$7.7M

21.1

F/D/MX

$3.113B

7.4

$3.326B

6.8

$3.483B

4.7

RFG Juices/Drinks
Dollar sales of refrigerated juice continued to grow at a steady pace this year, although those gains were primarily led by price inflation. The $4.3 billion category was up 3% in the supermarket channel in the 52 weeks ending June 15, despite a 2.5% decrease in volume during that period. Dollar sales of orange juice, by far the largest segment in the category, have been flat, with increases in price roughly matching declines in consumption. Opportunities continue to emerge in the diverse category, however, with refrigerated smoothies, juice blends, lemonades, and grapefruit and apple juices posting double-digit growth off of relatively large bases.


CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$4.013B

2.9

$4.076B

1.6

$4.258B

4.4

Drug

$48.0M

10.9

$50.4M

5.0

$55.3M

9.7

F/D/MX

$4.103B

3.2

$4.184B

2.0

$4.388B

4.9

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$4.3B

3.0

Drug

$59.5M

13.7

F/D/MX

$4.4B

3.4

SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG All Other Fruit Juice

$65.8M

18.2

RFG Apple Juice

$23.0M

141.9

RFG Blended Fruit Juice

$297.0M

10.6

RFG Cider

$56.5M

6.8

RFG Cocktail Mixes

$182,261

0.7

RFG Cranberry Cocktail/Drink

$5.7M

-28.8

RFG Cranberry Juice/Cranberry Juice Blend

$2.4M

17.7

RFG Fruit Drink

$712.5M

5.4

RFG Fruit Nectar

$21.9M

7.7

RFG Grape Juice

$3.3M

-38.5

RFG Grapefruit Cocktail/Drink

$45,722

-5.7

RFG Grapefruit Juice

$77.5M

12.0

RFG Juice and Drink Smoothies

$135.5M

12.2

RFG Juice/Drink Concentrate/Syrup

$1.6M

-10.4

RFG Lemon/Lime Juice

$6.9M

5.1

RFG Lemonade

$192.4M

16.9

RFG Orange Juice

$2.7B

-0.8

RFG Pineapple Juice

$16.1M

12.8

RFG Vegetable Juice/Cocktail

$31.3M

7.5


Butter
Butter benefited in 2007 as shoppers shifted away from margarines and blends. Dollar sales were up 4.4% for the $1.3 billion category. But, the gains were mostly inflationary, forced higher by price increases that pushed the average retail price of butter to $3.25 per pound in May, according to data compiled by the U.S. Bureau of Labor Statistics. Unit sales of butter were up only 0.7% in the 52 weeks ending June 15, 2008. By comparison, dollar sales in the $1.2 billion margarines and butter blends category were up 3.3% on stronger pricing, even as unit sales fell 5.7%


52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$1.3B

4.4

Drug

$5.9M

25.1

F/D/MX

$1.3B

4.6

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$1.310B

-0.2

$1.221B

-6.8

$1.241B

1.6

Drug

$4.2M

12.6

$4.3M

2.6

$5.7M

31.5

F/D/MX

$1.325B

0.0

$1.238B

-6.6

$1.260B

1.8


Refrigerated Salad/Coleslaw
The refrigerated, packaged salad category is finally recovering from the damage caused by the two separate E. coli outbreaks in late 2006, which brought the category's sales to an abrupt standstill after years of rapid growth. In the 52 weeks ending June 15, dollar sales of packaged salad grew 4.7% off of 2% unit sales growth to reach $2.8 billion — the largest the category has been since calendar 2005. As long as consumers can continue to trust the safety of these products, the future looks bright again, as shoppers search for healthy, convenient foods to prepare at home.


52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$2.8B

4.7

Drug

$440,627

41.3

F/D/MX

$2.8B

4.8

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$2.762B

7.4

$2.735B

-1.0

$2.740B

0.2

Drug

$305,947

-19.3

$200,573

-34.4

$530,870

164.7

F/D/MX

$2.783B

7.5

$2.761B

-0.8

$2.769B

0.3

Processed Cheese
Dollar sales growth has picked up slightly for the processed cheese category, due to rising prices. Sales were up 2.5% in the 52 weeks ending June 15, boosting the category to $2.2 billion — the largest it has been since 2005. However, volume sales declines of 6.4% during that time indicate that shoppers are continuing to shift their purchases into the natural cheese category, where suppliers are offering an ever-expanding variety of cheeses in convenient packages.


SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

Aerosol/Squeezable Cheese Spreads

$66.8M

-10.9

All Other Processed Cheese Spreads

$158.7M

-0.8

American All Other Forms

$16.6M

1.0

Cheese Spreads/Balls

$343.4M

4.1

Imitation All Other Forms

$23.1M

16.4

Processed Loaf

$241.0M

-4.9

Processed Shredded Cheese

$7.8M

5.9

Processed Slices

$1.3B

4.6

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$2.289B

-3.7

$2.154B

-5.9

$2.120B

-1.6

Drug

$5.98M

7.7

$6.02M

0.6

$7.07M

17.5

F/D/MX

$2.317B

-3.6

$2.182B

-5.8

$2.153B

-1.3

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$2.2B

2.5

Drug

$7.8M

29.6

F/D/MX

$2.2B

2.8


Refrigerated Fresh Eggs

The retail price of eggs reached a new record high in March this year, with large, grade A varieties averaging $2.20 per dozen in U.S. cities, according to data compiled by the U.S. Bureau of Labor Statistics. The spike has been due to a couple of factors. Most notably, the ethanol boom has caused the price of corn to soar, leading to significantly higher feed prices for egg producers. Similarly, rising fuel prices have made eggs more expensive to transport. As a result, dollar sales of eggs rose 28.7% in the supermarket channel during the 52 weeks ending June 15, while unit sales declined 3%. Average retail prices have fallen from their March peak, to $1.92 in June, as feed and fuel prices have eased slightly — and as retailers sacrifice margins to compete and maintain volume in the $3.5 billion category.


CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$2.398B

-15.4

$2.487B

3.7

$3.145B

26.4

Drug

$15.4M

2.2

$16.1M

4.5

$25.7M

59.4

F/D/MX

$2.429B

-15.2

$2.525B

3.9

$3.203B

26.8

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$3.5B

28.7

Drug

$34.0M

76.9

F/D/MX

$3.6B

29.2

SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

Egg Substitutes

$214.1M

6.2

Fresh Eggs

$3.3B

30.3


Refrigerated Pasta

Sales of refrigerated pasta continued to grow during the past year, as shoppers tightened their food budgets, ate at restaurants less often and searched for convenient meals to prepare at home. Dollar sales of the $187 million category were up more than 14% in the supermarket channel, benefiting from unit sales gains of 9.6% in the 52 weeks ending June 15. Category growth has continued to accelerate since the end of the low-carb fad, with sales up 4.6% in 2005, 9.6% in 2006 and 10.6% in 2007 as suppliers expanded the variety of options in the category, and retailers found innovative new ways to merchandise the products, such as using display coolers in Center Store pasta aisles.


52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$186.7M

14.2

Drug

-

-

F/D/MX

$190.5M

14.4

DOLLAR SALES

% CHANGE

2005

Supermarkets

$144.9M

4.6

Drug

F/D/MX

$146.5M

5.0

2006

Supermarkets

$158.9M

9.6

Drug

F/D/MX

$161.3M

10.1

2007

Supermarkets

$175.8M

10.6

Drug

F/D/MX

$179.3M

11.2

Refrigerated Spreads
Led by sales of hummus, the refrigerated spreads category enjoyed another great year. Dollar sales were up 18.7% to $319 million in the supermarket channel, off of unit sales growth of 14.4%. Hummus and flavored spreads carried the entire category, with refrigerated horseradish and refrigerated meat spreads/meat salads posting flat sales.


CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$205.9M

7.6

$243.9M

18.4

$297.8M

22.1

Drug

$220,610

58.5

$189,722

-14.0

$239,983

26.5

F/D/MX

$207.0M

7.8

$245.2M

18.5

$299.6M

22.2

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$319.0M

18.7

Drug

$258,511

23.3

F/D/MX

$322.0M

19.1

SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG Flavored Spreads

$234.5M

27.4

RFG Honey

$278,499

-13.9

RFG Horseradish/Horseradish Sauce

$21.6M

0.1

RFG Meat Spread/Salad

$62.7M

-0.3


RFG Teas/Coffee

Refrigerated teas continued to be a relatively small but reliable growth category in the juice and dairy case this year, as media reports continue to tout the health and antioxidant benefits of the refreshing beverages. Sales have slowed somewhat. After double-digit gains in 2005, 2006 and 2007, dollar sales of refrigerated teas grew 7.5% in the supermarket channel during the 52 weeks ending June 15. Similarly, the much smaller refrigerated coffee segment continued to expand, growing 144.4% to reach $4.4 million in sales. Unit sales for the combined categories rose 6.3%, indicating that dollar sales gains were not inflationary.


52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$275.0M

8.4

Drug

$7.9M

35.8

F/D/MX

$286.3M

9.2

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$179.5M

20.7

$231.3M

28.8

$269.0M

16.3

Drug

$4.0M

30.0

$5.1M

29.0

$7.1M

38.8

F/D/MX

$185.3M

21.0

$238.8M

28.8

$279.1M

16.9

SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG Coffee Concentrate

$966,449

-21.7

RFG RTD Coffee

$4.4M

144.4

RFG Teas

$269.6M

7.5


Cream/Creamers

U.S. consumption of cream and creamers was flat in the 52 weeks ending June 15, but a spike in dairy prices was enough to land them on this year's list of the fastest-growing major categories in fresh foods departments. Posting a 7.9% increase in dollar sales, the category reached $1.5 billion in the supermarket channel, despite unit sales declines of about half a percent.


SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG Coffee Creamer

$903.0M

7.9

RFG Dairy Cream/Half & Half

$633.5M

7.8

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$1.5B

7.9

Drug

$15.9M

23.4

F/D/MX

$1.6B

8.5

CALENDAR YEAR

2005

2006

2007

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

DOLLAR SALES

% CHANGE

Supermarkets

$1.307B

6.4

$1.383B

5.8

$1.484B

7.3

Drug

$10.8M

22.5

$12.2M

13.2

$14.5M

18.2

F/D/MX

$1.330B

6.7

$1.412B

6.2

$1.522B

7.8

Other RFG Products
Driven by category expansion, refrigerated sauces, gravies and marinades continued to perform well during the latest 52 weeks ending June 15. Dollar sales in the subcategory rose 9.0% on higher volume to almost $203 million in the supermarket channel, roughly matching unit sales gains. Refrigerated baked beans, which grew 24.4% to post more than $11 million in sales in U.S. supermarkets, were another bright spot in the “other refrigerated products” category, which also includes refrigerated peanut butter, mustards, and meat and seafood seasoning mixes. Like other refrigerated side dishes, refrigerated baked beans can appeal to shoppers looking for healthy, inexpensive ways to put together family meals at home.


52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$217.9M

9.5

Drug

$23,352

169.7

F/D/MX

$220.1M

9.6

SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG Baked Beans

$11.2M

24.4

RFG Meat/Seafood Seasoning Mixes

$67,659

76.1

RFG Mustard

$869,295

-12.4

RFG Peanut Butter

$3.0M

3.3

RFG Sauce/Gravy/Marinade Mixes

$202.8M

9.0

DOLLAR SALES

% CHANGE

2005

Supermarkets

$171.1M

7.4

Drug

$17,632

-28.2

F/D/MX

$172.6M

7.8

2006

Supermarkets

$191.0M

11.6

Drug

$10,859

-38.4

F/D/MX

$192.6M

11.6

2007

Supermarkets

$208.8M

9.4

Drug

$13,605

25.3

F/D/MX

$210.7M

9.4


Refrigerated Side Dishes

The $1.2 billion refrigerated side dishes category demonstrated resilience in 2007, continuing to grow as shoppers searched for convenient, inexpensive ways to prepare meals at home. However, growth has slowed somewhat as the category matures. After posting double-digit dollar sales gains of 22.9% in 2005, and 14.6% in 2006, the category, which includes refrigerated appetizers and snacks, prepared salads, sauerkraut and other side dishes, grew 5.2% in the 52 weeks ending June 15, off an increase of 3.8% in unit sales.


DOLLAR SALES

% CHANGE

2005

Supermarkets

$948.2M

22.9

Drug

$896,706

-1.5

F/D/MX

$953.1M

23.1

2006

Supermarkets

$1.087B

14.6

Drug

$854,132

-4.8

F/D/MX

$1.093B

14.7

2007

Supermarkets

$1.177B

8.3

Drug

$929,595

8.8

F/D/MX

$1.184B

8.3

52 WEEKS ENDING JUNE 15, 2008

DOLLAR SALES

% CHANGE FROM LAST YEAR

Supermarkets

$1.2B

5.2

Drug

$769,961

-14.4

F/D/MX

$1.2B

5.2

SUBCATEGORIES

SUPERMARKET SALES 52 WEEKS ENDING JUNE 15, 2008

RFG Appetizers/Snack Rolls

$326.2M

5.1

RFG Prepared Salad/Fruit/Coleslaw

$473.0M

4.8

RFG Sauerkraut

$32.9M

0.8

RFG Side Dishes

$365.2M

6.3