Category Trends: Home Base in Center Store

Judging by sales in the 20 highest-volume and fastest-growth Center Store categories, the 52 weeks ending June 10, 2012, could be coined The Year of the Beverage.

Beer (2.6%), wine (5.3%) and premixed cocktails/coolers (25.9%) were among the supermarket standouts at a time when 36% of consumers said they socialize with friends more often at home so as not to incur the costs of going out, according to SymphonyIRI’s MarketPulse Survey.

Category Guide Intro: The Value Equation

But shoppers did more than entertain at home. Many worked single-serve coffee brewing into their everyday routine and the premiums attached to these handy little pods boosted dollar sales 17.1%. Energy drinks also sustained their momentum on top of two years of double-digit gains with sales spiking 14.6%.

Americans displayed a predilection for healthier snacks with crackers (4.7%) and snack/granola bars (6.7%) posting solid gains. But quick meals like cold cereal (-0.4%), soup (0.9%) and frozen dinners (-3.1%) did not fare as well due to increased competition, supermarket categories and quick-serve restaurants.

CENTER STORY KEY CATEGORIES
Supermarket dollar sales and percent change from last year

Carbonated Soft Drinks | $11.7B | -1.7
Fresh Bread and Rolls | $9.6B  | -0.4
Salty Snacks | $8.8B  | 2.9
Beer | $8.6B | 2.6
Wine | $6.3B | 5.3
Cold Cereal | $5.8B | -0.4
Frozen Dinners/Entrees | $5.7B | -3.1
Ice Cream/Sherbet | $4.3B | 4.3
Cigarettes | $4.2B | -6.8
Bottled Water | $4.2B | 3.4
Coffee | $4.1B | 17.1
Crackers | $4.0B  | 4.7
Cookies  | $3.8B | 3.2
Soup  | $3.8B  | -0.9
Bottled Juice | $3.4B | -3.7
Chocolate Candy | $3.1B  | 3.3
Snack Bars/Granola Bars | $2.3B  | 6.7
Peanut Butter | $1.1B  | 19.0
Energy Drinks | $945.4M | 14.6
Premixed Cocktails/Coolers | $264.9M  | 25.9

CSDs, Fresh Bread, Salty Snacks

Carbonated Soft Drinks

Soda sales continue to lose their food channel fizz despite posting the top revenue of any food or beverage in the supermarket.

The slump is becoming more exaggerated at a time when moves by New York City Mayor Mike Bloomberg to ban sodas larger than 16 ounces from foodservice establishments are making consumers think twice about the calories they drink.

But it’s not all doom and gloom for the effervescent category as major cola brands work on ways to maintain their share and even draw lapsed users. Pepsi is successfully bringing drinkers back with innovations like Pepsi Next, a mid-calorie version of PepsiCo’s flagship product with just 60 calories and 60% less sugar, and Dr Pepper Snapple’s Sun Drop was among the 10 best-selling new food and beverages of 2011, according to SymphonyIRI Group. 

The drug channel is also making inroads with soda drinkers, posting a double-digit increase in sales.

Fresh Bread and Rolls

With the exception of hamburger and hot dog buns, dollar sales of pricier packaged bread and rolls were flat during the 52 weeks ending June 10, 2012. But the damage could have been more significant considering that volume sales fell 5.2% in supermarkets, 2.5% in drug stores and 4.8% in food, drug and mass channels (excluding Wal-Mart) combined. Indeed, price was definitely a factor with retails surging 8.6% in 2011 vs. the prior year.

Though more costly options dissuaded some, a certain segment looks to bread as a vehicle for nutrition, as new forms and whole grains make it easy for health-conscious shoppers to heed federal guidance and make half their grains whole.

Sprouted, ancient and other whole grains are enforcing the health halo at a time when whole wheat is the most popular bread, followed by white and multigrain, according to Experian Simmons NCS data cited by Mintel in a recent bread report.

Salty Snacks

Dollar sales of salty snacks are up with ready-to-eat popcorn/caramel corn showing the most significant lift.

SymphonyIRI’s State of the Snack Industry report indicates that 55% of consumers are more likely to eat what tastes good rather than what is healthier and 60% often snack for enjoyment instead of hunger. But fewer in-between-meal eaters appear to be turning to salty snacks. Despite a lift in dollar sales of cheese snacks, corn snacks, potato chips and pretzels, the overall volume of salty snacks purchased across food, drug and mass channels (excluding Wal-Mart) is down 2.2%.

Health concerns may have something to do with the drop, as the U.S. Centers for Disease Control found that salty snacks are among the 10 food types responsible for more than 40% of Americans’ sodium intake. But as granola bars, fresh fruit and yogurt dip into chips’ share of snacking occasions, manufacturers are refining recipes for health. Frito-Lay has shifted to all-natural ingredients for many of its snacks and recently introduced Kettle Cooked Applewood Smoked Barbecue chips with 40% less fat than regular chips. Private labels are even getting in on the act  — H-E-B with its Unsalted Restaurant Style Tortilla Chips, and Giant Eagle with lower-fat potato chips.

Beer, Wine, Cold Cereal

Beer

Beer drinkers are abuzz about the specialty brews available at their local supermarket as retailers and manufacturers large and small become more entrenched in the segment.

While overall beer sales remained flat in 2011, with dollar sales up 1% and case sales down 2% in supermarkets, craft beers posted their sixth consecutive year of double-digit growth — dollar sales rose 15% and volume sales were up 12.6% vs. the previous year, according to SymphonyIRI Group.

Last year, Anheuser-Busch acquired Goose Island Beer, and MillerCoors created the Tenth and Blake Beer Co. — a craft and import division — to take advantage of the success of premium brews.

Supermarkets are even adding store-brand crafts to the mix. Last month, Hy-Vee debuted its new Baraboo line including a lager, IPA and wheat beer made by a local brewer. It will roll out seasonal offerings during the coming year.

Like all alcoholic beverage categories sold in supermarkets, overall beer sales are on the rise as 36% of consumers polled by SymphonyIRI report going out less often and entertaining at home due to the economic downturn.

Drug stores are a popular outlet for pre-party pit stops with beer sales up 7.1%.

Wine

Wine is posting impressive growth as new drinkers enter the category. Members of Generation Y have spurred much of the 9% jump in consumption in the past five years as they opt for unpretentious brands presented as easy and suitable for every day.

Posting 13% growth in food, drug and mass channels combined during the 52 weeks ending May 13, 2012, according to SymphonyIRI, Barefoot — positioned by E.&J. Gallo as a “fun, flavorful and affordable” wine — is the category share leader.

Supermarket shoppers also seem to be gravitating toward sweeter wines, as the American palate and especially that of younger consumers, who grew up drinking soda and energy drinks, is accustomed to sweeter tastes. Take Moscato wine, which boasts a sweeter taste profile; sales have soared 73% over the past year.

Younger shoppers are making more of their selections in drug stores that devote space to alcoholic beverages. Members of Gen Y view these outlets as the new convenience stores and are using them for quick fill-in trips.

Cold Cereal

Cereal sales were flat during the 52 weeks ending June 10, with the exception of varieties sold in the drug channel, which saw a 1.8% bump in unit growth.

The breakfast staple may be falling out of favor now that more convenient options like cereal bars, smoothies and microwaveable fare that promise a hot breakfast in minutes are on the scene.

According to a breakfast trends study by foodchannel.com, hearty options like oatmeal are making a comeback at a time when quick-service menus are dedicating more choices to the daypart. Even with these options at their disposal, 31 million Americans are still skipping breakfast, according to the NPD Group.

Faced with these obstacles, cereal makers have endeavored to jazz up their offerings with healthy reformulations and the addition of functional ingredients like fiber, whole grains and omega-3s.

Frozen Dinners, Ice Cream, Cigarettes

Frozen Dinners

Even during the height of the recession, when consumers were eating out much less, the frozen dinner category experienced sales declines. Since then, the category has continued to slip, with supermarket sales declining 3.1% to $5.7 billion in the 52 weeks ending June 10, 2012.

Unit sales in supermarkets also plunged 6.4% during that period, with price points relatively stable. The largest sales declines hit the multi-serve frozen dinners/entrees subcategory, which fell 8.9%. Drug stores, which own a miniscule share of this category, did see sales rise 5.1%.

Although frozen meals have evolved significantly from “TV dinner” days, this perception may be holding the category back, reported FoodProcessing.com, adding that manufacturers have been countering this image by developing premium lines of meals and co-branding with restaurant chains like TGI Fridays, Marie Callender, California Pizza Kitchen and P.F. Chang’s.

Moreover, the category offers an array of meal possibilities, including hearty portion sizes, lighter fare for weight management, and premium and value-based offerings, noted Prepared Foods Network, which also pointed out the rise in better-for-you claims, including low-, no- and reduced-fat, -calorie or -trans fat.

Ice Cream/Sherbet

After declining significantly in 2010, ice cream/sherbet sales rebounded in 2011 and 2012, growing 4.3% at supermarkets during the 52 weeks ending June 10, 2012. During the same period units sales declined 4.2% to $1.2 billion, but that was offset by an average price increase of 29 cents, which brought the average unit price to $3.62. Supermarkets continued to dominate sales in this category, with a 93.5% share, though the greatest sales growth (8.9%) took place in the drug sector.

While most consumers are looking for an indulgence when eating ice cream, rising health concerns continue to drive interest in “better-for-you” ice cream products such as reduced-fat, fat-free, low-carbohydrate, no sugar added, added calcium or other nutrients, or lactose-free ice cream. Novelty/single-serving products are also an important part of this trend, as some consumers prefer pre-packaged portions when counting calories, carbohydrates or fat grams, according to the International Dairy Foods Association.

Another key trend for ice cream is the continuing popularity of co-branding, noted the IDFA, resulting in an increase in the number of new ice cream products that use ingredients from candy, cookie, fruit, flavoring and coffee manufacturers. The IDFA expects this trend to continue to be important.

Cigarettes

The downturn in cigarette sales in supermarkets — and the marked uptick in cigarette sales in drug outlets — continued last year and through June of this year, while overall sales across food, drug and mass remained flat. Food retailers, with their growing focus on health and wellness, appear to be collectively deemphasizing smokes, while often keeping them well-protected from pilfering, which also detracts from sales.

Future sales of cigarettes may be impacted by a new Food and Drug Administration rule requiring tobacco companies to include graphic images on packaging depicting the health effects of smoking, which have been found to be more effective than text warnings. However, that rule, which was to be implemented in September, is tied up in legal proceedings, having been blocked by a federal judge.

But other efforts to discourage cigarette sales, particularly to youth, continue, such as an ad campaign by the Community Partnerships for a Tobacco Free New York in March  that called for gas stations, convenience stores and supermarkets to cover or move tobacco to an area concealed to shoppers. In addition, select Hannaford Supermarkets and Price Chopper stores in New York voluntarily added double-thick opaque filters and otherwise muted tobacco sets at the urging of the Project Action Tobacco-Free Coalition.

Bottled Water, Coffee, Crackers

Bottled Water

Following marked growth in the early 2000s, but then a nosedive during the peak recessionary years of 2008 and 2009, bottled water sales have rebounded, growing 3.4% to $4.2 billion at supermarkets during the 52 weeks ending June 10. Supermarkets continue to dominate the category, generating 82.4% of total food, drug and mass sales.

Aggressive promotions, particularly of private label, helped to bring bottled water back to the growth side of the ledger.

Perhaps capitalizing on their health benefits, sparkling/mineral waters, which account for 10.5% of supermarket sales, lifted the category with growth of 25.9% in the 52 weeks ending June 10. But convenience bottles of still water dominated the category with 71.9% of supermarket sales.

Bottled water may not approach its previous growth rates considering that during the recession, a segment of shoppers grew accustomed to tap water to save money. Moreover, the environmental issues associated with bottled water continue to trouble some consumers, also prompting switches to tap water.

Last year, Weis Markets, Sunbury, Pa., differentiated its product by switching to a new bottle made with 100% recycled PET plastic. The chain claimed to be the first in the nation to offer a bottle manufactured with recycled resin derived from baled post-consumer plastic purchased from municipal recycling plants.

Coffee

Though accounting for just 12.4% of supermarket coffee sales, single- cup coffee is by far the fastest-growing segment of the coffee category, jumping a remarkable 126.9% during the 52 weeks ending June 10. Those gains were the result of both the popularity of the segment and the proliferation of new flavors and brands, which will include private-label offerings from Safeway and Kroger beginning next month.

Overall supermarket coffee sales grew 17.1% to $4.1 billion — representing 85.4% of total food, drug and mass sales — during the previous 52 weeks ending June 10.

Consumers have grown accustomed to the convenience of single-cup coffee brewers, notably the Keurig single-cup brewers. But many are beginning to appreciate the premium paid for the single-cup coffee servings — the equivalent of about $80 per pound — which should help drive sales of the private-label products. Wal-Mart Stores is expected to come out with its own low-cost single-serve coffee brewer this year, which should help expand the single-cup market further.

Crackers

Cracker sales continue to benefit from their status as the go-to snack item served by families entertaining at home to cut costs during the sluggish economy. Supermarket sales of the category — which account for 90.9% of total food, drug and mass sales — rose 4.7% to $4.0 billion during the year ending June 10, 2012.

The biggest sales gains were experienced by crackers with fillings, a favorite grab-and-go snack, which grew 7.2% during the same 52-week period. Private-label sales of crackers have also been strong in recent years as a result of the economy.

Because crackers are generally baked, consumers perceive them as being healthier snacks. Cracker producers see significant growth potential for healthy snacks, such as those featuring whole grains, fiber, antioxidants and 100-calorie packaging as well as those that emphasize low sodium and low fat, according to an analysis by Tully & Holland. But the rise in commodity prices stemming from the widespread drought in the U.S. this year could impact prices of crackers, along with sales and margins.

Cookies, Soup, Bottled Juice

Cookies

Allergy concerns have prompted many schools to ban home-baked goods. This has created plenty of opportunity for packaged sweets like cookies.

Indeed, cookie dollar sales grew 3.7% to $4.3 billion in food, drug and mass outlets (excluding Wal-Mart) for the 52 weeks ending June 10, 2012.

Several iconic brands continue to excite consumers. On March 6, for instance, Oreo turned 100. Kraft says Oreo sales have topped $2 billion in annual revenues over the last century. The brand grew 25% in 2011 alone and has had average growth of more than 17% annually since 2006.

New Oreo flavors have been introduced to meet consumer flavor demands. Last year, triple double Oreo was launched. The cookies combine two layers of Oreo creme — one chocolate and one original — and three layers of Oreo cookies.

Kraft has added excitement to other brands as well. For instance, it introduced Chips Ahoy! Chewy Gooey cookies, soft cookies with a creamy center.

Soup

Soup sales have simmered.

Dollar sales slipped 0.6% in food, drug and mass channels (excluding Wal-Mart) for the 52 weeks ending June 10, 2012.

There are several reasons for the decline. For one, due to higher costs for ingredients and other materials, soup makers have raised prices. At the same time, some consumers moved away from soup in favor of other portable meal solutions.

But soup marketers are investing in innovation to appeal to today’s consumers. Campbell Soup Co. says it’s on a mission to “reinvent” its products for what it calls the New American Family — nontraditional, multi-generational, single-parent and multicultural.

The company will launch “Campbell’s Go! Soup,” a line of five or six microwavable pouch soups in exotic global flavors like Coconut Curry and Moroccan Chicken. The company will promote Campbell’s Go with meal solutions designed to appeal to younger consumers.

Bottled Juice

Bottled juice dollar sales slipped 3.5% in food, drug and mass outlets (excluding Wal-Mart) to $3.7 billion.

Grapefruit juice cocktail experienced the largest sales loss, declining 11% to $32.3 million in food stores for the 52 weeks ending June 10, 2012. Part of the drop could be due to reports that grapefruit juice can interfere with several kinds of prescription medications.

Certain chemicals that grapefruit products and citrus fruits contain can interfere with the enzymes that break down various medications in the digestive system. As a result, more medication stays in the  body. This can increase the potency of medication to potentially dangerous levels, causing serious side effects.

But it is not all bad news for bottled juice. Several categories showed tremendous growth. Juice smoothies experienced the largest sales increase, soaring 101% to $22 million in food stores for the 52 weeks ending June 10. Juice smoothies cater to consumers looking for an easy way to get a serving of fruit and vegetables.

Another up-and-coming category is aloe vera juice, whose sales soared 32% to $2.2 million in food stores for the 52 weeks ending June 10. Aloe vera juice appeals to health-conscious consumers due to reports that it can aid in weight loss, digestion and immune function.

Chocolate Candy, Snack Bars, Peanut Butter

Chocolate Candy

Consumers are sweet on chocolate.

Dollar sales rose 4% to $5.8 billion in food, drug and mass channels (excluding Wal-Mart) for the 52 weeks ending June 10, 2012.

All but one subcategory posted dollar sales gains. The only category to post a decline was sugar-free, which slipped 0.3% to $35.6 million in food stores.

Chocolate marketers continue to add excitement to the category with new products. Citing a survey showing nearly three in five women would love to savor their chocolate without guilt, Hershey introduced Hershey’s Simple Pleasures, made with 30% less fat compared to the average of the leading milk chocolates. They are available in three varieties: Milk Chocolate with Chocolate Creme, Dark Chocolate with Chocolate Creme, and Milk Chocolate with Vanilla Creme.

Hershey promotes the line as a way to give women more independence by relieving them of guilt associated with chocolate consumption.

Fans who also declare their “Sweet Independence” online at the Hershey’s Simple Pleasures chocolates Facebook page will receive a $1 coupon toward the purchase of the new product.

Another new brand is Hershey’s Air Delight aerated chocolates.

Meanwhile, the category continues to profit from reports of the health benefits of chocolate. Additionally, Nestlé has promoted a study showing that eating a moderate amount of dark chocolate every day can help reduce the hormones in your body that make you feel stressed.

Snack Bars/Granola Bars

Snack and nutrition bars are undergoing a sweet transition.

Catering to those looking for a healthy, yet dessert-like snack, manufacturers have introduced a variety of indulgent flavors.

This has helped bars appeal to different consumer sets, from women looking for a meal replacement, to fitness enthusiasts and those looking for a better-for-you dessert.

Balance Bar, for instance, offers cinnamon bun bars and S’Mores-flavored bars. Made with a layer of graham cracker topped with marshmallow filling and covered with milk chocolate coating, each S’Mores bar contains 14 grams of protein and 200 calories.

Just as sweet are Balance Bar’s new “Nimble” bars geared to women. Nimble is marketed as the first food bar sweetened with Truvia rebiana, a natural, zero-calorie sweetener. Containing 120 calories, the bars come in such flavors as Peanut Butter and Yogurt Orange Swirl.

Peanut Butter

Peanut butter dollar sales may be up in the double digits, but much of that is due to price increases.

Indeed, food store dollar sales were $1.1 billion, up a whopping 19% during the 52 weeks ending June 10, 2012. But unit sales for the same period slipped 4.1% to 322.3 million.

Prices soared due to a peanut butter shortage resulting from a poor peanut crop. Some farmers in the Southeast suffered from drought, and others moved their acreage to other crops.

The supply got so bad that some retailers rationed their peanut butter sales. The Food City in Bristol, Va., reportedly limited peanut butter purchases to two jars per customer.

The good news is that the supply is predicted to improve as Georgia farmers start allocating more land to peanut crops, and Argentina is expected to deliver a strong crop.

Meanwhile, manufacturers are adding excitement to the category with new introductions. Kraft Foods, for instance, has extended its 100-year-old Planters peanut brand to the peanut butter category.

What differentiates the Planters brand from others is that Kraft is targeting adults, who consume two-thirds of the $1.8 billion worth of peanut butter sold in the U.S. each year. Along with traditional Planters peanut butter, the company just launched Planters Nut-rition Energy Mix peanut butter. Containing wholesome ingredients like bananas, granola, cranberries, raisins and cinnamon, the peanut butter comes in three flavors: Banana Granola Nut, Berry Nut and Cinnamon Raisin Granola Nut.

Energy Drinks, Premixed Cocktails/Coolers

Energy Drinks

Energy drink sales are full of vigor. Dollar sales in food, drug and mass channels rose nearly 14% to $1.4 billion for the 52 weeks ending June 10, 2012.

What’s more, the market is poised for additional growth, according to research firm Mintel.

As of June 2012, some of the key energy drink consumers — African Americans, Hispanics and teens — continue to experience higher-than-average unemployment conditions. This suggests that the market should experience further growth by recapturing those still unemployed consumers once the employment situation improves, according to Mintel.

As the market becomes increasingly crowded, brands are looking to differentiate themselves. One way they are doing so is with a natural positioning. Nestlé’s Jamba All Natural Energy Drinks, for instance, contain 7% fruit juice, 80 milligrams of caffeine, 90 calories and 20 grams of sugar in an 8.4-ounce can. It comes in three flavors: crisp apple, strawberry banana and blueberry pomegranate.

Premixed Cocktails/Coolers

The beverage alcohol category got a jumpstart from a host of premixed cocktails catering largely to women. Dollar sales soared 27% in food, drug and mass channels to $295.9 million for the 52 weeks ending June 10, 2012.

 The category has been propelled by the success of the Skinnygirl brand, which has grown from one item — a premixed margarita — to a full line of ready-to-serve, lower-calorie cocktails, including a cosmo, pina colada and sangria.

Liquor shelves are also home to a variety of other convenient premixed items, like Smirnoff’s grand cosmopolitan, vodka mojito and pomegranate martini; Malibu rum punch; and Jack Daniel’s Lynchburg Lemonade.

And the convenience trend doesn’t stop there. As if a premixed margarita wasn’t easy enough, Big Easy Blends has taken it to the next level with its Cordina Mar-Go-Rita and Dai-Go-Ri, ready-to-drink frozen cocktails that come in single-serve pouches that can be frozen and taken on-the go.

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