Grocery's Top Performers Reflect New Work-From-Home Realities

Americans’ changed models of work, with many previous office-goers shifting to hybrid or entirely work-from-home schedules, also mean changed grocery-buying behaviors. And against the headwinds of retail inflation and renewed concerns about the trajectory of the COVID-19 pandemic, the best-performing grocery products and categories will be those that recognize and adapt to this shift, according to market research firm IRI.

In a June survey of U.S. consumers, 46% said they expected to work from home at least one day a week in the coming month, with 30% expecting to work from home five days a week, IRI EVP Sally Lyons Wyatt said in a recent presentation on center-store trends. Unsurprisingly, then, with office coffee machines still not getting the workout they once did and consumers still without vending-machine access for an afternoon energy drink, grocery stores' beverage aisles continue to generate booming sales.

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Beverages, in fact, were one of just a few center-store product categories this spring to post higher dollar sales vs. the tough-to-beat year-ago period, with sales up 7.8% year over year and up 15.4% vs. spring 2019. (Energy drinks alone have seen dollar sales rise 17.5% vs. a year ago and 20.7% vs. two years ago.) Moreover, beverages and other products with label claims of "contains caffeine" or "caffeine added" have surged vs. 2020 and 2019, Lyons Wyatt noted. Other strong beverage performers include liquid beverage mix-ins and sports drinks.

Consumers' altered working lives offer CPG brands and retailers opportunities to creatively meet consumers' changed needs, with expanded (and value-oriented) product pack sizes; seasonal, LTO and out-of-the-ordinary beverage and salty snack flavors; and smart bundle promotions (popcorn and soda, coffee and baked goods, energy drink and meat snacks, etc.) providing the chance to build brand loyalty as they keep an eye on rising food prices.

And while salty snacks (dollar sales up 2.5% year over year, 13.1% vs. 2019) and caffeine-boosted beverages have seen especially strong sales growth in the past year, significant opportunity remains with more-substantial meal-builders, Lyons Wyatt said. More time spent working at home doesn't necessarily mean more time for meal prep, so while eating-at-home occasions remain elevated vs. the pre-pandemic period two years ago, consumers still are on the lookout for convenient meal solutions that fit into their still-busy lives. For retailers, providing complete-meal ideas (in-store and online) and options that let consumers build a meal with a from-scratch center-plate dish plus, for example, prepared sides can build both basket size and customer loyalty, she noted. 

"When they're home, they are still cooking," she said. In 2019, 40% of consumers prepared a large majority (at least 80%) of their meals at home, according to IRI research. In June 2020, that share rose to 70%. As of June 2021, it had declined—but only moderately—to 61%. 

More pressure-cooker and slow-cooker-ready meals, especially heading into fall and back-t0-school season, can help value-conscious, convenience-seeking consumers get dinner for their household on the table. And convenient, on-the-go breakfast and lunch options (especially those that feature reusable/recyclable packaging) will hold appeal for those working away from home at least part of the week and for families with kids heading back to school in person.

Should new COVID-19 mitigation measures—operating hours/capacity restrictions, remote learning, etc.—be put in place later this summer or fall in areas struggling with surges of the disease, consumers likely will shift more of their food spend back to grocery stores, reversing the trend of this spring and summer. But recognizing the rising prices they're seeing at retail, they may be more attuned to justifying and being more deliberate about their grocery choices, Lyons Wyatt suggested. For consumers who can afford it, premium coffee and favorite seasonal nondairy creamers may stay in the basket, but other product categories may see a shift in favor of private vs. national brands (which outperformed private labels in 2020). 

One other trend likely to stick? At-home social occasions. Where friends and family feel comfortable gathering (e.g., smaller groups of close friends where everyone's vaccination status is known), at-home social occasions remain a less-expensive alternative to restaurant or bar outings, and grocery retailers that offer ways to make these smaller get-togethers feel appropriately celebratory can drive more-consistent visits heading into the fall and winter holidays and higher spend.