Fresh foods flourish as grocery shoppers continue to shift spending 2023-07-29

Data from food industry research firms showed sales growth across nearly every department at supermarkets in the United States in the past year. Yet most fresh-food categories benefited from inflated prices while struggling to increase unit sales volume, even nominal highfliers like dairy and bakery, according to data from NIQ and Circana.

Looking closer at the year-over-year sales numbers, dairy climbed 15.5% to $95.6 billion (52 weeks through May 2023), with the bakery also reporting double-digit growth (14.5% to
$19.7 billion). 

All other fresh categories generated sales gains for the year, including meat ( 4.7% to $90.3 billion), produce ( 5.2% to $80 billion), and deli ( 8.5% to $50.1 billion), while seafood sales was the only reported decline (falling 1.1% to $7.3 billion). Within the produce category, dollar sales of vegetables rose 7.5% to $38.5 billion, while dollar sales of fruits grew 2.9% to $38.9 billion.

But year-over-year unit sales were down for all fresh products except fruit ( 0.5%), meat ( 0.7%), fresh meat ( 1.3%), and bakery ( 0.8%). 

The top gainers by sales dollars this year contain multiple items that fall into the prepared food options, which have been steadily growing in demand lately. Outside the prepared foods trend, turkey was second on this list with 88.4% in dollar sales gains to $125.4 million and 50.5% in unit sales growth. 

Softshell tortillas showed dollar sales growth of 52.2% to $88.6 million (including 28.1% unit sales growth). Multi-serve pizzas grew 38.7% to $749.4 million in sales, up 43.1% in unit sales growth. Latino sweet goods followed suit with 40.5% dollar sales growth to $95 million and 29% unit sales growth. Lastly, mini doughnuts took some share with 36.4% sales growth to $284.1 million and 8.6% unit sales growth. 

Also notable in dollar sales gains were lunch combos (up 47.3%), doughnut party platters (up 46.6%), and lunch meat party platters (up 42.8%).

This year’s top sales decliners tell their own story. Olives showed the biggest decline in sales dollars at -45.9% with a similar -46.6% in lower unit sales. Pastry crusts and shells declined in dollar sales at -32.9% and a -52.4% decline in unit sales, perhaps pointing to the rise of consumers starting to treat themselves with small indulgences (and baking less at home).

Meat alternatives saw a big year-over-year dollar sales decline at -28.2%, dipping to $151.96 million in sales, with a -27.9% decline in unit sales. While the fresh meat department is making a comeback, it seems that meat alternatives are in less demand. 

Also, notable declines are vegetable party platters (-15.6%), scallops (-17.8%), and bagels and spreads (-15.3%).

Ninety-five percent of shoppers are concerned about food-cost inflation, which is 2% higher than it was in February and 1% higher than in March, according to a Circana Shopper Survey for four weeks in April. 

“We, in produce, have the blessing of size variety,” said Jonna Parker, principal, Fresh Foods Team Lead at Circana, at a recent conference hosted by the International Fresh Produce Association. She also reported at that time that prices were up 11.3% across all food at retail, including fresh, according to year-to-date 2023 Circana data. “Convenience and quality are still driving sales, as the deli and bakery are driving growth,” she said. 

While inflation was the overarching concern for grocery shoppers last year, prices are continuing to stabilize, leaving extra wiggle room for consumers to spend their hard-earned dollars. While they are planning on traveling a little bit more than in the summer of 2022, they are certainly still feeling the pinch. 

“This means fewer/shorter trips and staycations — both opportunities for grocery retailers to create memorable moments at home,” said Parker via the May marketplace report for the International Dairy Deli Bakery Association (IDDBA). 

The report also documented the continued economic pressure on incomes and how that pressure is subsequently affecting grocery shopping habits. According to the report, over eight in 10 shoppers are applying one or more money-saving measures when buying groceries, resulting in shifting dollars around — between retail and foodservice, and channels, products, and brands. 

As such, many consumers are mixing items prepared from scratch with items that are semi- or fully prepared. Heather Prach, vice president of education for the IDDBA, suggests grocers leverage cross-merchandising stations that can help deliver that extra item in the basket.  

“Retailers have been successful in displaying product in the same case, but also by leveraging signage and coupons instead of moving physical products in the light of labor constraint,” said Prach in the marketplace report.

In May, dairy sales continued to pace well ahead of year-ago levels, according to the IDDBA marketplace report from that month, and unit sales also remained steady. The marketplace report also indicates that only a handful of dairy
categories accomplished unit growth in May 2023 vs. May 2022. Those include natural cheese, butter, cream cheese, whipped toppings, cottage cheese (which, in particular, experienced strong demand), and cheese snack kits. 

“Deli-prepared foods were not only the biggest seller in the deli department, but also had a strong year-on-year growth performance,” Parker said in the IDDBA report.