Fresh foods hang tough as shoppers search for savings

Price inflation has been the overarching factor for grocery shoppers in recent months, and the case has been no different in fresh food departments.

In its June marketplace report, the International Dairy Deli Bakery Association (IDDBA) cited an IRI survey finding that 96% of consumers say they are paying somewhat or a lot more for groceries than they did last year. What’s more, respondents listed examples of increased prices across nearly every store department.

“A number of deli, dairy and bakery categories are among the most frequently mentioned items when shoppers reflect on inflation,” Jonna Parker, team lead for fresh at IRI, said in the IDDBA report. “Bakery and dairy have a very high trip frequency, making consumers ultra-aware of the price increases.”

In June, total sales for perishables climbed 6.8% to $25.8 billion, with above-average increases for refrigerated including dairy ( 14.8% year over year to $6 billion), bakery ( 9.3% to $3.1 billion) and deli ( 7.2% to $3.4 billion), IDDBA reported, citing IRI U.S. multi-outlet data. Other fresh categories generating gains for the month were meat ( 5.7% to $6.7 billion) and produce ( 1.4% to $6.1 billion), while seafood sales fell 13.3% to $502 million.

Year-over-year unit sales were down across the board for June, with seafood (-21.8%) as the only fresh category seeing a double-digit decline. That was followed by produce (-6%), deli (-4.7%), meat (-4.1%), bakery (-3.4%) and refrigerated including dairy (-2.5%). Overall perishables unit sales dipped 4.5% in June versus a year earlier.

Compared with the pre-pandemic period, the largest gain by dollar sales in June came from refrigerated including dairy, up 29.2% from June 2019. All fresh departments experienced double-digit dollar sales growth over that time span, including meat ( 24.6%), bakery ( 22.3%), deli ( 21.2%), produce ( 17.6%) and seafood ( 15.4%), with total perishables showing 23% growth.

Still, just two departments — produce ( 2.7%) and deli ( 2.6%) — recorded unit sales gains in June 2022 versus June 2019. Overall perishables unit sales in that time frame inched up 0.1%, but decreases included bakery (-5.2%), seafood (-4.7%), meat (-0.6%) and refrigerated with dairy (-0.5%).

In its May market report, the latest available at presstime, the International Fresh Produce Association (IFPA) highlighted the impact of price changes in the produce department.

Price per pound for fresh produce overall stood at $1.85 through May, up 9.6% from a year earlier and up 19.6% from two years ago. Fresh fruit’s price per pound came in at $1.69 for May ( 10.5% from 2021 and 24.4% from 2020), while fresh vegetables per-pound price was $2.01 ( 8.5% from 2021 and 14.9% from 2020).

“The average price per pound across fruits and vegetables was $1.85, actually down 4 cents from April,” Joe Watson, vice president of retail, foodservice and wholesale for IFPA, observed in the association’s May report. “While high, we are at least seeing more price stability month-over-month. Yet the continued high level of inflation is and has been impacting volume sales and net dollars across the store.”

Fresh produce pricing was $1.75 per pound over the 52 weeks through May ( 7.8% from 2021), reflecting prices per pound of $1.62 for fresh fruit ( 10.7%) and $1.85 for fresh vegetables ( 5.1%).

“Compared with the fall of 2021, inflation is higher, more people are making changes and the supply chain challenges from labels to packaging to transportation and labor continue to be significant,” Watson noted. “The consumer reactions combined with supply-side volatility are creating an environment of continued change and uncertainty.”

Customers are hunting for savings in fresh foods but not always finding it. IDDBA’s June report said, according to IRI research, 59% of consumers are seeing fewer of the items they want are on sale, and 43% said items aren’t discounted as much as they used to be. About half of shoppers, 51%, are stocking up on certain items more than usual, 18% out of fear they won’t be available next time and 26% out of concern that prices may rise further.

“All this points to great power of relevant, targeted promotions if supply chain conditions allow for it,” explained Heather Prach, director of education for IDDBA. “It could be a cross-promotion, happy-hour sale, one-day or three-day promotion, but try to keep relevant promotions front and center to retain a greater share of primary shoppers instead of them cherry-picking competitors’ deals and losing a vital part of the total store basket.”

In terms of growth opportunities, fresh departments can tap into the rebounded food-away-from-home trend, IRI’s Parker noted. “Restaurant takeout and delivery open the door for retail deli, dairy and bakery departments to sell appetizers, sides, beverages or desserts,” she said in the IDDBA report.

And grocery stores mustn’t overlook the online channel in driving fresh sales. “Online trips have been very stable, at around 13% of total trips, and making sure deli, dairy and bakery get an equal share of online basket penetration versus their in-person share is still an area of growth,” Parker said.