Forecast calls for 5.5% food and beverage sales gains in 2023

TOP TAKEAWAYS

Food and beverage dollar sales growth will moderate in 2023 as inflation eases and prices stabilize, according to a new report from IRI.

The Impact of Inflation on Consumer Behavior report predicts a 5.5% increase in food and beverage dollar sales through all channels for the full year, while unit volumes will decline by 2% as consumers will continue to shun some discretionary purchases. The growth in dollar sales is lower than the inflation-driven 8.7% growth in 2022, but higher than the historical baseline of 2%-3% annual growth.

Although sales of premium products have been softening, IRI said consumers continue to spend on premium products in some categories, including sports drinks, canned/bottled fruit and non-chocolate candy. Dollar market share for premium-tier sports drinks was up 2.3% in the 13-week period that ended Jan. 1, for example, while premium canned/bottled fruit was up 2% and premium non-chocolate candy was up 1.5%.

Switch to private label

Among the most common ways consumers are seeking to economize on the grocery shopping is to switch to private labels, according to the report. Categories that saw a strong shift toward private label in the fourth quarter, in terms of dollar market share gains, included:

• Deli prepared meats, up 11.8%

• Deli Spreads, up 8.7%

• Perimeter cookies, up 7.9%

• Shelf-stable meat, up 5.1%

• Sugar, up 5%

• Shelf-stable coffee creamer, up 5%

• Frozen juices, up 4.4%

• Refrigerated whipped toppings, up 3.8%

• Cottage cheese, up 3.8%

• Bottled water, up 3.4%

Perimeter prices decelerate

The report also noted the disparity in inflation trends between the perimeter fresh departments and the center store categories. Price inflation in perimeter departments declined steadily in 2022, from 11.4% in the first quarter to 7.5% in the fourth, as prices lapped the surge that occurred in Q4 2021.

In center store, price inflation went in the opposite direction, growing from 9.4% in Q1 of 2022 to 15.3% in Q4.

The report found that perimeter departments also gained in unit volume sales in the second half of 2022 in many categories, relative to the first half. Pork, beef, and chicken all saw volume growth in the second half, as did some other fresh categories such certain types of fruits and vegetables and fresh shellfish.

Grocery perimeter departments also saw higher volume lifts from promotions in 2022, relative to 2021, while center store volume lifts were basically flat. Promotional levels on a broad range of categories were up significantly in Q4 of 2022 relative top Q4 2021, but most were still well below pre-pandemic levels, the report found.

Although only a handful of food retailers have reported year-end earnings for 2022, those that have, such as Walmart, SpartanNash and Loblaw, have reported similar trends, with inflation expected to persist and unit volumes remaining under pressure in 2023