Grocery Sales Improving Versus 2013 But Still Face Stiff Competition

March 27, 2014

The Food Institute reports that after starting 2014 with a strong 4.3% increase in sales, grocery stores posted only a 2.5% gain in February. Nonetheless, for the first two months of 2014 grocery stores rang up $94.8 billion in sales according to government data 3.4% more than the same two months in 2013. That’s a significantly larger gain than the meager 2.1% rise in the first two months of 2013 however.

Intense winter weather in January certainly contributed to that increase as customers stocked up on food and non-food supplies. Apparently that surge did not carry into February though. 

Looking ahead, grocers may benefit from increased food inflation this year after not being able to count on any significant inflation related growth in sales last year. Beef and pork prices are both poised to climb in the wake of anticipated tighter supplies. Indeed fresh meat prices are now over $5 a pound at retail, and pork has climbed strongly as well.

Continued competition from so-called alternative retailers continues to impact the grocery industry. In the first look at 2014 for the sector, January sales at warehouse club and supercenter sales moved 3.2% higher, with the Food Institute estimating some $17.0 billion in food sales. Drug stores and pharmacies did slightly better with sales overall up 3.6%, and ringing up an estimated $1.7 billion in food sales. 

Somewhat surprising is the small 1.5% increase in e-shopping and mail order sales during the month. Perhaps consumers were “shopped out” however due to the strong showing e-retailers had in 2013. Food sales still account for only a small portion of overall e-sales, however, about $418 million based on Food Institute estimates but growing.

To find out more about the potential in this arena, see the The Food Institute’s recent webinar about the future shock of online shopping, which is available on The Food Institute website.

While not strong, at least sales have been consistent thus far this year at eating and drinking places. For both January and February sales were up 2.5% from 2013 and totaled $86.3 billion for the cumulative period.

Growth at full-service units is outpacing that at limited service, however, the latter was up only a bit over 2% and full service was up a about 4.5% based on FOOD INSTITUTE estimates. 

Competition remains intense among quick service providers and with TACO BELL adding breakfast offerings this month, it will be interesting to determine whether they will add more sales to the industry overall, or simply take sales from the competition, including MCDONALD’S, which is looking at extending its breakfast offerings beyond the morning hours.

For more regular update the food industry, see The Food Institute website at www.foodinstitute.com.

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