The Shrinking Pie That Is Food Sales

Food store sales have only been able to keep up with the inflation rate for food-at-home since the third quarter of 2011, according to THE FOOD INSTITUTE’s quarterly review of food sales at-home and away-from-home, and retail food price trends.

Food store sales have only been able to keep up with the inflation rate for food-at-home since the third quarter of 2011, according to THE FOOD INSTITUTE’s quarterly review of food sales at-home and away-from-home, and retail food price trends.

It is interesting to note that in two recent periods of declining food inflation, retail food stores have had a difficult time outpacing the inflation rate even though during this latest round of declining inflation retailers have done better than during the so-called “Great Recession,” when sales growth was running about two full percentage points under the inflation rate.

Apparently, retailers learned something during that time that has helped them during the past 12 months. On the other hand, during the period of rapidly rising prices in 2010, retail food store sales gains expanded and in the first half of 2011 even outpaced eating out sales gains.

For the most part, however, eating out sales have fared better than food stores since the beginning of 2012, peaking with a 9.9% gain in the first quarter of this year, but still up a strong 5.8% in the most recent quarter and up 7.7% through the first nine months of 2012 on a cumulative basis.

WHERE ARE FOOD SALES GOING?

Food & beverage store sales rose a meager 1.2% in September versus a year ago to nearly $52 billion – lower than the inflation rate for retail food, according to THE FOOD INSTITUTE analysis. That has been the trend for five of the past nine months, meaning that less physical volume is moved through all food & beverage stores. There, sales through the first three quarters were up just 3.6%. For supermarkets alone, which account for roughly 85% of all food and beverage stores, sales are up even less, at 3.2% through Sept. 1 – exactly the same as the inflation rate, indicating no change in overall physical volume. (Note: Supermarket data lags one month behind totals.)

Beer, wine and liquor store sales have outpaced grocery stores and supermarkets, rising 4.6% during the eight months ended Sept. 1.

The latest CENSUS BUREAU sales data for August marked the second consecutive month sales at the nation’s supercenters and warehouse clubs fell from year-ago levels, and the fourth monthly decline thus far this year. Through the first eight months of 2012, sales were up just 1.4%, below the overall all item inflation rate (the Consumer Price Index) of 2.1% during the same period.

Not long ago, these outlets were posting consistent double-digit sales gains over the prior year. The Food Institute estimates that in prior years about 52.5% of sales at these retailers have come from food sales. Today, sales total about $134 billion through Sept. 1. Perhaps the increased focus on food at supercenters such as WALMART and TARGET, has meant consumer’s shopping carts have been filled more with lower priced food products than higher priced hard- and soft-line items, reducing overall dollar sales at supercenters. Could it be that even more food than thought is going through these outlets?

CITI RESEARCH estimates that Walmart holds a 20.4% share of the grocery market, Target 3.4%, COSTCO 4.6%, and SAM’S CLUB 4.0% — about $265 billion annually, combined.

Other alternative retailers, such as drug stores and dollar stores are selling more food but comparatively small amounts. Drug store food sales are estimated by The Food Institute at about $1.5 billion a month and dollar store food sales at the leading players, DOLLAR GENERAL and FAMILY DOLLAR, are estimated by CITI at about $600 million a month, although growing rapidly along with the number of dollar stores.
Table EDP

Sales growth at the nation’s eating and drinking places is outpacing overall food inflation but food costs are only a portion of this channel’s overall revenue. Through the first three quarters of 2012, sales neared $400 billion, up 7.7% from a year ago, although that growth slowed to about 4.9% in September.

Full-service sales growth, estimated by The Food Institute, continues to outpace limited service sales. As noted here previously, patrons seem to be splurging on full service restaurants more often than a year ago, but not in a manner that accounts for the overall slowdown in supermarket sales growth.