CHICAGO -- Growth in food and beverage industry value sales (sales through multi-outlets, including the convenience channel) has slowed from 5% in 2011 to 4.1% in 2012 year to date. This figure is representative of slower or negative growth pervasive in the food and beverage market that will continue for the remainder of 2012. A new Symphony Consulting Executive Briefing, "The U.S. Food & Beverage Market: YTD 2012 Trends & Outlook," reports on and analyzes trends in specific food and beverage product categories and channels, as well as highlights shopper sentiments.
"Our comprehensive review of food and beverage trends for 2012 points to limited growth, with weak growth prospects for the remainder of the year," said Krishnakumar S. Davey, managing director of Symphony Consulting. "Shoppers are still making conservative and deliberate purchase decisions and are reluctant to open their wallets. With this in mind, manufacturer and retail decision makers must uncover select, high-growth categories, and target products and offers to very specific shopper groups."
Smaller food and beverage manufacturers (defined as companies with revenues under $1 billion) have demonstrated outsized growth in 2012. Value sales growth in 2012 YTD has increased an average of 7.9% versus one year ago, as compared to 3% for medium-sized businesses (revenues $1-5 billion) and 1.3% for large enterprises (revenues over $5 billion). Volume sales among small manufacturers have also outpaced competitors: 3.6% growth for small manufacturers versus 0.5% and 3.3% declines for medium and large manufacturers, respectively. Small manufacturers have discovered and successfully penetrated specific market niches, such as Greek yogurt within the yogurt category and single-cup coffee within the coffee category.
Medium and large manufacturers have enjoyed success in the alcoholic beverage and energy drink categories primarily. Anheuser Busch, for example, enjoyed value sales growth of 5.5% versus the large manufacturer average of 1.3%. Monster Beverage Group posted an astounding 27% value sales growth rate, versus the medium-sized manufacturer 3% average. Growth in these segments typically were due to very small price increases or price declines.
Among staple products, such as milk, fresh bread and rolls, growth continues to be slow as shoppers react to continuously increasing prices by cutting back. Value sales of staples versus one year ago grew just 1.6% as compared to 4.8% for non-staples. Estimated volume sales have declined 2.5% in staple products versus growth of 0.2% for non-staples.
Contributing to weaker staples sales is the potential shift to new-age healthy snacks. Shoppers are increasingly avoiding traditional big meals and replacing them with more frequent, smaller meals comprising portion-controlled healthy products. Many healthy and relatively portable products, such as snack/granola bars, energy drinks and spreads (e.g., hummus), have witnessed volume gains in 2012.
However, not all non-staples are alike. While the category has grown on average, several areas of non-staples have fared poorly. Ready-to-eat meals, such as frozen dinners, frozen pizza and soup, saw value sales increases of just 0.3% in 2012 versus one year ago as compared to a non-staples category average of 4.8%. Shelf-stable cooking ingredients (e.g., shelf-stable seafood and canned/bottled fruit) and breakfast foods (such as frozen breakfast food and pancake mixes) have exhibited similar weak performance.
The briefing said that shoppers continue to define value based largely on price, highlighting, for example, that 78% of shoppers state they will continue to seek deals in the future, and 56% are choosing stores based on lower prices offered.
Shoppers are opting to make more trips and purchase fewer items per trip to spread out the impact on their wallets, avoiding pantry-stocking trips that hit their wallets at once. In multi-outlets, shopping trips per buyer have grown 0.8% versus one year ago, while units per trip have declined 2.1% over the same period.
In addition, shoppers are increasing the number of stores at which they make purchases to lock in lower prices. Grocery and drug channels suffered from reduced trips per buyer (0.2% and 0.6% declines, respectively) while mass merchandisers excluding Walmart enjoyed 4.4% growth and dollar stores trips per buyer grew 7.2%.
Shoppers are rediscovering Walmart, which has reversed the trend of losing shoppers to other channels thus far in 2012. Walmart trips per buyer in 2009-2011 withered, with a CAGR of -1%, while rebounding 2012 YTD with growth of 3.2% over one year ago.
Citing continued rising prices due to this year's drought and ongoing wariness to spend among shoppers, the briefing offers several potential growth strategies. Manufacturers must focus on investing in key areas of growth, developing a strong portfolio of potentially popular products, such as new-age snacks, and health and wellness-focused items. These must be offered at attractive price points to achieve sustained short- and long-term growth. Targeting fast-growing shopper segments, such as GenY and older Baby Boomers is also a critical strategy for success.
Symphony Consulting is a business group of SymphonyIRI Group Inc., Chicago.
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