7th annual food and beverage consumables study - sept. 2019

7th Annual Food and Beverage Consumables Study - Sept. 2019

7TH ANNUAL FOOD AND BEVERAGE CONSUMABLES STUDY - SEPT. 2019 1

Executive Summary TABS Analytics has conducted a comprehensive survey on the purchase trends for food and beverage categories every year since 2013. TABS examines categories purchased, frequency of purchase, outlets where purchases are made, the deal tactics used and trends impacting consumer preferences.

Key Findings • Online Grocery Loyalty Grows, But Success is Costly – E-Commerce grocery

purchases nearly doubled in the past year, with 66 percent of consumers noting their loyalty to shopping online. However, the greater demand is revealing significant structural problems – low margins and unpredictable shipping and fulfillment costs – that will impact the profitability and sustainability of the business model.

• Organic Heads Toward Mainstream – Organic purchasing saw noteworthy gains in the past year. If this trajectory can be maintained over the next few years, organic may attain greater prominence in product mixes.

• Brick and Mortar Stores Continues to Dominate – Even though over half of consumers report shopping for groceries online – primarily at Amazon, Walmart and Target – brick and mortar grocery still accounts for 92 percent of transactions, with 99 percent of adults purchasing at these stores regularly. Though dropping year-over-year, traditional grocery maintains the highest share, followed by Walmart, dollar stores and Target. Dollar stores saw a more than 2 percentage point growth in share since 2018.

• Deals Remain Popular, But Tactics Change – Promotional engagement overall was flat compared to last year, but there was a big shift in the tactics. Use of circulars and free-standing inserts waned with declining newspaper readership, while two passive deal tactics – purchasing of private label brands and bonus packs – gained traction.

• Top Categories Hit Saturation Point – Some of the most frequently purchased categories, including cereal and yogurt, saw declines, indicating that these products have hit a saturation point. Water is the only mega-category that continues to experience sustained growth, while some of the biggest gains were in the least frequently purchased categories, such as novelties and popcorn.

• Households with Kids the Remain Most Lucrative Demographic – This group is 50 percent more likely to be a heavy grocery purchaser. 41% of Households with Kids (35% of respondents) are Heavy Grocery Buyers as compared to only 27% of Households without Kids being Heavy Grocery Buyers.


Methodology For the seventh consecutive year, TABS Analytics conducted a survey of 1,000 individuals age 18 or older in the U.S., with responses weighted by age and gender to the national census. A change in survey vendor resulted in a “step function” of results, which may cause the trend to appear more extreme than it is reality. The survey enabled TABS Analytics to gain insights into:

• Food and beverage categories purchased. 15 categories accounting for 20 percent of CPG retail dollar sales, including major snacking categories like candy, carbonated beverages, cereal, cookies, crackers, frozen pizza, ice cream, juice (refrigerated), juice (shelf), frozen novelties, popcorn, salty snacks, sports drinks, water and yogurt.

• Frequency of purchase. As defined in the following table when referring to heavy buyers, very heavy buyers and heavy deal users:

• Types of deal tactics used. Tactics examined include active deals (shoppers visiting multiple stores to get the best deals, circular, shopper loyalty cards, online coupons, free standing inserts (FSI), rebates) and passive deals (every-day low price (EDLP), private label (PVL), large size, bonus packs).

• Outlets where consumables are purchased regularly. Traditional grocery, Walmart, Target, dollar store, chain drug (CVS, Walgreens, Rite-Aid), online, value grocery, Costco, Sam’s, convenience store, Trader Joe’s, BJs and Whole Foods.

TABS Analytics tests and checks results for internal data validity against external industry corroboration, (correlating data to purchase frequency by category). It is important to note that “share of mentions” is a proxy for “share of trips” or “store transactions.”


Online Grocery Loyalty Grows, But Success is Costly E-Commerce grocery purchases nearly doubled in the past year. Now more than half (56 percent) indicate that they make at least one grocery purchase online, with 66 percent of consumers noting their loyalty to shopping through this channel. This growth is the first encouraging sign that online grocery retailers are solving the demand problem TABS Analytics has been talking about for the past five or six years. This channel is now approaching the minimum success threshold of 75 percent loyalty (see chart below).


Amazon, Walmart.com and Target.com remain at the top of online grocery by a large percentage, with all continuing to see meaningful year-over-year gains. But, the greater demand is revealing significant structural problems – low margins and unpredictable shipping and fulfillment costs – that will impact the profitability and sustainability of the business model. It’s possible that online grocery could become a victim of its own success, as more sales lead to greater losses because of the variable supply chain costs. While the big three E-Commerce giants may be able to offset these losses by also selling higher-margin products – like jewelry and big-ticket baby gear – online offerings by traditional grocery banners and pure play online grocery look to be a hopeless endeavor. Traditional grocery banners saw a small increase, but still trail significantly behind the big three. Online-only grocers continue to struggle with a very small share and are starting to crack under the pressure. Jet.com is going out of business, while some of the pioneers like Peapod, continue to lose money because they cannot achieve the necessary scale.


Organic Heads Toward Mainstream

Organic purchasing saw noteworthy gains in the past year, growing to 17 percent after a drop in 2018. While organic still represents a very small portion of overall purchases, should this trajectory be maintained over the next few years, it could become more of a conventional offering and feature more prominently in product mixes. The growth in organics and heavy online purchasing overall, shown below, reveal how previously niche markets associated with millennial purchasing patterns are impacting areas in which that demographic has a strong presence. E-Commerce grocery and a preference for organics are moving closer to mainstream as millennials enter new stages of life: getting married, having kids and enjoying greater income – all factors in heavier purchasing patterns.


Brick and Mortar Stores Continues to Dominate Even though over half of consumers report shopping for groceries online at least once, brick and mortar grocery still accounts for 92 percent of transactions, with 99 percent of adults purchasing at these stores regularly. Traditional grocery maintains the highest share at 15.4 percent, despite its share dropping by a few points annually for the last four years. While the downslide can be attributed to some of the large national retailers, like Albertsons and Kroger, many smaller, regional chains, including Publix and Wegmans, are seeing increases in share. Walmart and Target saw slight declines in 2019, but still rank as the second- and fourth-most frequented outlets, respectively. Dollar stores bucked the downward trend of other retailers, posting more than 2 percentage point growth in share since 2018. Published reports corroborate TABS Analytics’ results, noting both same-store sales growth and the addition of new stores to capitalize on consumer demand.


Deals Remain Popular, But Tactics Change

While promotional engagement overall was flat compared to last year, there was a big shift in the tactics used. With the decline in newspaper readership, active deal tactics, such as the use of circulars and free-standing inserts (FSI) experienced sharp drops of 11 and 13 percentage points, respectively. Shopping at various stores for deals still remains popular, growing 6 percentage points year-over-year. Consumers are now more inclined to take advantage of passive deal tactics, including purchasing of private label (PVL) products and bonus packs, both of which saw 4 percentage point gains in the last year. Every-day low prices (EDLP) remain the most popular deal tactic but were flat compared to 2018.


Use of deals by light (two or fewer deal tactics) and medium (three to five deal tactics) users continues to grow, reaching about 40 percent in 2019. TABS Analytics saw a sharp drop in the most dedicated segment – heavy deal users, who rely on six or more of those tactics.

Overall, the more deals a consumer uses, the more products they’re likely to purchase. However, in 2019, TABS Analytics saw a huge spike in the purchasing activity by lighter deal users.


Top Categories Hit Saturation Point

Water was the only top-tier category that is experiencing sustained growth. Some of the most frequently purchased categories – including cereal and yogurt – saw declines, indicating that these products have hit a saturation point.


Some of the most impressive gains were in the least frequently purchased (tier 3) categories – frozen pizza, novelties, bagged candy, popcorn and sports drinks – which are outperforming both tiers 1 and 2.

Households with Kids Remain the Most Lucrative Demographic Households with kids are 50 percent more likely to be a heavy grocery purchaser than households without kids. Only 35 percent of households have kids, but 41 percent of households in this group are heavy buyers, versus 27 percent of households without kids.


Conclusions

• Despite the explosive growth in E-Commerce grocery, the problems seem to be growing. Even though the Big 3 – Amazon, Walmart and Target – seem to have solved the demand problem, there is the structural problem with supply chain and margin that will cause this model to remain unprofitable. E-Commerce is a low-margin, variable cost model in which more sales lead to greater losses.

• As the Millennials move into a new stage of life, they appear to be bringing their habits with them, moving niche opportunities – such as online and organics – closer to the mainstream.

• Deal activity is still important to consumers, but the mix is changing. Deal engagement habits are consolidating due to the declining in newspaper readership, with free standing inserts and circulars dropping significantly. Deals drive incremental sales, particularly for heavy buyers. But it is not clear whether reduction of heavy deal users reflect changing outlet patterns or may be a cause of it. Circulars and free standing inserts may have been a hook for many to shop at traditional grocers.

• Brick and mortar grocery still dominates with 92 percent of transactions and 99 percent of adults purchasing at these stores regularly.

• Outlet gains conform to public information: Dollar store and E-Commerce are outpacing the market, and Walmart brick and mortar stores are showing solid gains.

• Regional grocers such as Publix, HEB and Wegmans, still seem to be doing well, which leads TABS Analytics to attribute troubles at brick and mortar grocery to the national chains, like Albertsons and Kroger, as well as small market grocers.

The Experts in Consumer Analytics® Tabs Analytics, founded by Dr. Kurt Jetta in 1998, is a technology-enabled analytics firm servicing the consumer products industry. Our mission is to simplify and improve the way analytics is conducted through analytical innovation, which translates into a competitive advantage for our clients. TABS is the leading outsourced sales and marketing analytics firm in the consumer-packaged goods (CPG) industry. For more information about TABS Analytics services or this white paper, please contact Robert Baldwin at [email protected].

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7th annual food and beverage consumables study - sept. 2019

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