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Last year was indeed challenging. At its beginning, few suspected the economic boom would peter out, and certainly no one imagined we would be at war at its end. The events of Sept. 11 made everyone feel less safe, the weakening economy made jobs less secure, and the faltering stock market made shareholders feel poorer.
But the traditional supermarket industry was already in a struggle, one that will continue and intensify, and which was punctuated by the fact that Wal-Mart Stores, Inc. opened its 1,000th supercenter during 2001.
It could be argued that the industry is witnessing a paradigm shift as seminal as the introduction of self-service in the Twenties, the rise of chain stores in the Thirties, and the proliferation of supermarkets in the Fifties. On the other hand, this could be simple bare-knuckle competition, which benefits consumers. Nevertheless, the supermarket industry—excluding a majority of supercenters—experienced a 3.5-percent overall sales gain, with all departments in positive territory, according to the 55th Annual Consumer Expenditures Study.
The decision to eliminate sales of supermarket-type merchandise rung up at mass merchandiser-operated supercenters was necessitated by Wal-Mart's decision to stop selling its scan data to research companies. At this point the lack of Wal-Mart scan data prevents measuring those sales in detail with any certainty, although more robust data is being developed through household panels run by ACNielsen and Information Resources, Inc.
Here, in descending order of growth, is how supermarket departments performed in 2001:
Manufactured refrigerated deli is not a full department within the supermarket, but the items are traceable and separate from service deli. This group led all departments, gaining 10.7 percent to $3.4 billion in sales. This movement reflects retailers' responses to consumers' demands for convenience and meal solutions. Lines like refrigerated entrees, fruit, and non-gelatin salads all grew around 20 percent or more. Small declines showed up in pizza and sandwich spreads.
Pharmacy is a perennial gainer. Last year's 8- percent increase, driven by more units and higher prices, was slightly smaller than the increase in 2000.
Sales of alcoholic beverages rose 6.9 percent, also behind the previous year's rate of increase. Malt-based coolers were the overwhelming source of growth, with sales more than doubling (up 126.9 percent) to $252 million, making them the biggest gainer on a percentage basis of any sizable category in the store.
Eleven out of 12 categories in commercial bread and baked goods expanded to give the department a 6-percent sales boost. The miscellaneous subcategory soared 34 percent on specialty items. Fresh cheesecake rose 11.4 percent. The only decline in the group was in fresh biscuits, which dipped 2.5 percent. That, along with a 1.5-percent decline in sales of refrigerated biscuit dough products, testified to the success of a new Pillsbury line in frozen biscuits.
The frozen food section climbed 5.9 percent to hit $26.2 billion, with 10 of 12 categories growing. Unprepared meat and seafood had the biggest gain, 12.8 percent. Seafood was stronger than meat, showing increases exceeding 30 percent for some unbreaded frozen products. Frozen ground beef moved up 16.3 percent, while frozen beef steak notched the only decline in the group, 2.7 percent.
Frozen novelties were up 10.5 percent, and frozen baked goods rose 8.9 percent, which was 2.9 percentage points greater than the increase for commercial baked goods and more than double that for in-store bakery. Frozen biscuits jumped 58.5 percent, and the year saw double-digit growth in sales of frozen cookies/dough (18.9 percent) and frozen bread (15 percent). Frozen cheesecakes plunged 14.5 percent.
Frozen juices and drinks fell 9.9 percent, while refrigerated juices rose 0.5 percent. Promotion, price, and supply play a big part in frozen orange juice sales, which were down 13.6 percent last year as orange drinks fell 20.9 percent. Refrigerated orange juice, on the other hand, rose only 1.3 percent.
Dairy sales increased 5.5 percent, as 11 of the 12 categories showed gains. Butter and margarine churned up 12.2 percent on the heels of butter itself, which showed a 23.9-percent gain. Next-biggest increase was in the yogurt category (11 percent), led by yogurt drinks' climb of 51.2 percent. Snacks and dips rose 8.5 percent, with dips up 10.1 percent.
Cottage cheese and sour cream climbed 6.4 percent, driven by sour cream, which was up 10.9 percent. Refrigerated desserts rose 6.3 percent. Milk, which at $9.6 billion in sales is the biggest factor in dairy, was up 5.6 percent. Refrigerated milk drinks spurted 91.9 percent, as cream rose 14.5 percent and flavored milk 12.9 percent.
Cheese—the second biggest part of dairy, with $7.8 billion in sales—increased 4.5 percent. Biggest gainers were Muenster (47.4 percent) and Swiss (23.9 percent). Specialty/imported cheese rose 14.3 percent. Processed cheeses were mixed; shredded cheese managed an 8.3-percent increase.
The egg category saw a 4.8-percent gain. Refrigerated dough products didn't rise much (1.9 percent), but the cookie/brownie segment was up 8.5 percent. Refrigerated juices and drinks were flat, but vegetable juices did soar 80.3 percent from a very small base. The largest dollar-volume juice, orange, managed a 1.3-percent gain, while pineapple rose the most, 22 percent.
Overall general merchandise, which includes the three distinct areas of scanned and non-scanned GM, plus video, was up 5.2 percent. Video rental has been falling and dropped 10 percent in 2001.
Scanned general merchandise witnessed declines in six of 14 categories and netted only a 2.1-percent increase. Housewares/appliances had the best growth (9.6 percent), attributable to relatively inexpensive imported appliances whose individual gains were mixed. Other increases were for canning/freezing supplies (7.9 percent) and kitchen gadgets (7.5 percent).
Declines were seen in some important GM areas such as light bulbs (1.1 percent) and photo (3.1 percent). School/office supplies dropped 1 percent. In a sign of the times, ink jet and toner cartridges rose 38.4 percent, while mailing supplies fell 25.1 percent.
Non-scanned general merchandise grew 11 percent on the back of a 65-percent runup in gasoline sales, an area that is rapidly expanding in the supermarket industry. All other categories were lackluster; phone cards slipped 10 percent.
All perishables combined to register a 4.8-percent gain. This is well ahead of the total for grocery and reflects the main strength of today's supermarket. Unfortunately, the economy took its toll, as perishables had been averaging a 5.5-percent rate of gain over the previous several years.
In-store service deli rose 4.6 percent, but that was unimpressive compared to the 10.7-percent gain in free-standing manufactured refrigerated deli items. The same story held for the in-store bakery, which rose only 4.2 percent in the face of significantly higher advances in fresh and frozen bakery.
The produce department experienced a 4-percent increase. Only two subcategories are published: precut salads with manufacturer UPCs, which sprouted a healthy 9.6 percent, and refrigerated salad dressings, which grew 10 percent.
Fresh meat and seafood expanded at a 3.9-percent clip. Pre-packaged manufacturer-supplied cold cuts did well, with a 5.9-percent increase, to $9.2 billion. Bratwurst was the biggest gainer (10.8 percent), and refrigerated canned ham was the biggest loser (15.7 percent). The next category, floral, recorded a modest 2.9-percent sales growth.
Grocery (food), the largest department, with 27.1 percent of total store sales, grew 2.9 percent. It is composed of 37 categories, and only three had sales declines: coffee (5.6 percent), non-carbonated soft drinks (2.4 percent), and cereal (1.1 percent). The best-performing category was bottled water, up 19.8 percent. That continued a string of double-digit gains at the expense of both carbonated soft drinks, which were up just 0.8 percent, and non-carbonated soft drinks. Other, stronger groups were snacks (up 7.2 percent), dry mix prepared foods (up 6.1 percent), and prepared canned foods (ahead 5.5 percent).
Health and beauty care, with seven of 21 categories suffering declines, netted out with only a 1.5-percent increase. Women's fragrances slumped 10.8 percent, while diet aids grew by 14.4 percent.
Grocery (nonfood) grew by only 0.9 percent, which isn't much, but was better than the performance of the mid-Nineties, when gains by mass merchandisers caused category sales to fall in supermarkets. Led by diapers, which dropped 5.8 percent, four of the 13 categories declined. The best positive performances were by fresheners (up 9.8 percent) and charcoal (ahead 6.6 percent).
To view in-depth data from this study, brought to you exclusively by Progressive Grocer, call the VNU bookstore at (646) 654-4501 and order a copy of the Sept. 15, 2002 issue.