The rapid growth of online grocery trends has led some center store sales to migrate online, however, according to a new consumer report by Catalina, new and innovative food products are driving the growth in brick-and-mortar center store sales. This is good news for the grocery industry as popular grocers continue to compete with online retailers.
Center store products are mostly CPG (consumer packaged goods) foods, which makes them easier to order online without worrying about freshness and same-day delivery. Due to these online grocery trends, grocers experienced a decrease in sales in this segment, but according to Catalina’s 2017 research, grocery stores have not lost a lot of sales. The market research organization claims that center store sales have decreased by one trip per shopper per year since 2016. In addition, Catalina revealed that 81 percent of all center store trips result in purchases, resulting in $1,408 in sales per shopper annually.
“Center store categories remain strong at 60 annual trips per shopper, per store. This is down just one trip per shopper per year, despite the onslaught of e-commerce and discount retailers,” said the report.
Catalina credits this success to CPG companies who are “nimble enough” to produce innovative consumer-targeted food products. Surprisingly, smaller food companies that make under one billion dollars in annual sales were found to be the key drivers in this trend. This may be because consumers have been found to prefer products made by smaller, local or family-owned companies more than larger corporations. In addition, private brand food innovation has been found to play a role in this trend as grocers are starting to invest in their own premium food formulations.
The biggest winners in the CPG category were found to be new non-fat/low-fat/lite ice cream products, which generated more than half a million new trips to the grocery store and a 67 percent increase in dollar sales since 2016. Frozen dinners experienced a 33 percent increase in sales but Catalina claims that “heart healthy” shoppers spent 43 percent more in this category. Innovative snacks like veggie, bean and plantain chips helped to bring the snacks category up last year with the average shopper spending $8.01 on such products, while shoppers who purposely avoid GMOs spent double that amount. The sparkling water subcategory also contributed to center store sales as consumers are now looking for more zero-calorie beverages. In addition, ready-to-drink coffee (especially high-protein coffee drinks) and premium candy/chocolate products were up in sales last year as well. These findings are indicative of changing consumer preferences and the growing health trend.
Catalina also highlighted products that experienced a decrease in sales last year. Cereal bars experienced the biggest decrease in sales (-19.4 percent) while toaster pastries/tarts followed with a -11.1 percent decline. Single serve juice drinks had a -10 percent decrease in sales and granulated sugar experienced a -6.8 percent decline in sales. Other products that had lower sales last year include bath tissues, sports drinks, cereals and pasta. All these products are usually considered unhealthy or are easily available through an online grocery.
From their findings, Catalina developed the following four steps for food manufacturers to utilize in order to increase their appeal and sales in this changing consumer market:
- Create Something New
As consumer preferences continue to evolve, food manufacturers can stand out in their category by introducing new and innovative food products. Currently, food products that have all-natural, non-GMO, organic and preservative-free qualities are highly sought after by consumers. Researching consumer trends and popular ingredients can give food manufacturers an advantage in this market as they introduce new formulations with unique and healthy ingredients.
- Be Transparent. Be Premium
With sustainability being a top concern for consumers today, food companies can appeal to their preferences by being transparent about their production techniques and investing in eco-friendly manufacturing. Such products are usually considered as premium items and consumers (especially millennial consumers) have no problem spending extra money on them.
- Command Shelf Space
The growing online grocery trend has led major food manufacturers to invest in their own e-commerce sales. However, Catalina encourages food companies to also invest in brick-and-mortar center store products as there is a lot of sales potential in this grocery store section.
- Showcase Your Advantage
According to Catalina, about 8 in 10 new product launches fail within two years of their launch. This is because some food manufacturers are not paying attention to consumer trends and demands. In order to succeed in this competitive market, food companies must identify what food qualities are in demand and they must also showcase such qualities on their products in order to catch the attention of selective shoppers.
Catalina’s findings reveal that 78 percent of consumer grocery baskets include center store items. This means grocers and food manufacturers have a lot of opportunity for their CPG products to be in those baskets. By focusing on consumer demands as well as new ingredients and food innovations, food companies are likely to stay ahead of food trends, which in turn will result in increased sales.