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TOP TRENDS IN FRESH: PERISHABLES ROLES IN A PANDEMIC RETAIL LANDSCAPE Hosted with thought leadership from FMI associate member March 3, 2021

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TOP TRENDS IN FRESH: PERISHABLES ROLES IN A PANDEMIC

RETAIL LANDSCAPE

Hosted with thought leadership from FMI associate member

March 3, 2021

www.fmi.org 2

Rick Stein, Vice President, Fresh, FMI

Sally Lyons Wyatt, EVP, IRI Center-of-Store & Produce Vertical

Jonna Parker, Principal, IRI Fresh Center of Excellence

Today’s Speakers

www.fmi.org 3

FMI ANTITRUST COMPLIANCE

◆ It is FMI policy to comply in all respects with the antitrust laws.

◆ All participants in FMI meetings and events are expected to comply with applicable

antitrust and competition laws.

◆ Avoid discussions of sensitive topics that can create antitrust concerns.

▪ Agreements to fix prices, allocate markets, engage in product boycotts and to refuse to deal with third

parties are illegal.

▪ Discussions of prices (including elements of prices such as allowances and credit terms), quality ratings

of suppliers, and discussions that may cause a competitor to cease purchasing from a particular

supplier, or selling to a particular customer, should be avoided.

▪ No discussion that might be interpreted as a dividing up of territories.

◆ It is important to avoid even the appearance of unlawful activity.

◆ Questions or concerns? Please consult with FMI staff.

This presentation and any opinions expressed

therein are not created, sponsored or endorsed by

FMI – The Food Industry Association

www.fmi.org 4

Reminder

If you registered for this webinar, you will receive a link to this recorded presentation by e-mail in 2-3 days, including the Q&A.

March 3, 2021

BRIGHT LIGHTS AND KEY LEARNINGS FROM 2020

Top Trends in Fresh

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 6

– 2020 –

the Year That Continues

to Change Everything

Sources: IRI Shopper Survey January 2021;

84%of all shoppers’ meals are made and

eaten in the home; in 2019 48% of

all shoppers’ meals were made and

eaten in the home

38%of shoppers plan to eat healthier

and/or start a new diet – the most

popular 2021 resolution, with another

29% saying spend less money

57%of children and 60% of teens are in

online-only school situations

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 7

The Top Trends in Fresh are as relevant today as when we launched this series six years ago.

This report focuses on the impact these trends are making in the industry.

New Supply Chains

Localization

Affordability

Customization to Consumerism

Premiumization

Fresh Prepared

Food Transparency

HolisticHealth

Convenience

Atomization of Personalization

Connected Consumer

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 8

7.0%

38.5%

54.4%

Adult Beverages

Fresh Foods Grocery, Frozen, RFG/Dairy

Share of Incremental Dollars Sold vs. 2019

8% 34% 58%

Dollar Sales % Change

(Sorted Top to Bottom by Total $ Sales)

Calendar Year 2020

Fresh Remains Important; However, COVID-19

Drove Grocery and Frozen 2020 Sales Higher

Source: IRI Integrated Fresh Market Advantage, including both fixed and random weight,52 weeks ending 12-27-20

Dollar Share, 2020

General Food 13.7%

Meat 19.2%

Beverages 12.1%

Refrigerated 14.0%

Produce 11.4%

Frozen 21.8%

Liquor 16.6%

Deli 1.8%

Bakery 6.2%

Seafood 25.7%

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 9

As We Progress Through 2021, Emphasis on

At-Home Meal Making Will Continue to Drive Growth

Top 15 Dollar Sales Change vs. YA / Calendar Year Ending 12-27-20

Source: IRI Integrated Fresh Market Advantage, Perishables excluding Refrigerated, including both fixed and random weight, Dollar Change vs. Year Ago 8-16-20 to 10-4-20

$501.5M

$548.4M

$608.2M

$625.3M

$632.1M

$642.2M

$753.2M

$815.2M

$815.5M

$822.2M

$903.M

$1.1B

$1.2B

$1.8B

$5.8B

PACKAGED LUNCHMEAT

FRESH FINFISH

FRESH POTATOES

FRESH TOMATOES

DELI GRAB & GO LUNCHMEAT

CENTER STORE BUNS & ROLLS

DELI SPECIALTY CHEESE

DINNER SAUSAGE

CENTER STORE BREADS

FRESH SHELLFISH

FRESH BERRIES

BACON

PORK

CHICKEN

BEEF

Ground Beef

Would be #1 (+$2.1B)

Chicken Breasts, Beef Ribeye and Beef

Loins all added more Dollars Than

Produce’s Top Category (Fresh Berries)

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 10

2020 Changed Consumers’ Mobility and the At-Home / Out-of-Home Balance; These Trends Were Drivers of Category Choices

New Supply Chains

Localization

Affordability

Customization to Consumerism

Premiumization

Fresh Prepared

Food Transparency

HolisticHealth

Convenience

Atomization of Personalization

Connected Consumer

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 11

2020 Growth in Fresh Food Categories Was a Result of the

Variety of Roles Fresh Plays, Especially in Meal Making

Growth Levers

The amount they are

paying in each

transaction (due to

volume, units or price)

is more this year

SPENDING

Shoppers had bought

this before, but now

are buying more often

FREQUENCY

Shoppers purchased

for the first time

they had not

purchased 2019

NEW BUYERS

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 12

As COVID-19 Disrupted Normal Eating /

Location / Availability Patterns, Shoppers

Turned to Different Fresh Categories They

Had Not Previously Purchased

Top Categories with 2020 Sales Growth Driven by New

Product Buyers, Sorted by Largest Share of Sales Growth

Source: IRI Integrated Fresh Shopper Loyalty Supermarket FSP Data, 52 WE 12-27-20

Lamb, Fowl, Exotic Meats Fresh Produce Rinses

Bagels & Bialys: RFG,

Pre-Pack, Perimeter

Deli Pre-Sliced Cheese

Refrigerated Tortilla /

Egg Roll / Wonton Wraps

Unsliced

Lunchmeat Chubs

Actions to

Consider

Targeted digital

advertising to

incent repeat

purchases

New Product Buyers

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 13

Drive Frequency of Fresh Purchases As a

Way to Align With the Different Roles

Perishables Play in Meal Making

Top Categories with 2020 Sales Growth Driven by

Frequency, Sorted by Largest Share of Sales Growth

Actions to

Consider

Source: IRI Integrated Fresh Shopper Loyalty Supermarket FSP Data, 52 WE 12-27-20

Out-of-store promotions to

win trips; bright, well-stocked

displays in high traffic areas to

incent even more trip frequency

Fresh Salads, Leafy

Greens (Pkgd, Bulk, etc.)

Fresh Cruciferous

Vegetables (Broccoli,

Cauliflower, etc.)

Fresh Tropical and

Specialty Fruit

Aisle, Packaged

English Muffins

Aisle, Packaged

Buns and Rolls

Fresh Snacking /

Salad Vegetables

Frequency

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 14

As You Increase Trips, Then Promote in

Ways to Increase Spend as Well

Top Categories with 2020 Sales Growth Driven by

Spending, Sorted by Largest Share of Sales Growth

Actions to

Consider

Source: IRI Integrated Fresh Shopper Loyalty Supermarket FSP Data, 52 WE 12-27-20

Meat Department

Meals and Side

Dishes

Perimeter

Pastries / Danish /

Coffee Cakes

Fresh Stone Fruit Refrigerated Condiments Perimeter Bagels

In-Aisle Packaged Breads Fresh Chicken

Price promotions of these pandemic

era staples can sway shoppers between stores;

utilize TPR, feature as well as online

e-commerce deals

Spending

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 15

Targeted digital advertising

to incent repeat

How are retailers capitalizing on the growth in fresh foods during 2020?

Price promotions

on staples to build

market share; utilize

TPR, feature & online

e-commerce deals

SPENDING

Out-of-store

promotions to win trips;

displays in high traffic

areas to incent even

more trip frequency

FREQUENCYNEW BUYERS

Discussion Question:

Growth Levers and Actions to Consider

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 16

These Top Trends are Also Changing the Fresh Foods Retail Landscape

New Supply Chains

Localization

Affordability

Customization to Consumerism

Premiumization

Fresh Prepared

Food Transparency

HolisticHealth

Convenience

Atomization of Personalization

Connected Consumer

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 17

29.9average minutes in the store; down >5 minutes

pre-pandemic Fresh Foods

(FW / RW) Channels Share

CY 2019

CY 2020

Share Change

% $ Change

Traditional

Grocery41.5% 42.0% 0.5pts 12.6%

Mass &

Supercenter15.5% 15.1% -0.4pts 8.4%

Club 9.8% 10.6% 0.8pts 20.4%

Discount

Grocery8.0% 7.8% -0.3pts 7.7%

Health/Specialty

Grocery4.0% 3.5% -0.5pts -2.5%

Dollar 0.5% 0.4% 0.0pts 6.9%

Unlike Earlier in the Pandemic, Fresh

Trip Frequency and Channel Share Are

Similar to YA, But Store Trips Are About

In/Out and Stock-Up On the Essentials

Sources: IRI Shopper Survey January 2021; IRI Household Panel data including FW/RW

flattrips to any outlet

change 4 WE 1/24/21

14%avg basket size with fresh,

change 4 WE 1/24/21

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 18

E-Commerce Has Also Made Massive

Impact – Opening Fresh Opportunities

Shopper Demand for Online Groceries Has Fast-

Forwarded into 2025, Especially for Perishables

Source: IRI eMarket Insights CY 2020 and IRI Shopper Survey, Wave 24 January 2021

16%of households use online as their

primary way to buy groceries

throughout the Pandemic

81%of online grocery shoppers expect to

do this more or about the same even

after vaccinated or restrictions lifted

$9B2020 Fresh Foods eCommerce Sales

87%Fresh Foods 2020 eCommerce sales

growth, 10 points higher than center

and frozen foods/beverages

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 19

Shoppers Seek Fresh Foods Differently Online than in Other

Foods and Non-Foods with Retailers’ Websites Driving 6 of 10 Orders

Filter: Dollar Sales

10%20%

30%

53% 34% 8%

7%

4%

2%

4%

27%

42%

59%

Total Store- Food & Non-Edibles

Center & Frozen Food Perishables (eCommerceTracked)

Total Brick&Mortar Site

Total Brick&Mortar Specialty Site

Total Online Specialty

Total Online Multi-Category

Total Delivery

Source: IRI eMarket Insights CY 2020

of Fresh B&M

eCommerce

Sales

84% is Pick-up at

Retailer

and 16%Retailer Delivery

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 20

7.8 7.7

9.08.3

9.010.0

12.513.0

14.0 14.213.4 13.6

12.613.2

12.5

14.2

7.2 7.57.9

7.57.9

8.9

13.314.2

12.7 12.612.1 11.9 11.8 12.2 12.2

13.0

SNAP Households Non-SNAP Households

As the SNAP Online Pilot Became Available, More

SNAP Households Started to Shop Online, and

Fresh Offering Is More Crucial Than Ever

% HHs Purchasing Food & Beverage on the Internet / Total U.S.

Source: IRI Consumer Network™, Total U.S. – Internet 4 WE Feb 23,2020- 4 WE Dec 27,2020

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 21

12% of the total F&B Spend, and

13% of total U.S. population

SNAP Recipients Represent

3% more trips* than

total population

A SNAP Shopper on Average Makes

36% of SNAP shoppers’ annual

food and beverage spend

Fresh Foods (ex. Dairy) Account for

SNAP Households Purchase $77B of Total Food & Beverage Annually,

and Typically Shop More Frequently Across a Variety of Channels

SNAP

Non-SNAP

SNAP Recipients F&B Generated Dollars*

12.4%$77B

Source: IRI Consumer Network™, Total US – All Outlets, 26 WE 12/27/20 / *Total F&B excludes Produce, Deli, Bakery / 52 WE 12/27/20 /.

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 22

MEAT PRODUCE DELI BAKERY SEAFOOD

Pork Ingredient

Cuts

Specialty Root Veg

& Cooking GreensSandwiches

Center Store

Sweet Rolls

Fresh

Crab

Chicken Wings

& LegsMangoes

Deli Entrees

(esp. Chicken)

Perimeter

Sheet Cakes

Fresh

Pollock

Meat Cheese

Cracker Kits

Fresh Mixed

Veg Pkgs

Meat /

Cheese Tray

Bakery

Cupcakes

Fresh

Catfish

Within Each Fresh Department, SNAP Shoppers Gravitate Towards

Key Categories with Meal Making, Convenience and Comfort Top of Mind

SNAP Recipient 2020 Top Indexed Fresh Categories by Share of Dept. Spend, Compared to Non-SNAP

Source: IRI Integrated Fresh Shopper Loyalty Supermarket FSP data, 52 weeks ending 12-27-20, full list in appendix

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 23

Despite 2020’s Changes, the Top Trends in Fresh Still Guide Consumers

New Supply Chains

Localization

Affordability

Customization to Consumerism

Premiumization

Fresh Prepared

Food Transparency

HolisticHealth

Convenience

Atomization of Personalization

Connected Consumer

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 24

Ideas to Guide the Future of Fresh

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 25

Despite All This Growth in Grocery,

Fresh Foods Are Increasingly Ubiquitous

All Types of Stores Are Seen as Solutions

for Fresh Spending by Shoppers

• Supermarkets

• Supercenters

• Club Stores

• Health and Specialty Grocers

• Discount Limited Assortment Grocers

• Independent and Co-Ops

• Local Bakeries, Delis, Butchers, Produce Stands

• Convenience Stores

• Dollar Stores

• Farmer’s Markets

• Coffee Shops

• Fast Casual Dining

• Take-Out and Delivery Services

…and many, many more with similar offerings

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 26

So How Can Your Store or Product Win When Fresh is Everywhere?

Leveraging Fresh Uniquely,

Anchored in What

Consumers Want and Need

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 27

Long-Term Success Amid an Increasingly Complex Share Game

Requires New Ways of Thinking and Measuring Success

Rethinking Fresh Opportunities for Each Department

MUST HAVE MEAL MAKERS

What triggers a trip to your store over other competitors when every type of chain markets on the freshest produce and best-value, but highest quality, meat?

FRESH DIFFERENTIATION FACTORS

What specifically sets your store apart when chains large and small offer hot / ready baguettes, mixed salad bowls and low-priced rotisserie chickens?

PREMIUM BASKET BUILDERS

What makes shopping your store (online or in person) a brag-worthy experience?

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 28

Meal Makers Anchor the Shopping List and the Plate; Must Be Easy to Find, With Easy to Find Ideas for Once You Get Home

Potential Marketing

In media, out-of-store trip driving promotions

touting pricing

In-store secondary signage or multi-item

price promotions to build bigger baskets

Online ideation via social and shopping channels as anchor

ingredients to recipes

Fresh Vegetables – Salad and snack making staples, fresh ingredients, side dishes and herbs

Deli / Bakery – Grab-and-go luncheon meats and cheeses, prepared meats and refrigerated side dishes, perimeter breads

Meat Department – Ground meatstraditional beef, chicken and pork cutsbacon, dinner and breakfast sausages

Seafood – Salmon, shellfish (shrimp and crab)

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 29

Differentiation Drivers in Fresh Should Extend Image and Set Tone, But Be Unique to Stand Out and Appeal to Your Core Shopper

Potential Marketing

In targeted social mediaactivities with targeted advertising, influencers

and hashtags

Décor throughout storesetting the theme,

driving interest to the event department(s)

Displays and signage prominently showcasing

these items that set YOUR store apart

Made-in-store fresh tortillas and tortilla chips in Southwestern divisions or fresh-from-the-bakery superfood power granola bars

Theme weeks in the perimeter – unicorns, “passport to the UK,” local sports, etc. tying in multiple departments such as bakery, cheeses, wine and produce

Online and in-store signage across aisles noting specific foods preferred for a type of diet such as Keto, Mediterranean, plant-based, etc.

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 30

Set Yourself Apart by Using Fresh Premium Experiences in Impulse-Driving Ways Added to Perishables and Center-Store Staples

Potential Marketing

In media, out-of-store by telling your story –

why you carry, how they got to your store

In-store secondary promotions –

buy this, try that

Online shopping suggestions as basket builders that correlate

with staple foods

Wide variety of types and sizes of berries “limited time only” seasonal fruit like winter citrus, summer melons, cherries

Specialty cheese programs and charcuterie board-ready sliced meats – with assistance or in-store signage to help pair with meals and activities

Restaurant-quality steaks, roasts recipe-based meal kit programs / claim-based programs (if aligned with your shopper)

Cart-stopping WOW factor baked goods in variety of “event” sizes from one to a small group to a celebration

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 31

Discussion Questions:

The Future of Fresh

1 | Which fresh foods might

be overlooked for their power,

especially during the pandemic?

2 | With the increase in eCommerce, what

recommendations do you have for

retailers to communicate fresh foods

to their shoppers?

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 32

The Top Trends in Fresh Series

May 5, 2021

Health & Wellbeing

July 21, 2021

Sustainability

and Food Waste

October 19, 2021

Transparency

New Supply Chains

Localization

Affordability

Customization to Consumerism

Premiumization

Fresh Prepared

HolisticHealth

Convenience

Atomization of Personalization

Connected Consumer

Food Transparency

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 33

xxx

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 34

Your feedback is important.

Please complete a brief survey

so we can continue to improve.

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 35

Mark Clouse

President and CEO, Campbell Soup Company

November 10, 2020

Stuart Aitken

Chief Merchant & Marketing Officer, The Kroger Co.

September 3, 2020

Vivek Sankaran

President & CEO, Albertsons Companies

August 25, 2020

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 36

IRI’s Latest CPG and Retail Insights Reports to Manage

the Impact of COVID-19 (click to see full report)

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5. Boomers

4. A Global Perspective

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1. Anticipate the Future

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2. Harness Growth in 2021

1. The Premium Opportunity

5. COVID-19 Vaccine Update:

Impact on CPG Industry

4. Anticipated Vaccine Adoption &

Impact on the CPG Industry

3. Potential Impact of Reduced

Unemployment Benefit

Changes on F&B Spending

2. Consumer Stimulus,

Unemployment Benefit

Spending & Shopping Behavior

1. The Impact of a Second Round

of Stimulus on the CPG

Demand Curve

7. Defending and Recapturing

the Shelf

6. Innovation Lessons from the

Great Recession to Apply

Today

5. Building Brands During

Recessionary Times

4. Recessionary Lessons to

Apply to Private Label Today

3. How Big Brands Performed

During the Great Recession

2. Maintaining Pricing Discipline

During a Recession

1. How the Great Recession

Reshaped CPG Demand Curve

5. Anticipating Life After

COVID-19

4. Consumers Provide a

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Months

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of U.S. Consumer and

Shopper Behavior

2. Then and Now: Consumer

CPG Behavior During

Economic Downturns

1. COVID-19: Impact on CPG

and Retail

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 37

The IRI CPG Demand Index™ provides a standard metric for tracking changes in spending on consumer packaged goods.

U.S. Demand Index™ Forecasts are delivered through a proprietary, fully automated forecasting solution that anticipates consumer demand.

Channel Shift Index™ provides a standard metric for tracking changes (migration) in spending on consumer packaged goods across select channels.

The IRI E-Commerce Demand Index™ provides a standard metric for tracking changes in spending on consumer packaged goods purchased online.

Inflation Tracker™ provides the well-known price per unit metric for tracking changes in pricing of consumer packaged goods.

Supply Index™ provides a standard metric for tracking changes in product availability (i.e., in-stock rates) in stores for consumer packaged goods.

Out-of-Stock Levels for Top-Selling Subcategories by Market Area in the U.S.

Top U.S. Topics from IRI Social Pulse™

CPG Economic IndicatorsAccess IRI’s industry-standard metrics for consumer product demand and supply during the pandemic, our CPG inflation tracker and the latest data on category trends, out-of-stock levels, consumer sentiment and more.

Demand Index™ U.S. Demand

Index™ Forecasts

Channel Shift

Index™

E-Commerce

Demand Index™

Inflation

Tracker™ Supply Index™ Out-of-Stock Levels

for Subcategories

U.S. Topics from

IRI Social Pulse™

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 38

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© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 39

Sally Lyons Wyatt

[email protected]

Jonna Parker

[email protected]

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 40© 2021 Information Resources Inc. (IRI).

Confidential and Proprietary. 40

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