Fresh Foods Growth

US consumers are on the hunt to put more greens on their tables at meal time—even if it means spending a little more cabbage. This shift has consumers adjusting their shopping behavior by either paying more or making product trade-offs to be healthier and eat well.

A change in buying behavior is sprouting growth at the perimeter—the areas of the market that sell fresh food items. In 2012, rising prices sparked dollar volume growth in all segments of the perimeter except seafood and vegetables, where prices had fallen from a year ago. It was consumer demand, however, that beefed up sales in the deli prepared foods, seafood and fruit areas. The lingering effects of last year’s drought has prices up the most in fresh meat (+5.4%), yet volume sales are down just 1 percent. “Protein is still very much a part of our diet, but this reflects how some consumers are shifting spending away from higher-priced beef to less expensive pork and poultry,” says Todd Hale, SVP, Consumer & Shopper Insights.

Prices for grocery items remain high, as unit prices in Nielsen-measured categories and retail channels have risen every month over the past two-and-a-half years. And the higher prices have consumers keenly focused on their budgets and how they spend their hard-earned cash. Many are finding, however, that it’s cheaper to eat in than go out, which has been a boon to both food and non-food retailers that have responded to the situation by expanding their overall food offerings.

According to year-end 2012 consumer price index data from the U.S. Bureau of Labor Statistics, prices for grocery foods have risen less than restaurant food (1.3% vs. 2.5%). So while rising commodity prices have driven sales growth in almost all major retail departments measured by Nielsen, unit sales trends are a different story, as seven of 11 departments experienced flat or negative unit sales growth. Unit sales growth is occurring in departments where consumer demand is trumping higher prices.

“Consumers are adjusting their shopping behavior to the relatively high prices, but they’re focused on meeting their demand for fresh foods and produce,” says Hale. “Specifically, given higher prices, reduced promotion support, they’re making trade-offs or buying less, especially in non-food grocery, dairy, fresh meat, dry grocery, general merchandise and frozen foods. Where are they buying more? Volume for fresh produce, health and beauty aids, and deli are all up on a year-over-year basis at the end of last year.”