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1984 Nielson review of retail grocery store trends.

Last year's solid "real" sales growth has continued into the first half of 1984 as evidenced by statistics compiled by the A.C. Nielsen Company.

The data presented on the following pages show food store sales this year are running 7% ahead of a year ago, while food prices are up only 3%.

The figures also show:

* Retailers are striving to keep operating costs down. In all areas of the country, they are cutting back on space allocations for energy-demanding. refrigerated and frozen items.

* As system prices fall, the number of scanning installations continues to increase rapidly, permitting even greater cost savings benefits for retailers.

* Inventory efficiency has improved as shown by the 4% increase in annual turnover rates for the categories in the Nielsen Grocery Commodities Index.

* The stronger economy has boosted branded label sales several share points at the expense of both controlled and generic labels.

Food store sales volume for 1984 year-to-date is running 7% above last year. With food store prices increasing at a 3% rate for the first part of the year, real growth is continuing at about the same rate as in 1983.

The only store type to lose importance continues to be small independents with annual sales under $1 million. Chains, under and over $1 million, have captured and all-time high in share of total food store sales.

In this report, chains are defined as groups of four or more stores under common ownership.

Price inflation has slowed considerably. Food-at-home prices rose only 1% in 1983 and for the first half of 1984 they are up 3%.

The Consumer Price Index for all items rose 3% during 1983, and for the first half of 1984 is up 4%. The steepest price rises continue to come from the medical care sector. Prices for prescription drugs have risen an average of 10% in the first part of 1984, while over-the-counter drug prices have increased 6%.

The strongest 1983 grocery store sales gains were recorded in the Pacific region with Los Angeles, the Southeast and the Mid-Atlantic following closely. The stronger food store sales trends are in those areas with the highest population growth, although the gains in the Mid-Atlantic are reflective of general economic improvement.

All signs to continued economic recovery. During 1983, total U.S. retail sales climbed to almost $1.2 trillion, 9% more than 1982. Since price increases were minimal, or at least slowed significantly in 1983, much of that increase represents real growth. In the first half of 1984 retail sales are 13% ahead of 1983, signs of continued strong economic recovery. Prices are moving up slightly faster in 1984 than in 1983, but do not yet seem to be slowing real growth.

The key to gains in both 1983 and the first part of 1984 are the strong sales surges within the automotive and hardware and lumber sectors. Increasing employment opportunities and slowing inflation are helping fuel consumer demand for cars, housing and home additions.

Total food-away-from-home expenditures reached $115.1 billion during 1983--an 11% gain over 1982--with much of that growth supported by strong trends within the fast food segment. That segment now accounts for 36% of sales, up four percentage points in five years. These trends continued through the first half of 1984, but at a slightly slower 9% pace.

Ever since the introduction of generic labels in 1978, the shares of sales for both controlled label and branded label have been eroding. In 1983 and through the first part of 1984, however, generic label importance has begun to slide, and controlled label importance has continued to fall. The move back to branded items is due to strong recovery for the economy in general, a narrowing of the price differential between controlled label and branded items, and a sharp increase in couponing activity for branded items.

Last year was a banner year for grocery store real growth with weighted tonnage increasing by 4% over 1982, and the first half of 1984 looks even stronger than the first six months of 1983 in spite of slightly higher prices.

The continued growth of real tonnage, coupled with reduced inventory building, has fueled a steady increase in turnover for the past 3-1/2 years. Turns hit 25.7 in the first half of 1984, a 4% increase over the first half of 1983.

Note that inventory level measurements represent only items actually stocked at the retail store level and do not include chain and wholesaler warehouse inventories.

The Nielsen Grocery Commodities Index is composed of 81 grocery categories. During 1983, the total reached $68.1 billion, or 27.6% of total grocery store all-commodity volume.

During 1983, the number of new items appearing in grocery stores dropped by 21% to 5,109 items. This is the first time since 1978 that introductions have declined. A sharp decrease in proliferation (new flavors, sizes and colors of existing brands) accounted for most of the decline, but new items from new brand introductions also slowed from 1982.

During the first part of 1984, new item introductions both from proliferation and new brands are slowing even further.

A total of 869 completely new brands made it to grocery retailers' shelves during 1983, 16% less than in 1982. Each new brand was introduced with an average of 2.0 SKUs, a ratio that has increased only slightly over the past years.

All product groupings registered declines during both 1983 and in the first part of 1984. However, new brand introductions for non-perishables and frozen foods are declining at a slower rate than refrigerated foods, health and beauty aids or remaining non-edibles.

Sales of the Nielsen 49 health and beauty aid categories grew 12% on a dollar basis and 7% on a unit basis during 1983, an indication of continued strong consumer demand for these products in grocery stores.

The 7% unit gain for the 49 categories as a whole was supported by the oral hygiene, color cosmetics, and the paper goods groupings, all with 9% unit sales increases over 1982.

Within the oral hygiene grouping, toothpaste and mouthwash have seen a great deal of category activity from gel and fluoride products. Color cosmetics continue to enjoy greater distribution and consumer acceptance in food stores. Both the disposable diapers and sanitary protection categories within the paper products grouping are highly competitive with advertising, promotions, coupons and new products stirring up sales.

Sales of the Nielsen 49 health and beauty aid categories in food, drug and mass merchandisers combined increased 10% on a dollar basis and 6% on a unit basis. During 1983, mass merchandisers enjoyed another year of strong HBA sales growth. As a total category, dollar and unit sales ware up 15% and 12%, respectively.

Note: The Nielsen health and beauty aid index is currently composed of 49 selected over-the-counter toiletry, cosmetic, and remedial categories. No prescription items are included.

For the total Nielsen 49 health and beauty aid categories, grocery stores accounted for 47.1% of all sales during 1983, 2.7 percentage points more than 1979. Food stores maintain a commanding and still increasing portion of sales of disposable diapers, sanitary protection, pre-moistened towelettes and dentifrice. Drugstores still account for major portions of sunglasses, after-shave lotions and colognes, color cosmetics, and many remedial categories such as laxatives and foot remedies.

In 1983, food store dollar sales of the Nielsen 49 HBA categories reached $9.4 billion, and accounted for approximately 3.6% of total grocery store sales.

Of the selected grocery products depicted here, only a few have enjoyed significant gains in linear space allocations. Those categories that did gain included chewing gum, crackers, soft drinks, and canned and dry soup.

Refrigerator space devoted to fresh meats was reduced by 5% to 84 linear feet per store for the U.S. average. There were reductions in all regions except the Middle Atlantic and Southwest.

Meat, poultry and fish allocations were all reduced from

High energy costs are pushing space allocation downward. Nationally, total refrigerated linear footage declined 4% from the record high levels in 1982. All regions except the East Central and Metro Chicago experienced some decline, Metro Chicago with an average 335 linear feet of refrigerated shelving per store has surpassed Metro Los Angeles as the leader in refrigerated space allocation.

The decline in refrigerated foods space allocation on a national level can be attributed to natural and processed cheese space allocations, which were reduced by 7%, and margarine and milk space, which was also reduced significantly. The overall gains in refrigerated space in Chicago were almost entirely in cheese space.

Retailers in just about every area of the country adjusted to high energy costs in 1983 by reducing freezer space. The trend toward less frozen space allocation began last year in New England and Metro Los Angeles. Now all areas except the Middle Atlantic and East Central are showing declines.

On a nationwide level, the reduction in frozen space allocation can be attributed to vegetables, juices, pastries and dessert pies and the fish sections. The pizza and dinners sections have held their allocated space.

While not included in total frozen food space allocations, linear footage for ice cream and frozen yogurt has remained stable.

Manufacturers distributed a record 142.9 billion coupons during 1983, up 20% from the prior year. The year also saw a sharp rise in the number of redemptions. Consumers used a total of 5.6 billion coupons, 24% more than 1982. This represents 3.9% of total distributions. By using coupons, consumers saved $1.7 billion on their shopping bills in 1983 and retailers received $390 million as their allowance for handling the coupons redeemed.

The average face value of grocery coupons distributed during 1983 was 24.1 cents, up 11% over 1982. The trend toward higher face values on coupons is accelerating. Just less than 25% of all coupons distributed have a face value of 15 cents, far less than 1982 levels. Twenty-five-cent coupons also account for one-quarter of all distributions, up from 1982. Coupons with a face value of 50 cents or more now account for 9% of all distributions.

The vehicle most chosen to distribute the total 142.9 billion coupons remains the Sunday paper. Freestanding inserts carry 36.6% of all distributions. Daily newspaper freestanding inserts (a relatively new vehicle) are fast gaining popularity and now account for 6.4% of distributions.

The average redemption rate for all products is 3.9% this year, slightly higher than in 1982. By vehicle of distribution, there is a great deal of variance. The instantly redeemable on-pack coupon enjoys a redemption rate of 24.7%. Regular in-pack coupons have an 18.3% redemption rate and Sunday paper free-standing inserts a 4.3% rate.

Scanning installations grew by 26% to 8,150 during 1983. Scanning stores currently account for 35% of total food store dollar sales. Within three years, the number of scanner equipped food stores could increase sufficiently so that scanner stores account for 50% of total food store sales.

Scanning penetration is highest in Denver, where 69% of total food store sales are made at scanner equipped supermarkets. Los Angeles, at 59%, is the next highest major market, closely followed by Miami Fort Lauderdale, at 58%; Chicago, 55%; St. Louis, 55%; and Seattle-Tacoma, 54%.

During 1983, Nielsen examined 180 individual brands to determine consumer sales volume can be expected when a brand is given retail level promotional support. The average index of gain for a brand given promotional support was 220, meaning that average weekly sales during the promotional period increased 120% above weekly sales during a non-promotional period. And in two instances, the index topped 500, meaning sales increased more than 400% above the non-promotional period.

What effect do price promotions have on an individual brand? This case history documents the results of a temporary price reduction with and without display support during the 22-week peak summer selling period on a brand of canned baked beans.
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Publication:Progressive Grocer
Date:Sep 1, 1984
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