Study reveals brick-and-mortar grocery is still king
Despite a 4-point year-over-year increase, the number of regular online food and beverage purchasers is still only 17%.
Food and beverage categories have seen an increase over the last two years, as many major retailers experienced same-store sales rise thanks to an increase in median income and a low unemployment rate, according to the 6th Annual Food and Beverage Consumables Study. The study, produced by TABS Analytics, Shelton, Conn., identified solid share gains for online grocery, but found that the format is still a small player in the $800 billion industry, accounting for less than 5% of sales.
“Growth in virtually every category of food and beverages examined in this year’s study can be attributed to two underlying trends—more buyers purchasing those products and heavy buyers increasing the amount of those products that they purchase,” says Dr. Kurt Jetta, president and founder. “Online retailers still have a lot of ground to make up to see the same kind of penetration we’ve seen in other markets, such as vitamins and products for children.”
This study was conducted in August by TNS, UK, and was designed to uncover how consumer buying patterns within these categories are shaped by the promotions offered. There were 15 consumables categories analyzed, including candy, carbonated beverages, cereal, cookies, crackers, frozen pizza, ice cream, juice (refrigerated), juice (shelf), frozen novelties, popcorn, salty snacks, sports drinks, water and yogurt.
Other key findings from the study include:
- More buyers, more frequent purchases drive category gains. The study examined a 2-year compound annual growth rate (CAGR), which saw salty snacks overtake the No. 1 position, followed by frozen pizza, novelties and popcorn, which all showed strong gains. The only category that declined in the past two years is carbonated beverages, which still has a purchase frequency that outpaces water.
- Top demographics—Millennials, households with kids above average buyers. When looking at the heaviest buyers, both Millennials (ages 18-34) and households with kids exceed the average by 2-3 percentage points. With median income rising, gains were seen in the middle-income levels, not just the highest income bracket.
- Top deal tactics—Low prices and circulars. Everyday low price (EDLP) remains the favored deal tactic, growing in popularity among those ages 18-34, while circulars rose to No. 2. Deal search declined significantly year over year, as households with kids seemed to prefer convenience to bouncing from store to store to get the best prices.
- Traditional grocery and Walmart still most favored outlets. That quest for convenience seems to lead consumers to traditional grocery stores and Walmart. Despite their commanding lead, traditional grocery and Walmart saw a 2 percentage point year-over-year decline each, as small format stores – such as dollar stores, drug outlets and value food banners – experienced gains of 2-4 percentage points at their expense.
- Online grocery growing, but nowhere close to success threshold. Despite a 4-point year-over-year increase, the number of regular online food and beverage purchasers (defined in the study as six or more purchases per year) is still only 17%. Only 38% of consumers shop in the format even once, and well under half of the shoppers (44%) are loyal to the format. “The stated loyalty rates (the percentage of online grocery shoppers that purchase there regularly) of online grocery shopping are well below the 75% level needed to ensure a viable, successful business model,” says Jetta. “This format has a long way to go to achieve a stable demand; until then e-commerce grocery will be relying on having to invest in expensive trial-generating activities.”
- Demand for trendy organic and diet items wane. While there may be much hype about the importance of having organic and diet products in the mix, consumer preferences indicate that these are not likely to become anything greater than niche markets. Only 13% of consumers said they try to purchase organic (-1 point compared to 2017), while low-calorie/no-calorie products showed a significant 4 percentage point year-over-year decline, indicating that it's not as big a priority for consumers as in the past.