Value Still Prime Motivator Guiding U.S. Food Retailing Growth

NEW YORK -- The shadow of the Great Recession continues to loom large over the U.S. food retailing landscape as consumer behaviors adopted during the economic strife linger, particularly the desire to find value in food and beverage purchases, according to a new report released by Packaged Facts.

"The value focus remains tied to the nation’s economic fortunes. As long as unemployment remains high, the likeliest scenario for the retail industry -- and indeed the U.S. economy as a whole -- will be slow growth, and value will continue to be a prime motivator behind consumers’ food and beverage purchases," stated Don Montuori, publisher of Packaged Facts.

"Whether eating more meals at home, shopping more at notoriously value-centric retailers such as dollar stores or Walmart, deferring discretionary purchases, or trading down on essentials, these new consumer tendencies will persist throughout 2011," he continued.

While price is an important part of the value proposition, it is not the only criterion. Value, defined by consumers as "worth the money," also encompasses other considerations including quality, perceived benefits (convenience, nutritional, health, etc.), and service, according to the report. As a result, consumers may be willing to pay premium prices if the products offer the benefits shoppers deem worthwhile, Packaged Facts noted.

Food retailers are scrambling to adjust their marketing strategies to survive the growing competition that’s erupted in the industry. Experiments with internet marketing and digital technologies, SKU reduction, price wars, tweaking private label offerings, and maneuverings to position themselves as arbiters of wellness and nutrition management are emerging retailer trends that could reshape the future of the industry in the short-term, the report stated.

Retail sales of foods and beverages in the U.S. reached $560 billion in 2010, an increase of only 2 percent over the prior-year-period. The grocery channel generated 57 percent of retail food and beverage dollar sales in 2010; with value channels ringing up 26 percent, convenience channel 14 percent; and alternative channels (drug stores, vending machines, etc.) 3 percent. Leading the retailer pack was Walmart, with an estimated $62 billion in food and beverage sales in 2010.

Packaged Facts projects that total U.S. retail sales of foods and beverages will advance at an average 5 percent annual pace over the next five years to reach $698 billion in 2015.

The Future of Food Retailing in the U.S., 3rd Edition report offers a comprehensive examination of the overriding trends in the market, highlighting opportunities and strategies retailers and CPG marketers can use to optimize their businesses during the coming years. The report provides detailed analysis of trends in the key retail channels through which foods and beverages are sold. In-store merchandising and food preparation trends, category sales trends, marketing trends and media trends, including use of new social media, are also covered in the report.

Packaged Facts is a division of and publishes market intelligence on a wide range of consumer market topics, including consumer goods and retailing.

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