Grocery Sales Keep Falling... Is This Just the Beginning? | Fast Five Shorts

Grocery unit sales in the U.S. fell by nearly 2% year over year in June, marking the fifth consecutive month of declining volume.

That is according to a new analysis from Bain Co. And Nielsen IQ.

Unit sales declined 1.8% in June, 1.9% in May, and 2.2% in April, with the west region hit hardest at down 3% and the Northeast least affected at down 1.3%.

The study says shopper pullback has now outpaced pricing growth and inflation, meaning price increases can no longer mask the fact that consumers are simply buying fewer items.

Roughly 8 in 10 US consumers say they're trying to spend less, with close to 30% specifically working to cut grocery expenses.

Among that group, more than half are trading down to cheaper brands.

Over 40% are leaning on coupons and promotions, and about half say they're just buying fewer items outright.

Rising gas prices, steady grocery inflation, and reduced SNAP participation were all cited as key pressure points.

Josh, your job at Meijer was to help give voice to the customer, so you probably had a front row seat into some of these dynamics.

Do you think five straight months of unit declines is a temporary blip or is it a genuine volume contraction?

I think it's a great question, Chris.

I do, I do think it's, you know, contraction that will continue.

Yes.

And I think, I also think it can change, but I don't know when.

You know, it's been a trend for a couple years now.

Last year was inflation, this, this year it's been fuel prices and other things that are, you know, on people's minds and, and tightening their wallet a little bit.

But, and people are start continuing to shift to wholesale.

Right.

Costco and Sam's Club of the World are doing pretty well and that looks like that's going to continue.

And these are all things that I think are just going to be hard to overcome.

But honestly, in order to buck the trend, I think true deflation has to happen, not just slowed inflation.

And I think fuel prices have to go down.

And I think CPGs and retailers are just going to have to be willing to cut into their profits a little bit and be sharper on pricing and not just like more promotions and sales, but it's the everyday value.

That's why you see, you know, some of the more budget grocers out there right now, like the Aldi's and the Walmart's of the day, that really focus on an everyday low price strategy, they're the ones that are winning right now.

Yeah, man, that deflation, that deflation needing Deflation is a scary statement to say it is when you step back and think about it.

Wow.

Yeah.

I mean, I agree with you.

I think it, I think it's.

I think, I think it's more of a contraction.

I think we're in for a long 10, 10 years here or so for the grocery industry too.

The other thing I'd call out to Josh is like, I think it's more of a contraction because there were three other factors I think that are at play here beyond just like gas prices and inflation, which are definitely an important part of this, but those are more temporal in nature.

And I think there are three other things that are endemic to the grocery industry that are kind of putting the gun squarely pointed at the industry right now.

The first is what the headline discussed and talked about it a little bit, which is the changing SNAP regulations.

Those are really interesting.

I was talking to somebody that knows this space really well and he told me that there is a CPG brand, like a top five CPG brand that 40% of its sales are at risk from SNAP waivers.

Changing.

And that is, that is just a holy crap statistic.

If that, if that hits that CPG, if it hits other CPGs, even to the same degree or even even like half of the degree.

Right.

20% Of your assortment being at risk for SNAP waivers is a big, big deal.

So that's going to have an impact.

The second thing which has also been called out is GLP1.

I don't think we've seen the impact of that yet.

I think that's still coming and it's going to continue to be more pronounced.

But the third thing, and which we'll get to this more too, I think too, Josh.

And you hit on it a little bit with, you know, people moving towards Costco.

The other element here is the increase in quick delivery.

You know, the everyday items are moving out of the regional grocers and they're primarily going to Amazon and Walmart and the basket sizes online are probably smaller than typical grocery trips.

So that's why people are buying less as well, because you just don't have the load up factor of not, you know, getting the end of the cart and not, you know, buying on a budget to the same degree that you can online.

So.

So yeah, for those reasons, I'm with you, Josh.

I think, I think there's a big contraction here.

Anything else you'd add?

No, I don't think so.

I mean, the SNAP is a great point.

GOP1 is a great point.

I think people are going to be consuming less food.

When they're consuming less food, they're buying, you know, less, less units.

And I think, you know, the, the health trend, too, is probably something to consider along with GLP1s is.

Yep.

You know, as people look for healthier options, there's a lot more unhealthy options in stores than there are healthy options.

So you're just going to see naturally less products being bought.

And so, you know, we'll see.

But I think it's going to continue for a while, like you said, and maybe plateau.

And if things change, maybe it could turn around, but it doesn't look like it's going to.

To happen for a while.

Yeah.

Yeah.

And I'm really interested to continue to watch the trend on, on delivery too.

Like, does.

Does how we shop for groceries change the amount of groceries that we buy?

And I think, I think the answer to me, if you put a gun in my head, is yes.

What do you think, Josh?

I think it's yes.

And I think that's what retailers are trying to figure out with their online shopping is that you don't have the opportunity to drive impulse as much, which is why they're using things like personalization.

They're trying, they're.

They're looking at their, their full shopping experience and the customer journey online to try to create those impulse opportunities.

Because the baskets are smaller.

You aren't buying that candy bar at checkout.

You know, you aren't buying that.

Whatever it is that you see as you're walking towards checkout like you do in the store.

You don't see the end caps.

Like, there's no virtual end cap on a website.

Right.

But the end caps drive a lot of volume.

And so I think creating a similar experience online as you do in store is a continued challenge.

So more digital shopping means less.

Less volume.

Yeah.

You know, it's funny, Josh, to.

I'll tell, tell a funny quick story here before I move on to the next headline I was reaching.

I was recently at the nca, which is the National Confection Association's conference out in San Diego, like two weeks ago, and I was giving a speech and I talked about this in much more detail than I just covered now in terms of the rise of quick delivery.

And I could tell, I was just talking, that the whole industry was like, oh, boy, you know, there's kind of like a, a quietness that fell over the room.

And then I got in the elevator to go back up to my room, as did everybody else, and this guy didn't see that I was in there.

And he was like, man, that guy really shook me with what he was talking about.

And then everyone else in the elevator was quiet, and I got off.

And then one guy was like, yeah, he was.

He kind of knew what he's talking about, right?

And I was like, thanks, man.

It was.

It was hilarious.

So, yeah, it's just.

There's a lot happening in this industry.

It's so.

It's just so fascinating to watch.