Grocery spend decelerates 2%, but still elevated (ACI)
For the week ended September 27, CPG demand was up 8% YOY in the multi-outlet channel according to IRI. Demand has been between +8-9% since the week ended August 2 except for one week ended August 30. In the grocery channel CPG demand was up 13% YOY, down from 15% in the previous week as seen in the chart below. In the grocery channel the edible category grew 14%, down 2% from the prior week while non-edible was up 7%, down 1% from the prior week. The frozen category led all edible categories with growth of 20%, followed by beverage alcohol up 19%. In fresh foods the meat department was up 15%, even with the prior week.
CPG promotions remain lower (SFM)
Grocery items have had lower promotions during the pandemic. With the shortage of inventory, increased demand, and less frequent visits retailers have had fewer reasons to promote items. For the week ended Sept. 19 CPG promotions were down 10.6% compared to the prior year as seen in the chart below. Lower promotional intensity is a gross margin tailwind for the retailers and CPG manufacturers.
One of the main reasons promotions are lower is that the breadth and depth of products is lower as a result of the increased demand exceeding production capabilities. The following chart depicts the total distribution points as reported by Nielsen. For the week ended September 19 the total distribution points were down 5.2%. Sprouts Farmers Market has pulled back on promotions in its produce section, a major category in which it previously used to drive traffic into the stores, driving 450bps of gross margin expansion in the most recent quarter. In contrast, Kroger only had 5bps of gross margin expansion in its most recent quarter.
On-premise alcohol consumption recovering (BUD)
A few states report on-premise alcohol consumption. In Kansas alcohol sales were up 5.4% in the 12 months ended Feb. 2020 compared to down 45% in the six months ended Aug. 2020. Sales were down 27.7% for the month of August. In Tennessee alcohol sales were up 16.2% in the 12 months ended Feb. 2020 compared to down 59.6% in the six months ended Aug. 2020. The month of August was down 16.1%. In Texas beer sales for the 12 months ended Feb. 2020 were up 2.8% compared to down 65.5% in the five months ended July 2020. The month of July was down 60.6%. Texas sales were negatively impacted by a second shutdown of bars in July.