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U.S. egrocery sales finished 2022 near record highs, offering another sign that the pandemic uptick in this ecommerce category is proving to be sticky.
Key data from the Brick Meets Click/Mercatus Grocery Shopping Survey for December 2022, fielded Dec. 28-29, is as follows:
- Total sales reached $9.1 billion, growing 2.4% year-over-year.
- That’s just shy of the all-time record, recorded during Q1 of 2021, which was $9.3 billion.
- More than half of US households ordered groceries online during the month, which was up 4% year-over-year.
Here’s a look at key data by category of egrocery:
- Pickup sales were up 14.7% year-over-year
- Delivery was down slightly to 1.8%
- Ship-to-home fell 16.2%
via Brick Meets Click/Mercatus
Mass retailers, which include multicategory stores like Walmart, Amazon and Target, were the biggest contributor to gains, outpacing contributions from pure-play grocers. The monthly active user base at mass retailers grew nearly three times faster than the overall MAU base, accounting for nearly half of the total MAU base on the month. Mass AOV also grew three times faster than grocery, with a year-over-year increase of 12%.
It’s true that mass retailers have been attracting new shoppers amid inflation as people seek lower-price options to stretch dollars. That was on view in December, as more than 30% of users cross-shopped at both mass and grocery retailers. But mass retailers have also continued to improve the ecommerce capabilities, creating a better experience for customers.
The two trends are connected. Walmart executives illustrated this on their recent earnings call: The retailer is seeing more affluent customers seek it out as they look to save money. At the same time, Walmart is working to keep these customers coming back by bolstering pickup and delivery, as well as increasing perks through the membership program Walmart+.
“The investments that mass retailers have put into their pickup services are a significant driver of the format’s gains,” said David Bishop, partner at Brick Meets Click, in a statement. “And while lower prices are a contributing factor in the growth of the mass MAU base, being able to more consistently execute at the store level is also helping to strengthen retention and engagement with existing customers, especially when compared to grocery.”
Hammering the point home, mass retailers also outperformed grocery stores when it comes to repeat intent rates, which measures the likelihood that customers will use digital grocery again. In this category, mass and grocery were about even in 2021. Now, mass has an advantage of more than 10 points.
This serves notice to pure-play grocers that the competition for share is only picking up. With sales continuing to grow, adding digital capabilities is just as much a must now as it was at the start of the pandemic.
“Regional grocers have many opportunities to improve the customer experience and the profitability of operating an online grocery service today,” said Sylvain Perrier, president and CEO at Mercatus. “From our ongoing work and research into online customer behavior, we’ve learned how important it is to develop a strategy that makes sense both financially and operationally, and that builds on how a grocer is positioned in the market and with their core customers.”
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Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.