June 11, 2020

Retail food sales likely to be elevated for rest of 2020, experts say

With restaurants limited to take-out, delivery and drive-through in recent months due to COVID-19 restrictions, food retail numbers have benefitted. That includes fresh, shelf-stable and frozen produce.

In a recent Food Institute webinar sponsored by Mazars, titled “U.S. Retail: How COVID has impacted the retail industry,” Barclays Capital executives Hale Holden and Karen Short discussed the situation and its possible long-term effects. While the talking points included all facets of retail operations, including things like price points, curbside pickup, touchless payments and customer flow, they also included trends in food consumption.

While some states are beginning to allow sit-down restaurants to reopen as of early June, many are limited to 50% capacity. Other restaurants simply won’t survive. With limited seating and fewer choices, retail food sales should continue to be above normal.

“The shift to home food seems to be staying (for the rest of 2020),” said Holden, the head of U.S. high yield research and managing director of Barclays. “(Out of) 700,000 restaurants, 10 to 15% won’t open across the U.S. and will close permanently.”

Retail trends

Overall, consumers have gravitated toward brands they know and trust during the pandemic.

“It’s hard for bigger brands to find new customers, but all of a sudden they’re finding a lot of new customers,” Holden said. “They’ve tried to rehash old brands, and they’re having success with that.”

Short, managing director and senior equity research analyst for Barclays, said now that restaurants are reopening in a limited capacity, consumers will likely see price increases. In turn, that would allow retailers to raise prices without experiencing a backlash.

“Prices had already been creeping up before COVID,” said Short, adding that since COVID consumers are “paying full price for pretty much everything” as conventional grocers have been avoiding promotions.

She added that future government stimulus and an end to the $600-per-month Federal Unemployment Boost, as early as July 31, could be significant factors in the market.

All retail food segments spiked in early- to mid-March, when COVID stay-at-home orders went into place. As of late May, frozen produce and shelf-stable produce were still trending 33 and 24% above a year ago, above a year ago. Fresh produce sales were up 14%.

The week ending March 15, frozen and shelf-stable made up 30% of all produce sales in comparison to 16%, on average, for the year of 2019. The shares have gradually moved back closer to 2019 numbers in the weeks since, reaching 82% for fresh and 18% for frozen and shelf-stable the week ending May 24.

When asked if which category, fresh meat and produce or non-perishable foods, has the better chance of sustaining some of its COVID gains long-term, Holden said frozen and shelf-stable.

“Fresh is something people are always going to buy,” he said. “(Non-perishables) have seen real benefit with trial and then repeat buys.”

The full webinar can be watched here.