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Consumers are Hooked on Seafood. But Will Higher Prices Make Waves?

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For years, Americans have been encouraged to eat seafood more often as it’s a good source of protein, vitamins and nutrients – plus it’s low in calories and saturated fat. The health benefits are helping to drive the demand for fish at a faster pace than beef, pork and poultry.

The 6.2 percent increase in U.S. per capita seafood consumption in 2015 was the biggest jump in over 20 years. Plus, according to the National Oceanic and Atmospheric Administration (NOAA), Americans increased their seafood consumption by nearly 1 pound per personin 2015, to an average of 15.5 pounds for the year.

In the recent Progressive Grocer’s 2017 Retail Seafood Review, over half of respondents expected seafood sales to increase this year. Even so, Americans still fall short of dietary recommendations of 8 ounces of seafood per week (24 pounds/year), which means there’s room to grow.

However, many grocers saw declines last year in some higher priced seafood categories and consumption increases in 2017 could be impacted by price changes. They noted that shrimp helped boost fresh seafood volume last year due, in part, to an average retail price decline of 9 percent.

If the tide continues to rise for seafood (U.S. wild-caught seafood, in particular), prices could as well and Category Managers will need to navigate accordingly.

Millennials’ hunger for healthy, local brands causing indigestion for big food manufacturers

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So why should we care what they eat? Well they’re now a larger group than the Baby Boom generation with numbers exceeding 75 million. In fact, Millennials (ages 18-36), now represent the largest segment of the U.S. workforce and have significant spending power.

The group has a strong appetite for high quality, natural foods and are willing to pay more for them. This hasn’t been good news for large food companies as they are showing a preference for healthier, organic and non-GMO foods from smaller, local food sources.

In addition, Millennials are more likely to:

  • be influenced by friends than be affected by advertising
  •  advocate for products by posting about them on social media
  • “love cooking” and consider themselves “experts in the kitchen”
  • be open to shopping in non-traditional retail environments
  • prefer labeling that also reveals what the food doesn’t contain (e.g. clean labeling)

As more Millennials enter the workforce and older ones move up the ladder, their spending power and influence will only grow. Understanding the buying behaviors and satisfying the unique needs of this large group will become a major component of a successful growth strategy for category managers in food companies going forward.

Thinking Outside the Big Box

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As Macy’s, Sears and J.C. Penney plan to close hundreds of stores over the next few years, malls are finding creative ways to fill the large empty spaces left behind of these big box anchors. Even so, some malls will not survive and over 300 malls are expected to close over the next 10 years.

But there’s hope for malls that can find the right solutions. Here’s why:

  • Brick and mortar is alive and well: Online sales still account for less than 10% of all retail sales.
  • Amazon reported a $38 billion increase in sales from 2000 to 2013 while Costco’s sales rose by $50 billion over the same period.
  • Malls catering to upscale shoppers can replace a Macy’s with a high-end department store such as Von Maur.
  • Mall developers are adding new venues like gyms and other entertainment options;
    • g. Orland Square Mall is getting a 29,000-square-foot Sky Zone trampoline park and 33,000-square-foot Gizmos Fun Factory for kids with an indoor ropes course.
  • Large supermarkets are moving into malls* because;
    • Space and parking are adequate
    • Good visibility and traffic
    • Appeals to millennials who like the efficiency of a one-stop visit

*Two examples:

Grocery giant Kroger Co., has purchased a former Macy’s Inc. location at Kingsdale Shopping Center in Upper Arlington, Ohio, and plans to build a new store in its place.

Natick Mall in Natick, Mass., is leasing 194,000 square feet of space vacated by J.C. Penney Co. to upscale grocer Wegmans, which is planning to open a store in 2018.

Time will tell whether malls will survive or thrive, but category managers need to understand how malls are changing and how to take advantage.

 

Whole Foods looks to Category Management to Drive Growth

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Intense competition for natural and organic foods has slowed sales growth at Whole Foods. Total overall revenues are up, but comparable-store sales have declined over the past year and a half, dropping 2.4% in its most recent quarter. Why? Demand for natural and organic foods has increased, but so has the competition:

  • Big box supermarkets like Kroger, Target and Walmart are carrying more natural foods.
  • Powerful rivals like Trader Joe’s are opening more stores.
  • Healthy online alternatives like Blue Apron and Plated have taken sales away from traditional grocery chains.

Whole Foods understands that competitors are making inroads and luring away customers. Their plan is to concentrate on their core customers via category management to maintain loyalty and increase average transaction size at checkout.

In February, Whole Foods hired dunnhumby, experts at analyzing customer behavior with a deep understanding of sales data from the manufacturer’s perspective. Whole Foods plans to use dunnhumby’s data-analysis skills to drive both its loyalty program and the implementation of category management. dunnhumby partnered with Kroger to develop its acclaimed loyalty program and will help Whole Foods build on the positive results of a loyalty pilot program launched last year in Dallas.

According to Mark Johnson, CEO of Loyalty 360, “dunnhumby’s rich data analysis will assist Whole Foods in optimizing product assortments, while at the same time bringing an understanding of the various triggers — price, promotion, selection, etc. — that drive increased purchases for each individual customer.”

Whole Foods CEO John Mackey stated, “We’re refocusing on our very best customers … we are focused on data through category management; managing our company a lot more with data and marketing information – evolving our purchasing operating model while developing data-rich, customer-centric category management capabilities are critical steps.”

Best Buy Looks to Mobile Phones to Continue Growth

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Best Buy shares recently jumped nearly 20% in one day when they announced comparable sales increased 1.6% in the past quarter. Analysts had expected a decline of 1.5 percent. One of the surprises was the increase in sales of mobile phones.

Recognizing the opportunity with smart phones, Best Buy has recently redesigned their mobile departments and put them front and center in their stores.

“It’s literally one of the first things you’ll see in the store,” said Carly Charlson, a Best Buy spokeswoman.

Some of changes to Best Buy mobile departments include:

  • additional specially trained employees
  • expanded presence from major carriers
  • big menu boards will highlight various promotions to offer more clarity
  • a new section dedicated to the growing category of prepaid and unlocked phones

In smart phones, Best Buy competes with thousands of Verizon, AT&T and T-Mobile stores and kiosks. But Best Buy has the advantage by offering all the major carrier plans in one place. Plus, most smart phone users prefer to purchase at a brick and mortar store where they can better understand new phone options, ask questions, transfer their info to new phones, etc.

For Best Buy, the focus on mobile looks like a smart move. Just a two percent increase in market share would result in more than $1 billion in incremental sales from smartphones alone.

Plus, incremental mobile sales will increase store traffic, a key objective for the company. And since smartphones aren’t gender specific, more smartphone sales will generate more store traffic by women – another important driver for Best Buy growth. More store traffic means more sales of TV’s, computers and large appliances – a boost to overall sales.

It’s clear, the mobile phone category can be a tremendous long-term growth opportunity if Best Buy can continue to leverage it. That is, get the word out about their unique buying experience and offer better deals than anyone else.