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Q1 2021 Index - Grocery

Ethan Chernofsky
April 15, 2021
Q1 2021 Index - Grocery

The grocery sector experienced a fundamental shift during the pandemic, and while the changes were generally good for most brands, others were very poorly positioned. And these differences largely centered around critical changes in consumer behavior that elevated certain brands because of distinct characteristics.

As an example, traditional grocery brands saw a significant advantage as they enabled customers to do more with a single visit and were well aligned with mission-driven shopping. And while many of these changes are likely to normalize over the coming months, some may have a surprising amount of staying power. Should these prove capable of continuing, as new factors arise from lingering COVID effects, some brands could be extremely well positioned for the coming months.

What factors demand consideration when analyzing the grocery sector’s future? We dove into our Q1 Quarterly Index to find out.

Q1 Visit Challenges - And Needed Context

Visits for the wider grocery sector dropped significantly both year over year and quarter over quarter - and there are several key reasons why. First, the sector saw one less day in February, which always has an impact, even if only limited. Second, severe weather hit hard throughout the country creating dips for several brands during late January and early February, though in all cases by March visits were returning to strong positions. Finally, March was being compared with the pre-pandemic surges of 2020 when visits flooded grocery stores in search of non-perishables, toilet paper, bottled water and more toilet paper.

The more limited decline of quarter-over-quarter visits when compared to year over year is important here as it deepens the idea that the declines were in fact driven by these anomalous factors and not some deeper, and more worrying, shift. 

The Return of Normalcy?

But, it is also increasingly clear that normalcy is returning to the grocery world. Much of pandemic supermarket behavior was defined by visitors choosing off-peak hours to make trips and spending more time than normal in a single location. The result was a boost in basket size and tremendous strength for grocers and the brands that sell through them.

Q1 saw the first real sign that these trends were shifting back to more normal patterns. Median visit duration was flat year over year for the first time since the onset of the pandemic, and weekend visit percentage rose dramatically for the first time since COVID hit as well. More people shopping on weekends generally indicates that standard work and school routines are deepening leaving less time during the week to shop at off-hours. The result also showed the rather obvious fact that when people are pressed for time, they have less time to buy groceries. 

Critically, there are some brands that bucked the visit duration trend, but almost all saw the shift back to weekends. The result is a requirement for grocery brands to align with these needs and potentially find new ways to incentivize those off-peak visits that have quickly become a habit.

Which Chains are Best Positioned?

And while brands that were hit hard, like Whole Foods, could see a comeback, some of the stronger performers actually seem to be even better positioned than before. While mission-driven shopping is likely to decline - indicated by lower visit durations and/or more visits per visitor - visits didn’t drop across the board. Publix continued its recent strength with visits down 2% year over year and 1% quarter over quarter - even in the face of inclement weather, fewer days in February and comparisons to the pre-pandemic grocery surge. Others, like Schnucks and Ralphs, also saw limited year-over-year declines. 

Though some of these brands did see flat quarter-over-quarter numbers, there are still many reasons for optimism. While COVID’s effects are slowly dissipating, the extended impact of the economic uncertainty should lead to an equally extended period of grocery strength, as the sector provides a value-oriented position in food. Additionally, this sector typically performs well, so those brands that leveraged the current environment to deepen their customer relationships could actually end up stronger in the long run.

Will the grocery sector continue its unique combination of recovery and return to normalcy? Visit our Q1 Quarterly Index to analyze the sector and others even more deeply.

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