News & Media

Center store staying strong, but with a whole different product mix
October 2, 2020
Source: Supermarket News

Center store dollar sales are up by more than 10% among more than half of grocery retailers in 2020, according to Supermarket News’ 2020 Center Store Trends Survey, with a total of 86% of retailer respondents saying they expect to see an increase in sales in the category in 2020 versus 2019.

The lion’s share of that growth can be attributed to the coronavirus pandemic, which erupted in the United States in March, and has been responsible for exponential growth in grocery sales across all categories, including center store. When asked, “How has the coronavirus pandemic impacted your in-store center store sales?,” 55% of respondents said the pandemic has led to an increase in center store sales of 10% or more, while another 27% expect to see sales increases between 5% to 10%.

Within center store, there has been a significant shift in what consumers have been buying this year during COVID-19. While snacks, beverages, groceries and beer/alcohol have been traditional leaders in the category, in 2020 retailers reported that the center store categories having the most success during the pandemic are household cleaners (mentioned by 73% of retailers), paper goods (71%), frozen food (63%) and shelf-stable food/grocery (60%). No surprise there, given the run on toilet paper and cleaning supplies during the initial outbreak of coronavirus.

But all center store categories have had significant success during the pandemic, according to the retailer response: Beer/alcohol was mentioned by 43% of respondents, snacks by 36%, beverages (non-alcoholic) 29%, health and beauty items (19%) and pet food/care (16%) all rounded out the categories that retailers reported having the most success with during COVID-19.

Steps to improve center store sales

The explosion in online grocery sales spurred by the pandemic has impacted center store in a number of ways. When asked what steps retailers are taking to increase center store sales, the overwhelming response was offering at-home delivery and/or curbside pickup at 68%.

And in response to which alternate channel poses the biggest threat to center sales in supermarkets, just under half cited online retail (49%), with direct-to-consumer channels trailing at 15%. In 2020, none of the longtime competitive threats such as Walmart, dollar stores, natural retailers and club formats was mentioned by more than 10% of respondents.

Retailers were also asked what specifically they would suggest to best fight competitors for center store sales. Once again, delivery and pickup was the No. 1 response, but with less dominance at 34%. Fighting competitors on price was a fairly close second, with 26%, and private label also got some nods here, with 14%.

Beyond delivery and pickup, surveyed grocery retailers offered their own suggestions and experiences regarding center store sales.

“Certain areas of center store sales have diminished due to COVID-19 such as soups, paper products, rice products, pasta and disinfectant products,” one retailer told SN. “Manufacturers are overwhelmed due to hoarding.”

Among other retailer responses:

• “Fewer slower-selling SKUs and package sizes of same brand/product. Lower prices to compete against big-box stores.”

• “Keeping larger back stock and ensuring quick shelf restock.”

• “Different product mix based more on supply than sales.”

• “Given the pandemic, grocery is the one place consumers feel somewhat safe and are confident in. As we approach fall & holidays, there is no sign the pandemic is going away, and every indication it will get worse. Consumers will limit where they shop and will attempt to go online (Amazon) but the logistics of the back end will be overwhelmed. Impulse and gift giving via grocery will be huge.”

• “The largest impact to center store sales today is the compression in the supply chain. We are running at a 70% service Level from our wholesaler UNFI today vs. 96% pre-COVID. In addition, retail inflation is being driven by CPGs’ significant reduction in promotional investment.”

And, perhaps most succinctly:

• “Be in stock.”

Trends in center store

Overall, retailers are split when asked whether center store has a larger presence in the perimeter department of the supermarket now than in years past (49% say yes, 51% say no). Among those who said yes came the following comments:

• “Looking for additional sales and increased sales of profitability and loyalty.”

• “Mostly with secondary displays to maintain in stocks and supply.”

• “Similar to register aisles, packaged similar-type products are found in bakeries, produce, delis and other perimeter departments.”

• “People are hoarding because of the pandemic and so center shelf-stable products (i.e., paper products, water) can be moved to the perimeter if there is room to make it easier and increase the volume of those products since they are moving fast.”

One retailer noted, “Most retailers talk a good game about cross-merchandising products, but in reality, most of their departments don’t interact at all (i.e., meat or produce departments merchandising grocery items within their sections).”

Private label continues to be a strong performer in center store, with half of retailer respondents saying that private label makes up a larger portion of shoppers’ baskets in 2020. Another 43% report private label sales about the same as last year, with only 7% saying private label makes up a smaller portion of shoppers’ baskets this year.

New product innovations drive private label sales, and 52% of respondents say that is where they’ll focus on adding and updating their private label offerings in the next 12 months. Other categories of private label that retailers are looking to grow in the next year include natural/organic (37%), specialty such as gluten-free, local and imported (34%) and multicultural products (24%).

Health & wellness also drives center store sales. More than half of respondents (52%) say they plan to grow or update their offering in the next 12 months, while 46% also say they plan to focus on new products, such as plant-based and CBD. Shelf tags highlighting nutritional information of products are also on the rise, and 29% of retailers plan on using these to bolster their health & wellness positioning.

Marketing to specific demographic groups can also bolster center store. For instance, more than half of retailers (55%) say they plan to increase product assortment to grow their multicultural customer base in the next 12 months. Other efforts will include participation in community events (28%) and recipe demos/cooking classes (15%).

The group most retailers are targeting continues to be Millennials, which makes sense given the sheer size of that population segment. “This is currently the largest population right now,” noted one retailer. “We would focus on competitive pricing. Quality product and in-store placement for ease of accessibility. These are the people that will tell the younger generation to buy 'this product and that product' in the future.”

When asked “Which of the following groups will your shopper marketing efforts focus most heavily on?,” retailer responses were Millennials (33%), health & wellness customers (27%), females in general (11%) and Baby Boomers and Gen X at 9% each.

One respondent was more pragmatic about targeted marketing. “I don't think targeting one specific demographic group or cohort is a good strategy,” the retailer noted. “It depends on the category and items you are trying to target. Each group purchases differently so you have to target differently.”

The SN Center Store Trends Survey was sent out to food retailers and wholesalers throughout the month of August, with results finalized in early September. SN received a total of 74 food retail/wholesale responses.