Continued food inflation causing shoppers to trade down to cheaper items is expected to impact U.S. grocery seafood sales this year, and Walmart’s concerns about shoppers and Lidl’s corporate layoffs also signal trouble ahead for overall grocery sales.
Walmart reported higher Q4 revenue and an 8.3 percent increase in U.S. comparable store sales, but CEO Doug McMillon warned that shoppers are more cautious and the retailer lowered its profit outlook for the year. Walmart expects "stubborn inflation" in food, Walmart executives said on an analyst call, per Barron’s.
However, Walmart realized more frequent trips from households with an annual income of USD 100,000 (EUR 94,500) or more during the quarter.
“People are really price-focused now, regardless of income level,” McMillon said in August, per CNBC.
Walmart executives noted a spike in the retailer’s private label sales, and McMillon told CNBC he plans to keep the retailer’s own private brands priced low. While McMillon said he would prefer that Walmart’s brand partners and suppliers “step forward” on their own to lower prices, he wants “to play a role in helping get prices down.”
The company is “not participating in a recession if there is one,” McMillon said. “I think we have historically shown that we can bring prices down.”
As Walmart forecasts a lower profit, Neckarsulm, Germany-based discount supermarket chain Lidl is taking steps to restructure its business. The comapny laid off around 200 employees in its U.S. operations as it initiates a restructuring of its business.
“While we remain committed to the long-term success of Lidl US and look forward to continuing our expansion along the East Coast, we are continually evaluating our operations to ensure we are supporting our stores effectively,” Lidl US Senior Manager of Communications and Public Relations Chandler (Ebeier) Spivey told SeafoodSource. “As a part of this process, we have made the difficult decision at this time to eliminate a number of roles across the Company.”
The layoffs will “mainly impact our headquarters team, with no impacted employees at the store level,” Spivey added.
Grocery executives said they are concerned about the impact that continued food inflation will have on sales throughout the year. Overall food and beverage inflation soared 13.2 percent in the fourth quarter of 2022, according to IRI’s new Impact of Inflation on Consumer Behavior report.
In good news for the seafood category, inflation in meat and seafood rose only 3.4 percent in the quarter, much lower compared to other categories. Inflation in the dairy category spiked 23.2 percent, while deli prices hiked 18 percent, and center store/packaged goods prices rose 15.3 percent.
Overall, inflation is coming down in the fresh/perimeter departments, falling 7.5 percent. However, frozen seafood prices jumped 6.3 percent in January to USD 10.44 (EUR 9.87) per unit on average compared to January 2022, according to IRI and 210 Analytics. Ambient seafood inflation rose 7.4 percent on average, and fresh seafood experienced the lowest inflation at 3.3 percent.
“The CPG [consumer packaged goods] space has proven to be less volatile and more resilient during economic downturns than other sectors,” IRI Client Engagement Executive Alastair Steel said in a news release. “However, shoppers are feeling the impact of high prices and are shying away from discretionary purchases. Multiple tactics are being used to reduce spend and manage budgets, with value channels performing well.”
Many shoppers are trading down from brand-name products to private label to beat inflation. Overall sales of store-brand products jumped 11.3 percent in 2022 to reach a record USD 228.6 billion (EUR 216 billion), according to the Private Label Manufacturers Association’s 2023 Private Label Report.
IRI’s report showed 75 percent of all food and beverage categories seeing growth within private label, while premium food and beverage brands lost 0.6 share points for the 12 weeks ending 27 November.
Further proving consumers’ laser focus on value, registered dietitian nutritionists (RDNs) said Americans are more concerned with value and affordability when purchasing foods, rather than immune-boosting properties, for the first time since the start of the Covid-19 pandemic.
According to the Pollock Communications and Today's Dietitian "What's Trending in Nutrition" survey of 757 RDNs, shoppers’ top purchase drivers in 2023 will be foods and beverages that are affordable and value-based (70.4 percent), are easily accessible and convenient (59.1 percent), and support immunity (57.6 percent).
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