Small F&B companies demonstrate outsized growth

Despite a decline in overall sales in the F&B industry this year, smaller manufacturers in the United States are performing well, according to the latest report by Symphony Consulting. These companies who are defined as having revenues under $1 billion, exhibited “outsized growth”.

Minor players saw value sales growth in 2012 YTD increase by an average of 7.9 per cent. In comparison, medium-sized manufacturers (with revenues between $1 and 5 billion) achieved a 3 per cent increase, whilst large companies (with revenues above $5 billion) gained 1.3 per cent.

In terms of volume sales, small companies also outdid bigger companies, recording growth of 3.6 per cent. In contrast, those for medium and large companies have dropped 0.5 per cent and 3.3 per cent, respectively.

Small businesses can attribute the positive growth to their successful entry into specific niche markets, such as Greek yoghurt and single-cup coffee. On the other hand, the alcoholic beverage and energy drinks categories are dominated by medium and large companies where they enjoy great sales. Growth in the beverage segments typically was due to very small price increases or price declines, according to Symphony.

High prices weaken staples
Even staple products like milk and bread have not been spared from declining sales growth this year because high prices are forcing shoppers to cut back on purchases. Value sales of staples versus one year ago grew just 1.6 per cent as compared to 4.8 per cent for non-staples. Estimated volume sales have declined 2.5 percent in staple products versus growth of 0.2 percent for non-staples.

A trend that has contributed to the poor sales of staples is the shift toward new-age healthy snacks. According to Symphony, shoppers are increasingly giving up traditional big meals in favour of frequent, smaller meals that comprise portion-controlled healthy products. But this trend has brought big sales to on-the-go products like snack/granola bars, energy drinks and spreads like hummus.

Sluggish growth for some non-staples
Whilst the category has grown on average, some non-staples have fared poorly. Frozen dinners, frozen pizza and soup and other ready-to-eat meals, saw value sales increases of just 0.3 per cent in 2012 versus one year ago as compared to a non-staples category average of 4.8 per cent. Shelf-stable cooking ingredients (e.g., shelf-stable seafood and canned/bottled fruit) and breakfast foods (such as frozen breakfast food and pancake mixes) did not perform well either.
 
Consumer behavior: getting more bang for the buck
According to the survey by Symphony, shoppers define value based largely on price. About 78 percent of shoppers stated that they will continue to seek deals in the future, and 56 per cent are choosing stores based on lower prices offered.

Shoppers also said they would make more trips and buy fewer items per trip instead of doing the old pantry-stocking trips. In multi-outlets, shopping trips per buyer have grown 0.8 per cent versus one year ago, while units per trip have declined 2.1 per cent over the same period.

Shoppers said they are exploring more stores to see where they can get the lowest prices. This trend has adversely impacted grocery and drug channels since it reduced trips per buyer (0.2 per cent and 0.6 per cent declines, respectively) but at the same time it has buoyed sales for mass merchandisers (excluding Walmart) who saw 4.4 percent growth, whilst dollar-store trips per buyer grew 7.2 percent. Walmart experienced losing shoppers from 2009 to 2011, with a CAGR of -1 per cent, but it has bounced back in 2012 YTD with a growth of 3.2 per cent over one year ago.

Not so bright highlights for rest of 2012
Overall F&B value sales growth (sales through multi-outlets, including the convenience channel) hasUltra Boost Laceless