Americans’ changing grocery store habits are bad news for packaged food companies.
Customers are buying fewer items at a time but are visiting stores more frequently, Kroger executives said on a recent conference call with analysts.
This represents a huge shift in the industry because it shows consumers are moving toward more fresh and organic food. Because these products go bad faster than packaged alternatives, it’s necessary to stock up more frequently.
The recent merger of Kraft and Heinz is another sign of decline in the industry, according to Neil Saunders, managing director of retail analytics firm Conlumino.
The companies sell labels including Oscar Meyer, Bagel Bites, Kool-Aid, Velveeta, and Lunchables.
“Both brands have suffered from a slowdown in sales and are now looking to provide investors with a new growth story,” Saunders said.
America’s new attitude at the grocery store is hurting soda and cereal companies too.
For years people thought sugary cereals were healthy because of their low fat content.
But Americans’ dietary guidelines have changed to include fatty foods like eggs. Now people are encouraged to avoid sugar for their health.
Rather than eating cereal out of a box, many Americans are choosing to make their own bacon and eggs.
Fear of sugar is also hurting companies like Pepsi and Coca-Cola.
Selling more natural and organic food has helped Kroger report positive comparable-store sales for 45 straight quarters.
Kroger is also expected to surpass Whole Foods Market within two years and become the nation’s top seller of organic and natural food, according to a recent report by JPMorgan Chase.
The retailer’s “strategy of offering more specialty and organic food is helping it overtake other chains despite an industry-wide trend away from supermarkets,” JPMorgan analysts write.
Traditional supermarkets have been losing market share to high-end grocers, warehouse chains, and dollar stores because customers are seeking either specialty assortments or great value, according to a recent report by the real estate investment firm JLL.
“Millennials and Boomers alike are focusing more on healthy eating choices and creatively prepared meals,” the analysts write.
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