CENTER STORE REVIVAL: RETAILERS AND MANUFACTURERS STAGE A COMEBACK
EXECUTIVE OVERVIEW
SEPTEMBER 2007
IRI's Times & Trends highlights new developments and critical events across all major CPG categories and channels, providing powerful benchmarking data to help guide your strategic decisions. This issue provides insights into sales and channel share trends across center store categories.
This free summary is also accessible via the GMA/FPA Web site at  http://www.gmabrands.com/publications/gmairi.cfm

INTRODUCTION
Once the crowning jewel of grocery stores, “center store categories” – shelf-stable foods and beverages and grocery non-edible items – lost much of their luster over the past decade.

These categories have been at the center of cross-channel battles as supercenters, club stores and drug stores all stake a larger claim, resulting in substantial share losses for grocers.

In the face of intense price competition, and in response to growing consumer demand, many leading grocers have adopted differentiation strategies built on a superior position within fresh and prepared foods – reducing focus and investment in the center store. Further, as health and wellness needs have wielded a greater influence on consumer purchases, many center store categories have faced a gradual decline in demand.

But, there is a sliver lining to this story. We are now seeing signs of a revival.

Center store categories are in the midst of a transformation. The end result will likely differ significantly from the center store we know today, as leaner, more targeted assortments emerge. However, growth potential is there for categories and brands aligned with consumer trends and retail strategies.


 KEY FINDINGS

Center store categories post solid growth. After years of struggling sales, “center store” categories (shelf-stable food and beverages, non-edible grocery items) are showing signs of revival; dollar sales grew 3.1 percent this year across food, drug, mass channels (including Wal-Mart) -- matching total CPG growth. High-growth snack and beverages are fueling center store momentum.
 

Grocery center store share loss moderates. Grocery channel center store sales have been hard hit throughout the past decade as consumers shifted spending to supercenters and other channels. Over a four year period, grocers lost three share points among center store categories. Within the past year, however, grocers have successfully stemmed share loss.

Fresh produce and prepared meals are outpacing center store but represent a relatively small proportion of sales. With sales growing at three times the rate of center store categories, fresh produce and prepared foods have emerged as the cornerstone of grocery growth strategies, but many leading grocers are also maintaining focus on center store. Center store categories still comprises nearly half of total grocery sales, while produce and prepared foods comprise only 10 percent.

Retailers are implementing center store revitalization strategies. Many leading retailers have recognized center store growth potential and are developing revival strategies, including implementing a health and wellness positioning in center store through expanded “good-for-you” product assortments and nutritional store signage; investing in focused private label development across select high-potential categories; and localizing assortments to meet the distinct needs of different consumer segments.

Center store manufacturers are driving growth through innovation. Center store manufacturer growth strategies include product, packaging and merchandising innovation, as well as price increases to recoup skyrocketing ingredient costs. Health and wellness innovation has been a key driver of growth, with highly successful healthier product introductions, including reduced sodium soups and portion-controlled snacks, and on-package nutritional symbols to help consumers easily select products with specific nutritional benefits.


 

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Source: IRI's Times & Trends Reports
Information Resources, Inc. (IRI) is the world’s leading provider of enterprise market information solutions and services to the consumer packaged goods (CPG), retail, and healthcare industries.