If the Holidays Make Anyone Happy This Year, It’s Grocers

Christmas is coming, the geese are getting fat. Well, maybe not so much this year.

Covid-19 is poised to reshape Thanksgiving and Christmas dinners, with downsized celebrations the norm. This isn’t necessarily bad news for food retailers. In fact, with more people eating at home, the holidays could bring grocers some cheer.

According to GlobalData, Americans are expected to spend 5.2% more on holiday food and drink this year compared with 2019. The increase in food and grocery sales in the final three months of 2020 could be even bigger in the U.K., at 14%, the data provider estimates.

If the Holidays Make Anyone Happy This Year, It’s Grocers

But people probably won’t be spending on the usual items. For example, grocers are betting shoppers won’t need as many big centerpiece turkeys for holiday dinners. Consequently, they’ve upped their orders of turkey breasts (typically still attached to bone and known as crowns in Britain). Walmart Inc. will carry 20% to 30% more of them this year. Its British arm, Asda, said sales of frozen turkey crowns, which typically feed three to four people, are up 230% since they went on sale in mid-October, compared with 2019, outperforming frozen whole turkeys.

Kroger Co., the U.S.’s largest traditional supermarket chain, said that in addition to offering more small turkeys, it was preparing for heightened demand for ham, beef, pork roast and seafood. Alongside crowns, Britain’s Tesco Plc expects chickens and vegan alternatives to be popular. Its smaller U.K. rival Waitrose has tripled stocks of its upmarket Venison Wellington, which serves four people, after a flood of orders.

Large turkeys aren’t very profitable anyway, as supermarkets compete to offer the cheapest deals. Stores can actually charge more for packaged turkey crowns.

Smaller gatherings potentially mean more groups purchasing their own Thanksgiving and Christmas dinners. Take turkeys: Rather than a family buying one large bird to feed collected relatives, four or five family groups might each buy a crown or a joint of meat. If each group still wants all the trimmings — sweet potatoes, green bean casserole, cranberry sauce — that could mean an overall higher volume of food sold.

Fewer people dining in restaurants or spending the holidays abroad will also translate into more eating at home. This may be why people seem to be buying early. Sales of Christmas puddings were up 81% in the U.K. in October compared with the year earlier, according to data provider Kantar. 

The pandemic has also encouraged more preparation of food and drinks from scratch, whether it’s bread baking or DIY cocktail mixing. Data provider Nielsen expects this to continue over the holiday season. 

If the Holidays Make Anyone Happy This Year, It’s Grocers

Perhaps the biggest potential benefit to food retailers is shoppers buying more expensive items. Many affluent consumers have amassed savings under lockdown. At a time when many outside indulgences are unavailable, some shoppers are channeling their lust for luxury into their grocery carts, opting for filet mignon instead of cheaper cuts of meat or springing for an extra-fancy bottle of wine.  

Consumers have a propensity to trade up for the holidays, and they may be even more willing to do so this year. A report from market research company IRI found shoppers are less price sensitive about food and some other household essentials right now. They’re not balking as packaged-goods companies raise prices and yank promotions. 

If the Holidays Make Anyone Happy This Year, It’s Grocers

This doesn’t mean supermarkets can rest easy. As infections spike across the U.S. and Europe and shoppers have to deal with more restrictions, their preferences could suddenly shift again. This would test already stretched food supply chains, particularly in the U.S., where stock levels haven’t returned to normal.

If the Holidays Make Anyone Happy This Year, It’s Grocers

Retailers need to build in as much flexibility as possible. That means, for example, having the option to buy extra turkey crowns if there’s a surge in demand. If retailers fail to get the balance right, they could end up with too much of a particular product. 

Grocers have already navigated many challenges amid the pandemic — a rise in people working from home, an explosion in e-commerce ordering and a flight to comfort foods, just to name a few. Smaller holiday dinners are another to add to the list. With sharp inventory management and marketing, at least this shift won’t leave the industry hungry for sales. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

©2020 Bloomberg L.P.

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