April 14, 2017

In reviewing the sales results for supermarket prepared foods for the period ending 12/31/16, there is some reason to celebrate. According to Perishables Group, the industry saw ALL categories of prepared chicken grow in volume for the 52 week period over prior year. Prepared chicken was up 4.6% as a category, with growth driven by solid growth in rotisserie chicken (3.1%) and chicken appetizers (8.0%). Wings logged a very respectable 5.3% increase over prior year.

While the deli chicken category as a whole cooled slightly in the final quarter of last year (year over year increase dropping from 4.1% to 3.5%) rotisserie and chicken appetizers continue to fuel category health.

Share of Super-Category Dollars
Total U.S.
Deli Prepared Chicken, 52 Weeks Ending 5/27/17

 

 

Share of Super-Category Dollars
Total U.S.
Deli Prepared Chicken, 52 Weeks Ending 5/27/17

 

 

Top Line Sales Growth Lags Volume Growth

There is a story and a question in these sales results, however. Dollar growth lags volume growth in prepared chicken as a whole (2.7% vs. 4.1%). The reason top-line sales is not growing as quickly as volume growth is a factor of price. The industry is seeing more retailers reducing price in key categories (fried chicken and rotisserie chicken are notable) or increasing price promotion activity on these products.

The story is that price is clearly being used to boost volume and steal share. The question is: is the price activity producing the volume increase or subsidizing it? Looking at the prepared foods area (non-chicken), the two largest categories (salads and sandwiches) grew at 5.5% and 4.2% respectively. If the traffic and demand is there to fuel growth in these categories without significant price concession, is it true in the core chicken categories as well? It's an open question for which I'm not sure anyone has the answer, but it's intriguing. With retailers fighting to preserve razor thin margins, is there a possibility of building top-line sales and margin at the same time? It's a question worth asking.

 

Share of Super-Category Dollars
Total U.S.
Deli Prepared Chicken, 52 Weeks Ending 5/27/17

 

 

Share of Super-Category Dollars
Total U.S.
Deli Prepared Chicken, 52 Weeks Ending 5/27/17

 

 

The West Leads in Growth

In both prepared foods and prepared chicken the Western region of the country posted the strongest gains in dollar sales, with especially strong growth in appetizers and wings. Total west growth in prepared foods was 6.6% (US total: 4.9%) and prepared chicken was 4.6% (US total: 2.7%). The opportunity in the West is that they showed relatively weak rotisserie growth at only 0.3% (US: 2.4%).

The South shows the next strongest regional performance led by strong appetizer and rotisserie sales (6.1% and 4.1% respectively).

The Central region posted strong prepared foods sales with weak prepared chicken growth. In particular, fried chicken suffered a loss (-3.8%) and the Central region is missing out on growth in appetizers and wings that the rest of the country is seeing.

The Northeast faces the strongest challenges of all, with the lowest growth rates in the nation for prepared foods and prepared chicken. The miss in this region is strongly driven by a loss in top-line sales in fried chicken and rotisserie, with respectable performance in appetizers and wings.

 

 

52 Week Dollar Growth by Region

 

 

Good News All Around

Traffic and consumer demand suggests that supermarkets prepared foods is a growing part of consumers' solution for that burning question: what's for dinner? Every region has strengths to lean on and opportunities to grow top-line sales in a key category. Add to that the possibility that there may be some margin opportunities and the industry has plenty to work on in 2017 that will bear rich fruit.