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The State of the US Grocery Industry during the COVID-19 Pandemic

By: Douglas Daly – April 30, 2020

The Coronavirus pandemic caused widespread alarm resulting in a huge surge in the grocery industry spend in the middle of March.  As people shifted to this new normal of maintaining social distancing, grocery transaction volume dropped off considerably towards the end of March.  After mid-April, transaction volumes returned somewhat while spending continued to grow over earlier levels.

Figure 1: YoY Weekly Grocery Spend and Transaction Volume (Facteus)
People are spending more in fewer visits

As people nationwide changed their grocery shopping habits, retailers have an opportunity to better serve their customers.  With Facteus’ 17+ billion transaction dataset of nationwide card spend data with over 130 grocery chains identified, we provide a deeper understanding of the grocery industry.

Industry Performance by Grocery Chain

Like in our restaurant industry analysis, we applied a machine learning algorithm (unsupervised clustering algorithm called Gaussian Mixture Model, GMM) to cluster grocery stores based on weekly sales relative to the week ending March 1, 2020.  Again, the results are striking:

Figure 2: Weekly grocery store spend & transaction volume by cluster relative to March 1, 2020 (Facteus)

From these graphs we see each group follows a similar pattern: A surge in activity in mid-March followed by a steady decline in spend and a larger drop in transactions towards April where it largely remains.  As we look deeper, we see how this new environment has affected business:

Worst off

  • Convenience stores (Allsup’s, Buc-ee’s): Customers are more deliberate in their grocery shopping
  • Restaurant / Catering suppliers: People eat out less

Impacted:

  • Big box stores (Target, Walmart, Costco, Sam’s Club): Restrictions on allowed foot traffic greatly impact stores designed to handle crowds.  Business has rebounded as these restrictions seem to be relaxed in April.
  • Gourmet/boutique stores (Mariano’s Fresh Market, New Seasons Market, Market Basket): Stores designed for an experience where shoppers linger were hit heavily in late March and early April. In mid-April, customers continued to shop less often but increased their average spend dramatically.  For example, New Seasons Market traffic volume has remained at 50% below pre-crisis levels, but the total spend for the week ending April 26 is down by less than 5%.

Among local traditional supermarkets, performance varies wildly based on geography and how well they adapted to this new environment.

Customers want to get all their grocery shopping done at once while maintaining social distancing.  State and local governments have limited the number of customers allowed in the store at a given time, thus slowing traditional customer traffic.

Grocery Industry by Region

Across the US, total weekly spend was fairly consistent: a large mid-March spike at the height of the panic, a dip in late March as consumers depleted their excess supplies, and finally a steady-state of around 10% above pre-crisis levels which may reflect the corresponding hit to the restaurant industry.

To understand the change in consumer spend patterns, we focused on the total number of transactions and the average transaction size.

Figure 3 Weekly transaction count & spend by State cluster (Facteus)

Figure 4 Grocery store industry clusters by state

The data shows that people in states with stricter social distancing guidelines tend to be more deliberate in their grocery shopping, whereas those in states with looser guidelines returned to their earlier behavior by late March or early April.

Merchant effects across regions

As grocery stores are often regional in footprint and employ strategies based on their local customer base, these differences may be due to a wide range of factors outside of geography.  To test these results, we selected merchants across 2 states which match these criteria:

  1. Merchants must have a large nationwide footprint to reduce local operational effects and ensure a large data sample
  2. Merchants must target different segments of the population to verify consistency across consumer types
  3. States must represent different geographic clusters

We selected Whole Foods Market and Albertsons for comparison in Washington (cluster 1 – orange) and Texas (cluster 3 – green).

The results are below:

Figure 5: Merchant & State Comparison (Facteus)

Overall, Texas consumers transact more consistently in April, more like the pre-crisis levels than those in Washington.  This aligns with our state clustering results.   We also see the transaction amounts track fairly closely across states for each merchant.  Across merchants, however, we see consumers’ behavior varying wildly: Whole Foods customers increased their basket size by over 50% in April whereas Albertsons customers increased theirs by around 15%.  These results agree roughly with their performance nationwide.

Though two merchants in two states does not a rule make, it appears a merchant’s performance has more to do with factors outside geography.  We see Whole Foods performs more like other higher-end grocers across the country and Albertsons tracks well with other basic supermarket chains.  It’s possible this change in consumer behavior has most to do with income, age, and other demographic details but that will have to wait for another study.

We will continue to provide updates on how COVID-19 is impacting the health of businesses and how their customers change how they interact with them.Please visit FIRST.facteus.com often or follow us on LinkedIn or Twitter (@facteus) to be notified when we publish updates.

 

Appendix – List of Grocery stores included in analysis

Acme Markets, Albertson’s, Aldi, Allsups, Amigos United, Best Market, Bi-Lo, Brookshire Brothers, Brookshire Grocery, Broulims, Buc-ees, Carrs, Cash Saver, City Market, Coborns Stores, Costco, Country Mart, County Market, Cub Foods, D&W Fresh Market, Dierbergs, Dillons, Econo Foods, Fairway Market, Family Fare, Fareway Stores, Festibal Foods, Fine Fare Supermarket, Food 4 Less, Food Bazaar, Food Giant, Food Lion, Food Town, Foodland Hawaii, FoodMaxx, Foods Co., Fred Meyer, Fresh Thyme, Fry’s Food & Drug, Gerbes Super Markets, Giant Eagle, Giant Food, Gordon Food Service, Grocery Outlet, H-E-B, Haggen Grocery, Harps Food Stores, Harris Teeter, Harvey’s Supermarket, Holiday Market, Hy-Vee, IGA, Ingles Markets, Jay C Foods, Jewel-Osco, Karns Quality Foods, Key Food Stores, King Kullen, King Soopers, Kowalskis, Kroger, Lowes Foods, Lucky Stores, Lucky’s Market, Lunds & Byerlys, Mariano’s, Market Basket, Market Street Grocery, Martins Food Markets, Martins Super Markets, Meijer, Metro Market, Natural Grocers, New Seasons Market, Northgate Gonzalez, Markets, Olivers Market, Pavillions, Peapod Grocery Delivery, Pick N Save, Piggly Wiggly, Price Chopper, Price Rite Marketplace, Publix, QFC Quality Food Center, Raleys Supermarkets, Ralph’s, Randalls, Redners Markets, Restaurant Depot, Ridley’s Family Markets, Roche Bros., Rosauers, Rouses Market, Ruler Foods, Safeway, Sam’s Club, Save Mart Supermarkets, Save-A-Lot, Schnucks, Seafood City, Sendiks Food Market, Shaw’s and Star Market, Shipt, Shop-N-Save, Shoppers Food & Pharmacy, ShopRite, Smart and Final, Smith’s Food & Drug, Sprouts Farmers Market, Stater Bros., Stew Leonards, Stop & Shop, Strack & Van TIL, Super 1 Foods, Supervalu, Target, The Fresh Market, Times Supermarket, Tom Thumb, Tops Markets, Trader Joe’s, Trucchi’s Supermarket, United Supermarket, VGS Grocery, Von’s, Walmart, Wegmans, Weis Markets, Whole Foods Market, Winco Foods, Winn-Dixie, Woodman’s Markets