Food retailers are positioning themselves to better capitalize on the potential for Americans to spend their summer enjoying the comforts of home instead of taking more costly vacations amid the current economic climate.
With the talk of gas prices now approaching $5 per gallon and airline ticket prices escalating as well, several retailers — including Wal-Mart and Whole Foods — have launched aggressive summer promotions touting the virtues of the backyard barbecue, while others are launching fuel-discount promotions to attract the business of those consumers who do hit the roads.
“We've been speaking with retailers about the impact of food price inflation and the rising price of gas and the drop in driving, and they're interested in the whole idea of how to merchandise to get the most out of this situation,” Jim Hertel, managing partner at consulting firm Willard Bishop, Barrington, Ill., told SN last week. “There's a lot of interest in that. It makes all the sense in the world to try to merchandise for more cooking at home, and we expect to see an uptick in that category while restaurants will really be hurt.”
Reports from around the country indicated that during last week's Memorial Day holiday, consumers continued to curtail their driving, a trend that began last year and that some analysts projected would continue through the summer as consumers opt for what some pundits have dubbed “staycations.” In addition, consumer confidence last week fell to its lowest level in nearly 16 years, according to The Conference Board, New York, amid concerns over employment and inflation. The group projected a decline in consumer spending on big-ticket items during the next six months.
As vacations drop off the list of summer activities, consumers will be looking to reward themselves in other ways, and supermarkets stand to gain from positioning themselves as providing “fun” alternatives, according to Mona Doyle, president of The Consumer Network, Philadelphia.
“People are definitely looking for ways to make up for what they are not going to do,” she told SN. “I think promoting ‘staycations’ is a great idea — providing solutions for fast and fun meals at home is where the ticket is.”
In TV ads promoting its “American Summer” campaign involving discounts on picnic and barbecue grocery offerings, Wal-Mart Stores, Bentonville, Ark., touts “amazing prices” on such items as hot dogs and charcoal for outdoor entertaining around the grill. The ads promote getaways that are “as close as your own backyard” and conclude that “summer costs less at Wal-Mart.”
Whole Foods Market, the Austin, Texas-based natural-and-organic retailer, launched its “Destination Summer” promotion by saying its offerings provide “summertime meal solutions.” It incorporates online and in-store materials seeking to promote locally grown and produced product in summer recipes.
“Whether your summer adventures include a road trip or your backyard becomes your vacation spot, we're packed and ready to roll with all the tips and recipes you need for easy and delicious summertime meals,” the company said in a prepared statement.
Jonathan Ziegler, an analyst with Dutton Associates, El Dorado Hills, Calif., said less travel and high gas prices should give supermarkets an opportunity to capture additional business this summer, and noted that food retailers should continue to benefit from a decrease in restaurant spending.
“I expect to see more cross-over promotions by supermarkets that operate gas stations to encourage customers to spend more in the stores, including opportunities to discount gas in order to increase the spend in store,” he said.
Doyle said a consumer survey conducted last month by her firm showed that 80% of consumers said they were planning to reduce their spending because of the economy, and 76% of consumers under age 50 said they did not buy something they wanted on their last shopping trip because it was too expensive.
One of the more effective promotions she has seen recently, she said, was a ShopRite ad that detailed a meal plan for a family of four for under $10.
“I thought this ad was very responsive,” she said, noting that it acknowledged the rising costs of some products. “You can't go out to eat with four people for $10, or even for $15.”
Reporting by Elliot Zwiebach and Mark Hamstra