Sales growth is key

January 16, 2023
/ SKUBlog
/ By Susan Sipos

As we enter 2023, each week we will explore one of our 10 trends for the new year. We approach this a bit differently as our trends are developed for suppliers in the food and beverage industry. They are based on what we learn talking to different retailers, suppliers and stakeholders in the industry.

Our second trend is sales growth is key. With consumers returning to food service and inflation, retailers are facing significant challenges to deliver comparable sales growth. Inflation does ‘inflate’ sales but we know consumers will try to trade down or increase their dependence on temporary price reduction (TPR) items. Any supplier who delivers positive year over year growth will be ahead of many.

The large publicly traded retailers in Canada must report quarterly results. Investors watch these results very carefully. They look for stability and growth. Once a retailer struggles for sales investors will be leery. This can lead to pressure on the stock price and decision making within the retailer will change. When sales are soft (flat or declining) the automatic reaction is to ad some low prices to the add and drive people into the stores. This is a short-term solution but one many lean on. Costco is the only retailer who really does not rely on this tactic. The issue with this strategy is margins are reduced and profits usually fall. Not a good scenario for investors. All that to say sales are a key metric and after the last few years of unpredictable sales, retailers are looking for steady growth from their suppliers.

You need to know the big picture

Every category is different, but they all add up to the total. Every supplier should know what is happening with their customer’s sales. At SKUFood we try to make it a bit easier for you, so we have put together a table to share some recent sales information from retailers operating in Canada. You should be looking at their press releases and learning about them each quarter. They do share a lot of information. They are easy to find online.

In the following table we have summarized the sales results for some of the Canadian retailers. They all report at slightly different times so we have done our best to line up the results so you can compare one to the other. You can see some of the volatility in their sales results. E-commerce is a component of the overall sales but you can see how it fluctuates significantly from quarter to quarter.

A few definitions for you:

Same store sales (SSS) – this is the number most investors will look for. This is the sales growth (or decline) in stores that have not had significant changes in the past year. Each retailer probably has their own specific definition but the essence is these results are in the stores where you can compare year over year results. A much more accurate number to assess performance. Sobeys has made acquisitions to drive sales growth so you will see a bigger discrepancy between their absolute (all stores) and SSS numbers.

Ending refers to the date at the end of the quarter for which they are reporting the results. These retailers operate on 4 13 week quarters but there are instances where a year will have 53 weeks due to how the days fall. You have to talk to the accountants about those!

Compare your own sales results to your customers. Overall, you want to be growing faster than the total store. This is a good starting point. Some retailers will share department or even category sales growth. These are the best numbers you can get to assess your performance.

Costco, because they do a lot of things differently, report monthly sales to the public. This is great for suppliers to review and a better comparison for you. The following table illustrates Costco Canada sales

Establish the baseline and build a plan

We have shared a lot of sales numbers with you. When talking to your customers and delivering sales growth you need to establish the baseline. What will they compare you to? We have heard some retailers want to compare back to 2019 before the pandemic and others are only focused on last year vs this year.

Have the conversation as every retailer is different.

Once you establish how they want to review sales, build a plan to deliver growth. Start with the sales in the baseline year and look at what was happening. What promotions did you have in place and other factors impacting sales. Consider the options available to you this year for trade spend and marketing spend.

Retailers want to look to the future and work with suppliers who are focused on delivering the results. Share your plans and make sure you are aware of any opportunities that might be there for you.

Focus on the execution

Easy for me to say deliver sales growth. That requires inventory, a great plan and most importantly solid execution. Retailers are looking for suppliers to deliver on these fundamentals this year. It is tough to generate sales growth right now. Consumers are concerned about inflation and food service is working hard to get people back in the habit of eating out.

Report results to your customers and illustrate the sales growth you are delivering. They will appreciate this approach and see it as a breath of fresh air as we move into 2023.

If you have any questions about our SKUFood trends, you can always send me an email peter@skufood.com or call me at (902) 489-2900.

Peter

Athletes investing in agriculture

When you see the big contracts professional athletes sign you know they must be smart about investing their money. They have a limited time to earn the big dollars and the wise ones invest some for the future. Interesting to see some famous athletes investing in agriculture in the U.S. Perhaps some Canadian farmers should explain how much more they would get for their dollar in Canada!

Joe Burrow, Blake Griffin, Around 20 More Athletes Buy Iowa Farm for Roughly $5M

Consumer choices are influenced by diets

Anyone who worked in bakery in the 90’s would remember the impact fo the Atkins diet on the bakery department. Shelf space was reduced and retail grocery bakeries really struggled to deliver sales. It was incredible to see the impact of a ‘diet’ on sales. This impacted everyone in the who value chain.

The fad diets do not seem to get as much widespread following as they did but there is no doubt consumers are influenced by this type of reporting. If you products do fall within the criteria it can have a positive impact on sales. Remember consumers think about these things at the point of purchase so packaging can be important. The Mediterranean diet has been a focus for a while so people will remember it and could react positively at the point of purchase.